OUTDOOR SYSTEMS INC, 424B4, 1996-08-20

OUTDOOR SYSTEMS INC
424B4, 1996-08-20
ADVERTISING

Previous: RIGEL ENERGY CORP, SC 13D/A, 1996-08-20

Next: JETFLEET AIRCRAFT II LP, 10-Q, 1996-08-20

<PAGE> 1

PURSUANT TO RULE 424(b)(4)
REG. NO. 333-9545

8,600,000 SHARES

(LOGO) OUTDOOR SYSTEMS
COMMON STOCK
------------------
Of the shares of Common Stock offered hereby (the "Offering"), 7,300,000
shares are being sold by Outdoor Systems, Inc. (the "Company") and 1,300,000
shares are being sold by the Selling Stockholders named herein under "Principal
and Selling Stockholders." The Company will not receive any of the proceeds from
the sale of Common Stock by the Selling Stockholders.

The Common Stock is quoted on the Nasdaq National Market under the symbol
"OSIA." On August 16, 1996, the last reported sale price for the Common Stock,
as reported on the Nasdaq National Market, was $36.00 per share. See "Price
Range of Common Stock."

Following the Offering, the Company will offer $225 million aggregate
principal amount of its Senior Subordinated Notes due 2006 (the "Notes") by a
separate Prospectus (the "Notes Offering" and, together with the Offering, the
"Offerings").
------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 12 HEREOF.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............................. $34.50 $1.42 $33.08 $33.08
- ------------------------------------------------------------------------------------------------------------
Total(2).............................. $296,700,000 $12,212,000 $241,484,000 $43,004,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Before deducting expenses of the offering payable by the Company estimated
at $750,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 1,290,000 shares of Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$341,205,000, $14,043,800, and $284,157,200, respectively. See
"Underwriting."
------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about August 22,
1996.

ALEX. BROWN & SONS
INCORPORATED

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

CIBC WOOD GUNDY SECURITIES CORP.
THE DATE OF THIS PROSPECTUS IS AUGUST 19, 1996.
<PAGE> 2

[INSIDE COVER PAGE CONTAINS PHOTOGRAPHS OF VARIOUS BILLBOARDS ADVERTISING
PRODUCTS FOR MCDONALD'S, CHEVROLET, HUDSON'S FINE JEWELRY AND ALTOIDS'.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including notes thereto,
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless otherwise indicated, all information in this Prospectus gives effect to a
three-for-two Common Stock split effected in the form of a stock dividend paid
on July 22, 1996 and assumes no exercise of the Underwriters' over-allotment
option. The discussion below includes certain Transactions (as defined) that, if
not already completed, are scheduled or anticipated to occur concurrently with
or after the consummation of the Offerings. The "Transactions" consist of the
acquisition (the "Acquisition") of substantially all of the billboard and
transit advertising operations of the outdoor advertising division ("Gannett
Outdoor") of Gannett Co., Inc. ("Gannett"), including the acquisition (but not
the exercise) of the Houston Option (as defined), the Denver Disposition (as
defined), the Debt Tender Offer (as defined), the Acquisition Financing (as
defined) and the Other Acquisitions (as defined). See "The Transactions." As
used herein, the "Company" or "Outdoor Systems" refers to Outdoor Systems, Inc.
together with its consolidated subsidiaries and, where the context requires,
includes the business of Gannett Outdoor, and "market" in the United States
refers to the geographic area constituting a Designated Market Area as defined
by The A.C. Nielsen Company and in Canada refers to Census Metro Area as defined
by Statistics Canada.

THE COMPANY

Outdoor Systems, Inc., upon completion of the Acquisition, will be the
largest outdoor advertising company in North America, operating approximately
58,000 advertising display faces in 22 metropolitan markets in the United States
and seven metropolitan markets in Canada. The Company will have significant
operations in seven of the ten largest United States markets, as well as six of
the ten largest Canadian markets. Giving effect to the Acquisition, as if it
occurred at the beginning of the applicable period, the Company had pro forma
net revenues of $314.4 million and pro forma EBITDA of $113.3 million for the
year ended December 31, 1995 and pro forma net revenues of $154.8 million and
pro forma EBITDA of $54.6 million for the six months ended June 30, 1996.

Through the Acquisition, the Company will significantly increase its
presence in North America and diversify into additional major metropolitan
markets. The following table sets forth, as of June 30, 1996, certain
information with respect to the Company's outdoor markets after giving effect to
the Acquisition and the Denver Disposition (dollars in thousands):

<TABLE>
<CAPTION>
MALL TOTAL
MARKET 1995 PRO FORMA 30-SHEET 8-SHEET AND AIRPORT DISPLAY
MARKET RANK NET REVENUES BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- ------------------------- ------ -------------- --------- -------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES:
New York/New Jersey(1)... 1 $ 53,188 579 2,730 125 -- 3,507 6,941
Los Angeles.............. 2 41,739 785 2,962 -- -- 2,804 6,551
Chicago.................. 3 6,499 155 -- 638 -- -- 793
Philadelphia............. 4 1,941 -- -- -- -- 690 690
San Francisco............ 5 18,679 202 972 571 -- 1,346 3,091
Detroit.................. 9 20,264 438 1,340 104 -- 800 2,682
Houston(2)............... 10 5,480 377 -- -- -- -- 377
Atlanta.................. 11 21,654 748 1,910 -- -- -- 2,658
Sacramento(3)............ 17 -- 60 291 -- -- -- 351
Phoenix.................. 18 16,745 605 1,530 677 -- 1,418 4,230
St. Louis................ 19 8,010 268 852 -- -- -- 1,120
Denver................... 21 7,975 163 775 -- -- 5,300 6,238
San Diego................ 22 5,349 114 540 -- -- 668 1,322
New Haven(4)............. 26 5,496 149 835 -- -- -- 984
Kansas City.............. 33 6,988 198 849 -- -- -- 1,047
Grand Rapids............. 38 4,339 110 550 -- -- 80 740
New Orleans.............. 40 9,532 346 1,053 481 -- 213 2,093
Louisville............... 49 8,002 320 1,067 264 -- -- 1,651
Flint.................... 59 2,705 93 450 20 -- -- 563
Rochester................ 72 308 -- -- -- -- 240 240
Tucson................... 81 1,700 112 6 345 -- -- 463
Columbus, GA............. 127 2,596 180 422 100 -- -- 702
</TABLE>

3
<PAGE> 4

- ---------------
(1) All of the Company's bulletins and posters are located in New Jersey.
(2) Includes only Outdoor Systems' existing Houston operations. The Company has
the right to acquire Gannett Outdoor's Houston operations pursuant to the
Houston Option. See "The Transactions -- The Houston Option."
(3) Net revenues are included with San Francisco.
(4) Includes advertising display faces in New Haven, as well as other areas of
Connecticut.
(5) Net revenues are included with Toronto.

THE ACQUISITION

On July 9, 1996, the Company entered into an Asset Purchase Agreement (as
amended, the "Asset Purchase Agreement") to purchase substantially all of the
assets of Gannett Outdoor, including the stock of certain indirect subsidiaries
of Gannett, for approximately $640 million in cash, plus the net book value of
working capital and certain other specified assets of Gannett Outdoor (which net
book value is expected to increase the purchase price by approximately $60
million). See "The Transactions -- The Acquisition."

The Company will acquire from Gannett a total of approximately 40,000
advertising display faces consisting of bulletins, posters and transit
advertising display faces in 15 metropolitan markets in the United States and
seven metropolitan markets in Canada. Following completion of the Acquisition,
the Company will own and operate approximately 58,000 advertising display faces
located in 22 metropolitan markets in the United States and seven metropolitan
markets in Canada. Management believes that upon the successful consolidation of
Gannett Outdoor with the existing business of Outdoor Systems, the Company's
position as a leading provider of outdoor advertising services will be
significantly enhanced.

The Company believes that there are significant opportunities for revenue
enhancement in its combined operations after completion of the Acquisition. The
increased presence in North America resulting from the Acquisition should allow
the Company to expand its services to national advertisers through direct sales
efforts offering access to multiple markets. In addition, the Company believes
that its operating and sales strategies will allow it to improve utilization of
the Gannett Outdoor advertising display faces.

The Company also believes that the consolidation of certain administrative,
sales management and leasing management functions in connection with the
Acquisition will result in certain cost savings, including the reduction and
consolidation of duplicative (i) production and sales overhead functions, (ii)
production and administrative support positions, (iii) national sales and
marketing support functions, and (iv) accounting and administrative functions.
The Company believes it will achieve additional cost savings by closing one of
Gannett Outdoor's production facilities in Canada and by consolidating the
Canadian accounting and administrative functions. In addition to these cost
savings, the Company believes that subsequent to the Acquisition it may be able
to achieve additional cost savings arising from (i) reductions in facility costs
arising from renegotiated rents or reduced space and the reduction of expenses
relating to terminated employees, (ii) a reduction in labor costs arising from
production efficiencies and a reduced number of direct production and

4
<PAGE> 5

direct sales employees, and (iii) increased sales efficiencies arising from a
revision of the sales compensation system. See "Risk Factors -- Challenges of
Business Integration."

The Company will finance the purchase price of the Acquisition and the
related refinancing of certain existing indebtedness of the Company and will pay
the fees and expenses associated with the Acquisition and the acquisition
financing through (i) the net proceeds of the Offering, (ii) a revolving credit
facility and term loans of up to $530 million under a senior credit facility
(the "Senior Credit Facility"), and (iii) bridge loans of up to $240 million
under a senior subordinated credit facility (the "Subordinated Credit
Facility"). The financing obtained under the Subordinated Credit Facility is
hereinafter referred to as the "Bridge Financing." The Bridge Financing and the
financing obtained under the Senior Credit Facility are hereinafter referred to
as the "Acquisition Financing." See "Description of Indebtedness and Other
Commitments."

OPERATING STRATEGY

The Company's primary objective is to be the leading provider of outdoor
advertising services in each of its markets. Outdoor Systems' successful
operating strategy, focusing on superior sales and service, optimal management
of its inventory, centralized administration and strategic acquisitions, has
enabled it to improve the historical operating results in each of its existing
markets. Management intends to apply this strategy to each of its newly-acquired
markets.

- - Superior Sales and Service. The Company seeks to gain market share in each of
its markets through an intensive focus on customer sales and service, quality
displays and competitive pricing. Outdoor Systems has recruited and trained a
skilled sales force that is motivated by a program of commission-based
compensation and supported by a network of experienced local managers who
operate under a centrally coordinated marketing plan. Each Outdoor Systems
market has a general manager who is actively engaged in sales. In addition,
the Company seeks to attract and retain advertisers through creative
advertising layouts, timely installation and rotation of displays and rapid
response to customer needs.

- - Optimal Inventory Management. The Company seeks to balance advertising rate
growth with optimal occupancy of its displays in order to maximize revenues.
The Company's variety of outdoor advertising and transit displays in its
geographically diverse markets permits flexibility in pricing and packaging
its display inventory.

- - Strategic Acquisitions. Although the Company's focus will be the
consolidation and integration of Gannett Outdoor and the promotion of internal
growth of both new and existing properties, the Company will also continue to
pursue strategic acquisitions in existing and new markets to achieve increased
operating efficiencies, greater geographic diversification and increased
market penetration. The Company is primarily interested in continued expansion
in the 50 largest United States markets, because these markets typically
generate greater outdoor market revenues, readily attract national
advertisers, provide a better basis for regional advertising, attract quality
management and offer opportunities to gain a larger market share from
competitive media.

The Company believes that its experienced and sales-oriented management
team is an important asset in the successful implementation of its operating
strategy. William S. Levine, Chairman, Arthur R. Moreno, President and Chief
Executive Officer, and Wally C. Kelly, Senior Vice President of Sales, together
possess over 56 years of sales and management experience in the outdoor
advertising industry. In addition, the Outdoor Systems' general managers in its
existing markets have an average of nearly 14 years of experience in the outdoor
advertising industry. The industry

5
<PAGE> 6

experience of Mr. Moreno and other members of Outdoor Systems' management team
includes significant prior experience with Gannett Outdoor.

The Company was organized in 1980. The Company's executive offices are
located at 2502 N. Black Canyon Highway, Phoenix, Arizona 85009, and its
telephone number is (602) 246-9569.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.................. 7,300,000 shares
Common Stock offered by the Selling Stockholders..... 1,300,000 shares
Common Stock to be outstanding after the Offering.... 25,480,398 shares(1)
Use of proceeds...................................... To finance a portion of the purchase
price payable in the Acquisition. See
"Use of Proceeds."
Nasdaq National Market symbol........................ OSIA
</TABLE>

- ---------------
(1) Excludes 4,100,184 shares of Common Stock issuable upon exercise of options,
of which 2,884,135 are exercisable immediately and 1,216,049 vest ratably
over a four-year period, and 156,797 shares of Common Stock issuable in
settlement of accounts under the Company's Incentive Plan.

THE NOTES OFFERING

Following the Offering, the Company will offer $225 million aggregate
principal amount of its Senior Subordinated Notes due 2006, the proceeds of
which will be used to retire indebtedness under the Subordinated Credit
Facility. The Notes will be offered by the Company exclusively pursuant to a
separate Prospectus.

6
<PAGE> 7

SUMMARY PRO FORMA FINANCIAL INFORMATION

The following sets forth summary unaudited pro forma consolidated financial
information derived from the Unaudited Consolidated Pro Forma Financial
Information included elsewhere in this Prospectus. The summary unaudited pro
forma consolidated statement of operations for the year ended December 31, 1995
and for the latest twelve month period ended June 30, 1996 give effect to (i)
the Transactions, (ii) the net reduction in operating expenses of Gannett
Outdoor, (iii) the effect of conforming the capitalization of property and
equipment accounting policy of Gannett Outdoor to that of Outdoor Systems, and
(iv) the Offerings and the application of the estimated net proceeds therefrom
as if each had occurred at the beginning of the respective periods. The summary
unaudited pro forma balance sheet as of June 30, 1996 has been prepared as if
the Transactions and the Offerings had occurred on June 30, 1996.

The summary unaudited pro forma consolidated financial information does not
purport to present the actual financial position or results of operations of the
Company had the transactions and events assumed therein in fact occurred on the
dates specified, nor are they necessarily indicative of the results of
operations that may be achieved in the future. The summary unaudited pro forma
consolidated financial information is based on certain assumptions and
adjustments described in the notes to the Unaudited Consolidated Pro Forma
Financial Information and should be read in conjunction therewith. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," the Consolidated Financial Statements and the Notes thereto of
Outdoor Systems and the Combined Financial Statements and Notes thereto of
Gannett Outdoor, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PRO FORMA
LATEST
TWELVE
PRO FORMA MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, 1995 1996
----------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................................. $ 314,386 $322,248
Direct advertising expenses.............................. 174,353 176,389
General and administrative expenses...................... 26,723 26,672
Depreciation and amortization............................ 51,585 51,723
-------- --------
Operating income......................................... 61,725 67,464
Interest expense......................................... 62,949 62,949
Net income............................................... 182 3,117
OTHER DATA:
EBITDA(1)................................................ $ 113,310 $119,187
EBITDA margin(2)......................................... 36.0% 37.0%
Capital expenditures..................................... $ 21,661 $ 21,368
Number of advertising displays........................... 53,000 58,000
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL AS OF
AS OF JUNE 30,
JUNE 30, 1996 1996
----------------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................... $ 7,882 $ 63,391
Total assets............................................. 160,545 935,632
Total debt............................................... 138,633 643,706
Stockholders' equity..................................... 10,424 223,804
</TABLE>

- ---------------
(1) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense. While EBITDA should not be considered in isolation or
as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with
generally accepted accounting principles, or as a measure of profitability
or liquidity, management understands that it is widely used by certain
investors as one measure to evaluate the financial performance of companies
in the outdoor advertising industry.
(2) "EBITDA margin" is EBITDA stated as a percentage of net revenues.

7
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table sets forth summary historical financial data for
Outdoor Systems and Gannett Outdoor for the periods indicated. The information
presented below is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Results of Operations
and Financial Condition," "Selected Consolidated Financial and Other Data" and
the Consolidated Financial Statements and Notes thereto of Outdoor Systems and
the Combined Financial Statements and Notes thereto of Gannett Outdoor.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
OUTDOOR SYSTEMS(1) 1993 1994 1995 1995 1996
- ---------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues(2)................. $ 49,151 $ 52,077 $ 64,813 $ 29,738 $ 36,527
Operating expenses:
Direct advertising expenses... 23,721 24,433 30,462 14,596 16,151
General and administrative
expenses.................... 2,777 3,357 4,096 2,007 2,213
Depreciation and
amortization................ 10,421 9,165 9,970 4,958 5,259
Gain on 1994 Disposal........... -- 4,325 -- -- --
Operating income................ 12,232 19,447 20,285 8,177 12,904
Interest expense................ 11,894 16,393 17,199 9,017 7,929
Net income (loss)(3)............ (3,176) 1,333 2,768 (840) 2,141
Net income (loss) attributable
to common stockholders........ (5,748) (263) 307 (2,035) (1,320)
Net income (loss) per common
share(3)...................... $ (0.39) $ (0.02) $ 0.02 $ (0.12) $ (0.08)
Shares used in computing per
share computations(4)......... 14,819,223 14,064,269 16,949,385 16,834,464 15,573,117
OTHER DATA:
EBITDA(5)....................... $ 22,653 $ 24,287 $ 30,255 $ 13,135 $ 18,163
EBITDA margin(6)................ 46.1% 46.6% 46.7% 44.2% 49.7%
Capital expenditures............ $ 4,387 $ 4,924 $ 7,070 $ 4,251 $ 2,891
Number of advertising
displays...................... 10,800 11,900 12,700 12,000 18,000
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
GANNETT OUTDOOR 1993 1994 1995 1995 1996
- ---------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.................... $ 225,165 $ 235,236 $ 247,271 $ 115,888 $ 117,733
Other income (loss)............. 25 (67) 193 266 201
----------- -------- -------- -------- --------
Total revenues........... 225,190 235,169 247,464 116,154 117,934
----------- -------- -------- -------- --------
Direct expenses:
Direct advertising............ 159,927 163,362 171,091 82,955 82,410
General and administrative.... 30,572 33,866 33,101 16,123 17,169
Depreciation and
amortization................ 19,669 19,692 17,262 8,743 8,822
----------- -------- -------- -------- --------
Excess of revenues over direct
expenses...................... $ 15,022 $ 18,249 $ 26,010 $ 8,333 $ 9,533
=========== ======== ======== ======== ========
</TABLE>

8
<PAGE> 9

- ---------------
(1) In December 1994, the Company acquired substantially all of the assets and
business of Capitol Outdoor Advertising, Inc. in Atlanta (the "1994
Acquisition"), and in connection with the 1994 Acquisition simultaneously
sold its then-existing outdoor advertising displays in Atlanta (the "1994
Disposal") (the 1994 Acquisition and the 1994 Disposal are collectively
referred to as the "Atlanta Transaction"). In addition, in 1993 the Company
refinanced a substantial portion of its indebtedness with 10.75% Senior
Notes due 2003. Accordingly, operating results are not necessarily
comparable on a year-to-year basis. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
(2) Net revenues are gross revenues minus agency commissions, plus other income
of $1.0 million and $0.4 million for the years ended December 31, 1994 and
1995, respectively, and $0.3 million for the six months ended June 30, 1996.
(3) Deferred financing costs of $3.3 million and $0.8 million associated with
borrowings which were retired or redeemed were charged as an extraordinary
loss during 1993 and the six months ended June 30, 1996, respectively.
(4) Weighted average share amounts have been adjusted to reflect the
three-for-two Common Stock split effected in the form of a stock dividend
paid on July 22, 1996.
(5) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense and, in 1994, before the gain on the 1994 Disposal.
While EBITDA should not be considered in isolation or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with generally accepted
accounting principles, or as a measure of profitability or liquidity,
management understands that it is widely used by certain investors as one
measure to evaluate the financial performance of companies in the outdoor
advertising industry.
(6) "EBITDA margin" is EBITDA stated as a percentage of net revenues.

9
<PAGE> 10

THE TRANSACTIONS

THE ACQUISITION

On July 9, 1996, the Company entered into the Asset Purchase Agreement
pursuant to which it agreed to purchase substantially all of the assets of
Gannett Outdoor, including the stock of certain indirect subsidiaries of
Gannett, for approximately $640 million in cash, plus the net book value of
working capital and certain other specified assets of Gannett Outdoor (which net
book value is expected to increase the purchase price by approximately $60
million). As a result of the Acquisition, the Company will acquire from Gannett
a total of approximately 40,000 advertising display faces consisting of
bulletins, posters and transit advertising displays in and around New York, Los
Angeles, Chicago, Philadelphia, San Francisco, Detroit, Sacramento, St. Louis,
Denver, San Diego, New Haven, Kansas City, Grand Rapids, Flint and Rochester and
in various locations in New Jersey and Canada.

Pursuant to the Asset Purchase Agreement, the Company has made a deposit of
$15 million which will be credited against the purchase price if the Acquisition
is consummated. The consummation of the Acquisition is subject to certain
conditions, including, without limitation, the expiration or early termination
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "Hart-Scott-Rodino Act").

THE ACQUISITION FINANCING

The Company will finance the purchase price of the Acquisition and the
related refinancing of certain existing indebtedness of the Company and will pay
the fees and expenses associated with the Acquisition and the Acquisition
Financing through (i) the net proceeds of the Offering, (ii) a revolving credit
facility and term loans of up to $530 million under the Senior Credit Facility,
and (iii) bridge loans of up to $240 million under the Subordinated Credit
Facility. See "Description of Indebtedness and Other Commitments." If and to the
extent consummated, proceeds of the Notes Offering will be used to retire
amounts outstanding under the Subordinated Credit Facility. See "Use of
Proceeds."

THE DEBT TENDER OFFER

In connection with the Acquisition, the Company has commenced a tender
offer and consent solicitation (the "Debt Tender Offer") to purchase all of its
outstanding 10 3/4% Senior Notes due 2003 (the "Existing Notes") and obtain the
consent of the holders of the Existing Notes to modify or eliminate certain
provisions of the indenture governing the Existing Notes to permit, among other
things, the consummation of the Acquisition Financing. The aggregate
consideration offered by the Company in the Debt Tender Offer is $1,116.25 per
$1,000 principal amount of Existing Notes. The Debt Tender Offer will expire on
August 22, 1996, unless extended, at which time the Company expects to purchase
all Existing Notes tendered with consents. As of August 15, 1996, all of the
outstanding Existing Notes except for $15,000 principal amount thereof had been
tendered and had consented to the amendments to the indenture governing the
Existing Notes. The Company executed a supplemental indenture reflecting the
amendments.

10
<PAGE> 11

THE HOUSTON OPTION

Pursuant to the Asset Purchase Agreement, Gannett agreed to cause Gannett
Outdoor Co. of Texas, Inc. ("Gannett of Texas") to grant to the Company an
option (the "Houston Option") to purchase, within 120 days after the closing of
the Acquisition, Gannett of Texas' outdoor operations in Houston, Texas, for a
purchase price of $10 million in cash, plus the net book value of working
capital and certain other specified assets of Gannett of Texas. The Company
intends to exercise the Houston Option as soon as practicable following the
consummation of the Acquisition and the expiration or early termination of the
applicable waiting period under the Hart-Scott-Rodino Act. Exercise of the
option could require the sale or other disposition of part or all of Outdoor
Systems' existing operations in Houston.

THE DENVER DISPOSITION

On August 8, 1996, the Company sold substantially all of its existing
billboard assets in Denver (the "Denver Disposition") to an unrelated party for
$9.2 million consisting of $2.76 million in cash paid at closing and a ten-year
promissory note for the balance of the purchase price. The promissory note bears
interest at a rate of 9% per annum and will be payable in installments of
$162,500 (including interest) per quarter with a final payment of the remaining
principal and unpaid interest upon maturity. The promissory note is secured by a
first lien on the assets sold. The promissory note and all security instruments
in connection therewith will be pledged to secure the Company's obligations
under the Senior Credit Facility.

OTHER ACQUISITIONS

In May 1996, Outdoor Systems acquired control over perpetual easements for
1,360 plots of land in 17 eastern states for $21.6 million (plus future
consideration estimated to be payable beginning in 2006) from CSX Realty
Development Corporation (the "CSX Assets Acquisition"). Currently, 130 different
outdoor advertising companies have licenses to operate approximately 2,240
advertising displays on these plots of land. As a result of this purchase, the
Company has the right to collect the proceeds from these licenses. The Company
believes that the plots of land subject to the easements acquired in the CSX
Assets Acquisition (i) are located in attractive locations because of their
proximity to major highways, and (ii) provide a long-term, consistent revenue
stream due to their high occupancy license fees and renewal rates. The Company
is in the process of consolidating the operations acquired in the CSX Assets
Acquisition into its Atlanta market operations.

In April 1996, the Company acquired all of the stock of Decade
Communications Group, Inc. (the "Bench Ad Acquisition"), which owned
approximately 5,300 bus benches in the Denver metropolitan area for a purchase
price of approximately $1.8 million.

The CSX Assets Acquisition and the Bench Ad Acquisition are hereinafter
referred to as the "Other Acquisitions."

11
<PAGE> 12

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.

Leverage and Liquidity. Upon completion of the Offerings, the Company's
total indebtedness will be approximately $644 million, representing
approximately 74% of total capitalization. In addition, on a pro forma basis for
the six months ended June 30, 1996, the Company's earnings would have been
insufficient to cover fixed charges by $2.7 million. There can be no assurance
that the Company will have adequate cash available to make required principal
and interest payments. In addition, the terms of the debt instruments to be
issued in connection with the Acquisition include, and the indenture governing
the Notes to be issued in the Notes Offering will include, significant operating
and financial restrictions, such as limits on the Company's ability to incur
indebtedness, create liens, sell assets, engage in mergers or consolidations,
make investments and pay dividends.

The Company's high degree of leverage may have important consequences for
the Company: (i) the ability of the Company to obtain additional financing for
acquisitions, working capital, capital expenditures or other purposes, if
necessary, may be impaired or such financing may not be on terms favorable to
the Company; (ii) a substantial portion of the Company's cash flow will be used
to pay the Company's interest expense and under certain conditions to repay
indebtedness, which will reduce the funds that would otherwise be available to
the Company for its operations and future business opportunities; (iii) a
substantial decrease in net operating cash flows or an increase in expenses of
the Company could make it difficult for the Company to meet its debt service
requirements and force it to modify its operations; (iv) the Company may be more
highly leveraged than its competitors which may place it at a competitive
disadvantage; and (v) the Company's high degree of leverage may make it more
vulnerable to a downturn in its business or the economy generally. Any inability
of the Company to service its indebtedness or obtain additional financing, as
needed, would have a material adverse effect on the Company.

Challenges of Business Integration. The Company has never consummated an
acquisition of a business the size of Gannett Outdoor, and faces significant
challenges in integrating the operations of Gannett Outdoor with those of the
Company. Integration of Gannett Outdoor will require substantial attention from
the Company's management team, which has had limited experience in integrating
operations of the size of Gannett Outdoor. Diversion of management attention
from the Company's existing business could have an adverse impact on the
revenues and operating results of the Company. There can be no assurance that
the Company will be able to integrate the operations of the Company and Gannett
Outdoor successfully. In addition, Gannett Outdoor historically has operated
with a higher cost structure than the Company and the pro forma financial
statements assume that the Company will be able to achieve significant cost
reductions following the Acquisition, including cost reductions associated with
employee reductions and production plant closings. The Company could face
regulatory, contractual and other restrictions on its ability to implement the
cost reductions. There can be no assurance that the Company will be successful
in reducing the overhead and other costs associated with Gannett Outdoor, or
that realization of such cost reductions will not be delayed. In addition, to
the extent that the Company is successful in achieving part or all of such cost
reductions, there can be no assurance that the reductions will not have a
material adverse effect on the business of the Company.

Nature of Asset Purchase Agreement; Limited Recourse to Seller. The
representations and warranties made by Gannett in the Asset Purchase Agreement
relating to Gannett Outdoor and the assets to be acquired and the associated
indemnities are limited and qualified. Although Outdoor Systems is not obligated
to consummate the Acquisition if there are changes in the business or assets of
Gannett Outdoor which would result in a "Material Adverse Effect" (as defined
and excluding matters arising in the ordinary course of business), the Company's
recourse to Gannett after the Acquisition is extremely limited. In addition, the
Acquisition is being consummated on a very rapid schedule, and Outdoor Systems'
ability to conduct due diligence has been limited by time

12
<PAGE> 13

constraints and other factors. Accordingly, unanticipated events or liabilities
related to the Gannett Outdoor business could materially and adversely affect
the Company and the success of the Acquisition.

Increase in Interest Rates. All or a substantial portion of the
indebtedness to be incurred by the Company to finance the Acquisition is
expected to bear interest at variable rates. While the Company is required by
the Senior Credit Facility to enter into interest rate cap agreements to reduce
its exposure to increases in such interest rates with respect to at least $265
million of indebtedness, such agreements will not apply to the Company's entire
variable rate debt and, therefore, will not entirely eliminate the Company's
exposure to variable rates. Any increase in the interest rates on the Company's
indebtedness will reduce funds available to the Company for its operations and
future business opportunities and will exacerbate the consequences of the
Company's leveraged capital structure. Additionally, if the Notes Offering is
not consummated for any reason, the Company will not be able to reduce or retire
indebtedness outstanding under the Subordinated Credit Facility as anticipated
from the proceeds of the Notes Offering. Interest on indebtedness outstanding
under the Subordinated Credit Facility increases by 1% six months after the
Acquisition and by 0.5% every three months thereafter up to a maximum interest
of 20% per annum payable 15% per annum in cash and any excess payable in kind.
See "Description of Indebtedness and Other Commitments."

Prior Stockholders' Deficiency; Prior Period Losses. Until completion of
its initial public offering in April 1996, Outdoor Systems had a Common
Stockholders' Equity Deficiency as a result of net losses attributable to common
stockholders for periods prior to December 31, 1995. Outdoor Systems' net losses
in prior periods resulted in significant part from substantial depreciation and
amortization expenses related to assets purchased in Outdoor Systems'
acquisitions, interest expense associated with related indebtedness and deferred
financing cost charges recorded as extraordinary losses. Outdoor Systems
realized a net loss attributable to common stockholders during the first six
months of 1996 of approximately $1.3 million, in part due to a pre-tax
extraordinary loss of $1.4 million ($0.8 million net of tax benefit) arising
from the discount on subordinated debt retired in connection with its initial
public offering and a $2.3 million charge to additional paid in capital arising
from the unamortized discount on preferred stock retired as part of the initial
public offering. When the Bridge Financing is retired, the Company will write
off deferred financing costs related thereto (approximately $7.5 million if the
Bridge Financing is retired in the third quarter of 1996). The Company will
record goodwill and other intangible assets of approximately $60 million in
connection with the Acquisition, which will be amortized over a period of 30
years. In addition, the cost basis of advertising structures acquired by the
Company from Gannett will increase by approximately $480 million over the $132.6
million historic cost basis, which will be amortized over 20 years. The
increased depreciation, amortization, interest and other expenses associated
with the Acquisition may result in net losses in the future. There can be no
assurance that the Company will become profitable in the future.

Acquisition Strategy. The Company's growth has been facilitated by
strategic acquisitions that have substantially increased the Company's inventory
of advertising displays. One element of the Company's operating strategy is to
make strategic acquisitions in markets in which it currently competes as well as
in new markets. While the Company believes that the outdoor advertising industry
is highly fragmented and that significant acquisition opportunities are
available, there can be no assurance that suitable acquisition candidates can be
found, and the Company is likely to face competition from other outdoor
advertising companies or other parties for acquisition opportunities that are
available. In addition, if the prices sought by sellers of outdoor advertising
displays and companies continue to rise, as management believes may happen, the
Company may find fewer acceptable acquisition opportunities. There can be no
assurance that the Company will have sufficient capital resources to complete
acquisitions, that acquisitions can be completed on terms acceptable to the
Company, or that any acquisitions that are completed can be successfully
integrated into the Company. While the Company continues to evaluate acquisition
opportunities,

13
<PAGE> 14

there are no material acquisitions pending as of the date of this Prospectus
other than the Acquisition.

Economic Conditions; Advertising Trends. The Company relies on sales of
advertising space for its revenues and its operating results therefore are
affected by general economic conditions, as well as trends in the advertising
industry. A reduction in advertising expenditures available for the Company's
displays could result from a general decline in economic conditions, a decline
in economic conditions in particular markets where the Company conducts business
or a reallocation of advertising expenditures to other available media by
significant users of the Company's displays. While the Company has benefitted
from special events in the past, there can be no assurance that the Company will
continue to benefit to the same degree in the future from special events such as
the 1996 Olympic Games in Atlanta, and results in a particular market, year or
period could be adversely affected by the lack of such special events.

Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. Beginning in 1992, the leading tobacco companies
substantially reduced their domestic advertising expenditures in response to a
declining population of smokers in the United States, societal pressures to
reduce advertising, consolidation in the tobacco industry and increasing price
competition from generic products. In 1995, tobacco advertising accounted for
9.1% of Outdoor Systems' net revenues, and 9.9% of Gannett Outdoor's net
revenues. There can be no assurance that the tobacco industry will not further
reduce advertising expenditures in the future.

Competition. The Company faces competition for advertising revenues from
other outdoor advertising companies, as well as from other media such as radio,
television, print media and direct mail marketing. The Company also competes
with a wide variety of other "out-of-home" advertising media, the range and
diversity of which has increased substantially over the past several years to
include advertising displays in shopping centers and malls, airports, stadiums,
movie theaters and supermarkets, and on taxis, trains, buses and subways. Some
of the Company's competitors, principally in other media such as radio and
television, are substantially larger, better capitalized and have access to
greater resources than the Company. There can be no assurance that outdoor
advertising media will be able to compete with other types of media, or that the
Company will be able to compete successfully either within the outdoor
advertising industry or with other media. See "Business -- Competition."

Reliance on Key Executives. The Company's success depends to a significant
extent upon the continued services of its executive officers and other key
management and sales personnel, in particular its President and Chief Executive
Officer, Arthur R. Moreno, and its Senior Vice President of Sales, Wally C.
Kelly. Although the Company has designed its incentive and compensation programs
to retain key employees, including options to purchase shares of Common Stock
(certain of which are subject to forfeiture in the event the recipients violate
non-competition clauses included therein), the Company has no employment
contracts with any of its employees, and none of its employees are bound by
non-competition agreements. The unavailability of the continuing services of its
executive officers and other key management and sales personnel could have a
material adverse effect on the Company's business.

Regulation of Outdoor Advertising. Outdoor advertising displays are
subject to governmental regulation at the federal, state, provincial and local
levels. These regulations, in some cases, limit the height, size, location and
operation of billboards and, in limited circumstances, regulate the content of
the advertising copy displayed on the billboards. Some governmental regulations
prohibit the construction of new billboards or the replacement, relocation,
enlargement or upgrading of existing structures. Some cities, including Houston,
Kansas City and St. Louis, have adopted amortization ordinances or regulations
under which, after the expiration of a specified period of time, billboards must
be removed at the owner's expense and without the payment of compensation.
Ordinances requiring the removal of a billboard without compensation, whether
through amortization or otherwise, are being challenged in various state and
federal courts with conflicting results.

14
<PAGE> 15

To date, regulations in the Company's markets have not materially adversely
affected its operations. However, no assurance can be given as to the effect on
the Company of existing laws and regulations or of new laws and regulations that
may be adopted in the future. See "Business -- Government Regulation."

Contract Consents. The transfer by Gannett to the Company of certain
contractual and other rights as part of the Acquisition will require the consent
and approval of certain other parties doing business with the Division or the
subsidiaries of Gannett being acquired by the Company in the Acquisition. In
addition, transfer of the capital stock of certain of the subsidiaries of
Gannett may violate change-of-control or other non-assignment clauses contained
in contracts to which such subsidiaries may be a party. The Company expects that
many of these contractual and other rights will be assigned to it even though it
will not have all of the consents and approvals required for transfer prior to
the closing of the Acquisition which could result in termination of or default
under such contracts or other rights. There can be no assurance that the Company
will receive the requisite consents or approvals or obtain any necessary waivers
following the Acquisition to secure the benefits of all such contracts.

Transit Business. A portion of the business being acquired from Gannett
consists of revenues under contracts for the operation of display faces on bus
shelters and in subway stations and subways in various municipalities. This
includes agreements with agencies in the State of New York which accounted for
approximately $28.5 million of net revenues in 1995. Transfer of rights under
these contracts will require consent from the relevant public authorities. To
the extent that these consents and approvals are not obtained prior to the
closing of the Acquisition, the Company may delay the assignment of such
contracts and the transfer of the capital stock of one of the Gannett
subsidiaries and expects to enter into management agreements or other
arrangements with Gannett pursuant to which it will be provided the benefit of
these contracts. Although the Company anticipates that it will be able to secure
these consents or make other arrangements providing to it the benefit of the
contracts, there can be no assurance that it will be able to do so or that such
arrangements will avoid a breach of such contracts. Further, most of these
contracts are subject to termination upon short notice by the applicable
governmental authority, terminate at scheduled times which impose competitive
bidding and other requirements for renewal, include letter of credit and other
requirements obligating the Company to fund and meet certain minimum payment
requirements to the governmental authority and erect and maintain shelters in
the applicable jurisdiction, and contain other performance obligations which are
imposed on the Company. There can be no assurance that these various obligations
and conditions will not adversely affect the Company.

The transit business in New York and in certain other jurisdictions
historically has generated relatively low operating margins. There can be no
assurance that the Company will be able to improve the operating performance of
this business after the Acquisition.

Environmental Matters. As the owner, lessor or operator of various real
properties and facilities, the Company is subject to various federal, state,
provincial and local environmental laws and regulations. To date, compliance
with such laws and regulations has not had a material adverse effect on the
historical business of Outdoor Systems. However, a number of the properties
being acquired from Gannett have existing environmental conditions relating
primarily to underground storage tanks for which the Company will assume
responsibility upon closing of the Acquisition. In addition, two of the sites
are adjacent to Superfund sites and other properties are in the vicinity of
other industrial properties with known contamination. Of the two properties
adjacent to a Superfund site, one is believed to be contaminated by such site.
Although the Company believes that the existing Gannett Outdoor environmental
conditions are manageable, there can be no assurance that these conditions will
not create greater costs than currently expected or that compliance with
existing or new environmental laws or regulations will not require the Company
to make significant expenditures in the future, all of which could adversely
affect the Company.

15
<PAGE> 16

Seasonality. The Company's revenues and operating results have exhibited
some degree of seasonality in past periods. Typically, the Company experiences
its strongest financial performance in the fourth quarter and its lowest
revenues in the first quarter. The Company expects this trend to continue in the
future. Because a significant portion of the Company's expenses are fixed, a
reduction in revenues in any quarter is likely to result in a period-to-period
decline in operating performance and net income.

Control by Executive Officers and Directors. Upon consummation of the
Offering, the Company's executive officers, directors and their respective
affiliates will beneficially own (including for this purpose options exercisable
within 60 days after the date of this Prospectus and shares over which such
persons have voting control) approximately 51.0% of the outstanding shares of
Common Stock. Such persons, if acting together, would have sufficient voting
power to control the outcome of corporate actions submitted to the stockholders
for approval and to control the management and affairs of the Company, including
the election of the Board of Directors of the Company. As a result of such
control, certain transactions may not be possible without the approval of such
stockholders, including proxy contests, mergers involving the Company and tender
offers or other purchases of Common Stock that could give stockholders of the
Company the opportunity to realize a premium over the then-prevailing market
price for their shares of Common Stock. See "Principal and Selling Stockholders"
and "Description of Capital Stock -- Special Provisions of the Certificate of
Incorporation and Bylaws and Delaware Law."

Limited Trading History and Volatility of Stock Price. The Company
completed the initial public offering of its Common Stock in April 1996 and,
therefore, there is a limited trading history for the Common Stock. In addition,
from time to time, there may be significant volatility in the market price for
the Common Stock of the Company. Quarterly operating results of the Company,
changes in earnings estimates by analysts, changes in general conditions in the
Company's industry or the economy or the financial markets or other developments
affecting the Company could cause the market price of the Common Stock to
fluctuate substantially. In addition, in recent years the stock market has
experienced significant price and volume fluctuations. This volatility has had a
significant effect on the market price of securities issued by many companies
for reasons unrelated to their operating performance.

Shares Eligible for Future Sale. Upon the completion of the Offering,
13,688,750 shares of Common Stock (14,978,750 shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restriction under the Securities Act of 1933, as amended (the "Securities Act"),
unless purchased by "affiliates" as such term is defined under the Securities
Act, and 11,791,648 shares (the "restricted shares") will be eligible for sale,
subject to volume and manner of sale restrictions, in reliance on Rule 144
promulgated under the Securities Act. Additional shares may become available for
sale at various times upon exercise of outstanding stock options. Of the
restricted shares, 11,584,648 shares are subject to lock-up agreements with the
Underwriters and, therefore, may not be sold for a period of 180 days following
the date of this Prospectus. See "Underwriting." Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock.

Restriction on Dividends. The Company has not paid dividends on its Common
Stock and does not anticipate paying dividends in the foreseeable future. In
addition, the Company's debt instruments place limitations on the Company's
ability to pay dividends and make other distributions on its Common Stock. See
"Dividend Policy," "Description of Capital Stock" and "Description of
Indebtedness and Other Commitments."

Risks Associated with Forward-Looking Statements. This Prospectus contains
and incorporates by reference certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Those statements include, among other things, the discussions of the Company's
business strategy and expectations concerning the Company's market position,
future

16
<PAGE> 17

operations, margins, profitability, liquidity and capital resources, as well as
statements concerning the integration of the Acquisition and achievement of cost
savings in connection therewith. Investors in the Common Stock offered hereby
are cautioned that reliance on any forward-looking statement involves risks and
uncertainties, and that although the Company believes that the assumptions on
which the forward-looking statements contained herein are based are reasonable,
any of those assumptions could prove to be inaccurate, and as a result, the
forward-looking statements based on those assumptions also could be incorrect.
The uncertainties in this regard include, but are not limited to, those
identified in the risk factors discussed above. In light of these and other
uncertainties, the inclusion of a forward-looking statement herein should not be
regarded as a representation by the Company that the Company's plans and
objectives will be achieved.

17
<PAGE> 18

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 7,300,000 shares of
Common Stock offered by it hereby are estimated to be approximately $241 million
(or approximately $283 million if the Underwriters' over-allotment option is
exercised in full), after deducting underwriting discounts and commissions and
estimated offering expenses. The Company intends to use such net proceeds to
finance a portion of the purchase price payable in the Acquisition. See "The
Transactions -- The Acquisition."

If and to the extent the Notes Offering is consummated, the net proceeds
therefrom will be used to retire amounts outstanding under the Subordinated
Credit Facility. Amounts outstanding under the Subordinated Credit Facility may
be repaid at any time during the first 12-month period following the
consummation of the Acquisition Financing without prepayment penalty. See
"Description of Indebtedness and Other Commitments."

The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.

PRICE RANGE OF COMMON STOCK

The Common Stock is quoted on the Nasdaq National Market under the symbol
"OSIA." The following table sets forth, for the periods indicated, the high and
low closing sales prices for the Common Stock as reported by the Nasdaq National
Market, adjusted for the three-for-two stock split effected in the form of a
stock dividend paid July 22, 1996 to stockholders of record on July 8, 1996.
Prior to April 24, 1996, the day on which the Common Stock was first publicly
traded, there was no public market for the Common Stock.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996
Second Quarter (beginning April 24, 1996)................... $25.13 $14.00
Third Quarter (through August 16, 1996)..................... $36.50 $23.50
</TABLE>

On August 16, 1996, the last reported sale price per share for the Common
Stock on the Nasdaq National Market was $36.00 per share.

DIVIDEND POLICY

The Company has not declared or paid dividends on the Common Stock and does
not anticipate paying dividends in the foreseeable future. The Company intends
to retain any future earnings to repay senior indebtedness or reinvest in the
Company. In addition, the Company's debt instruments place limitations on the
Company's ability to pay dividends or make any other distributions on the Common
Stock. See "Description of Indebtedness and Other Commitments." Any future
determination as to the payment of dividends will be subject to such
prohibitions and limitations, will be at the discretion of the Company's Board
of Directors and will depend on the Company's results of operations, financial
condition, capital requirements and other factors deemed relevant by the Board
of Directors.

18
<PAGE> 19

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company (i) as of June 30, 1996, (ii) pro forma giving effect as of June 30,
1996 to the Acquisition, the Debt Tender Offer, the Acquisition Financing and
the Offering and the application of the estimated proceeds therefrom, and (iii)
pro forma as further adjusted giving effect to the Notes Offering and the
application of the estimated net proceeds therefrom. This table should be read
in conjunction with the information contained in "Unaudited Consolidated Pro
Forma Financial Information" and Outdoor Systems' consolidated financial
statements and notes thereto appearing elsewhere herein.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------------------------------
PRO FORMA AS PRO FORMA AS
ADJUSTED FOR THE ADJUSTED FOR THE
ACTUAL OFFERING(1) NOTES OFFERING(2)
-------- ---------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Current maturities of long-term debt.................. $ 173 $ 0 $ 0
-------- -------- --------
Long-term debt:
Senior Credit Facility.............................. 23,750 475,000 418,666
Existing Notes...................................... 114,670 -- --
Subordinated Credit Facility........................ -- 162,766 --
Notes............................................... -- -- 225,000
Other............................................... 40 40 40
-------- -------- --------
Total long-term debt............................. 138,460 637,806 643,706
-------- -------- --------
Common stockholders' equity:
Common Stock, $0.01 par value....................... 180 253 253
Additional paid in capital.......................... 33,987 274,648 274,648
Accumulated deficit(3).............................. (19,690) (39,594) (47,044)
Treasury stock (at cost) 7,650,297 shares........... (4,053) (4,053) (4,053)
-------- -------- --------
Total common stockholders' equity (deficit)(4)... 10,424 231,254 223,804
-------- -------- --------
Total capitalization........................ $149,057 $869,060 $ 867,510
======== ======== ========
</TABLE>

- ---------------
(1) Pro forma to give effect to the consummation of the Acquisition, the Debt
Tender Offer, the Acquisition Financing and the Offering and the application
of the proceeds therefrom based upon the assumptions set forth under "Use of
Proceeds."
(2) Pro forma as adjusted to give effect to (i) the transactions described in
footnote (1) and (ii) the Notes Offering and the application of the proceeds
therefrom, assuming the issuance of $225 million principal amount of Notes.
(3) Reflects the write-off of approximately $7.5 million of deferred financing
costs anticipated to be incurred in connection with the borrowings under the
Subordinated Credit Facility.
(4) Excludes 4,200,184 shares of Common Stock (4,100,184 shares after the
Offering) issuable upon exercise of options, of which 2,984,135 shares
(2,884,135 shares after the Offering) are exercisable immediately and
1,216,049 vest ratably over a four-year period, and 156,797 shares of Common
Stock issuable in settlement of accounts under the Company's Incentive Plan.

19
<PAGE> 20

UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION

The following unaudited consolidated pro forma financial information
combines the historical financial information of the Company and Gannett Outdoor
at June 30, 1996 and for the year ended December 31, 1995, the twelve month
period ended June 30, 1996 and for the six month period ended June 30, 1996,
giving effect to (i) the Transactions; (ii) the net reduction in operating
expenses of Gannett Outdoor; (iii) the effect of conforming the capitalization
of property and equipment accounting policy of Gannett Outdoor to that of the
Company; and (iv) the Offerings and the application of the net proceeds
therefrom. The pro forma consolidated balance sheet as of June 30, 1996 has been
prepared as if the Transactions and the Offerings had occurred on June 30, 1996.

The detailed assumptions used to prepare the unaudited consolidated pro
forma financial information are contained in the notes to unaudited consolidated
pro forma financial information. The unaudited consolidated pro forma financial
information reflects the use of the purchase method of accounting for the
Acquisition.

Pro forma adjustments for the Acquisition are based upon preliminary
estimates, available information and certain assumptions that the management of
the Company deems appropriate. Final adjustments may differ from the pro forma
adjustments presented herein. The unaudited consolidated pro forma financial
information does not purport to represent the results of operations or the
financial position of the Company and Gannett Outdoor that actually would have
resulted had the Acquisition occurred as of the date indicated, nor should it be
taken as indicative of the future results of the operations or future financial
position of the Company and Gannett Outdoor. The unaudited consolidated pro
forma financial information should be read in conjunction with the notes to
unaudited consolidated pro forma financial information and the separate
historical financial statements and notes thereto of the Company and Gannett
Outdoor which are contained elsewhere herein.

This pro forma data does not give effect to cost reductions that are
anticipated to be achieved subsequent to the Acquisition from (i) reductions in
facility costs arising from renegotiated rents or reduced space and the
elimination of expenses relating to terminated employees; (ii) a reduction in
labor costs arising from production efficiencies and a reduced number of direct
production and direct sales employees; and (iii) increased sales efficiencies
arising from a reorganization of the sales compensation system.

20
<PAGE> 21

OUTDOOR SYSTEMS, INC.

UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACQUISITION
------------------- AND PRO FORMA
GANNETT OFFERING NOTES OFFERING PRO FORMA
COMPANY OUTDOOR ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------- -------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS.................. $15,070 $ 81,202 $ 96,272 $ 96,272
PROPERTY AND EQUIPMENT -- Net... 112,457 132,636 $ 479,537(1) 724,630 724,630
PERPETUAL LAND EASEMENTS........ 23,674 -- 23,674 23,674
INTANGIBLE ASSETS -- Net........ -- 41,243 23,563(2) 60,000 60,000
(4,806)(1)
DEFERRED FINANCING COSTS........ 3,920 -- (3,274)(3) 17,207 $ 7,250(4) 24,457
16,561(1)
BRIDGE DEFERRED FINANCING
COSTS......................... -- -- 8,800(1) 8,800 (1,350)(4) --
(7,450)(5)
DEFERRED INCOME TAXES........... 3,827 -- 3,827 3,827
OTHER ASSETS.................... 1,597 1,175 2,772 2,772
-------- -------- --------- -------- --------- --------
TOTAL........................... $160,545 $256,256 $ 520,381 $ 937,182 $ (1,550) $ 935,632
======== ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES............. $ 7,188 $ 23,113 $ 2,580(1) $ 32,881 $ $ 32,881
-------- -------- --------- -------- --------- --------
LONG-TERM DEBT:
10.75% Senior Notes........... 114,670 -- (114,670)(1)
Senior Credit Facility........ 23,750 -- 451,250(1) 475,000 (56,334)(4) 418,666
Subordinated Credit
Facility.................... -- -- 162,766(1) 162,766 (162,766)(4)
Notes......................... -- -- 225,000(4) 225,000
Other long-term obligations... 40 -- 40 40
-------- -------- --------- -------- --------- --------
Total long-term
obligations............... 138,460 -- 499,346 637,806 5,900 643,706
-------- -------- --------- -------- --------- --------
OTHER LONG-TERM LIABILITIES..... 4,473 7,205 23,563(2) 35,241 35,241
-------- -------- --------- -------- --------- --------
Total liabilities........... 150,121 30,318 525,489 705,928 5,900 711,828
-------- -------- --------- -------- --------- --------
NET ASSETS TO BE ACQUIRED....... -- 225,938 (225,938)(1) -- --
-------- -------- --------- -------- --------- --------
STOCKHOLDERS' EQUITY (DEFICITS):
Common Stock.................. 180 -- 73(1) 253 253
Additional paid-in capital.... 33,987 -- 240,661(1) 274,648 274,648
Accumulated deficit........... (19,690 ) -- (13,330)(1) (39,594) (7,450)(5) (47,044)
(3,300)(1)
(3,274)(3)
Treasury stock................ (4,053 ) -- (4,053) (4,053)
-------- -------- --------- -------- --------- --------
Total stockholders' equity
(deficit)................. 10,424 -- 220,830 231,254 (7,450) 223,804
-------- -------- --------- -------- --------- --------
TOTAL........................... $160,545 $256,256 $ 520,381 $ 937,182 $ (1,550) $ 935,632
======== ======== ========= ======== ========= ========
</TABLE>

21
<PAGE> 22

OUTDOOR SYSTEMS, INC.

NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AT JUNE 30, 1996
(DOLLARS IN THOUSANDS)

The following explanations describe the assumptions used in determining the
pro forma adjustments necessary to present the pro forma financial position of
the Company after giving effect to the Acquisition, the Debt Tender Offer and
the Acquisition Financing.

<TABLE>
<C> <S> <C>
1. Entry records the Acquisition Financing that the Company will use to acquire
Gannett Outdoor and the use of the financing proceeds:
DEBIT
(CREDIT)
---------
Sale of 7,300,000 shares of Common Stock:
Common Stock................................................................. $ (73)
Additional paid in capital................................................... (240,661)
Increase debt as follows:
Senior Credit Facility....................................................... (451,250)
Subordinated Credit Facility................................................. (162,766)
Elimination of historical net assets of Gannett Outdoor...................... 225,938
Change in assets and liabilities resulting from allocation of purchase price:
Intangibles.................................................................. (4,806)
Property and equipment....................................................... 479,537
Increase in deferred financing costs attributable to the Bridge Financing.... 8,800
Increase in other deferred financing costs................................... 16,561
Increase in accumulated deficit due to premium paid and other costs of
tendering for 10.75% Senior Notes.......................................... 13,330
Increase in accumulated deficit due to commitment fee for preferred stock.... 3,300
Accrual for estimated severance costs for Gannett Outdoor employees to be
terminated at Acquisition date (estimated to be an average of six weeks
compensation).............................................................. (2,580)
Redemption of 10.75% Senior Notes............................................ 114,670
---------
$ 0
=========
2. Entry records the increase in intangibles (excess of costs over net assets
acquired) and deferred income taxes arising from application of SFAS No.
109 to allocation of purchase price:
Intangibles.................................................................. $ 23,563
Deferred income taxes........................................................ (23,563)
---------
$ 0
=========
3. Entry records the write-off of deferred financing cost related to the 10.75%
Senior Notes:
Write-off of deferred financing costs........................................ $ (3,274)
Increase in accumulated deficit.............................................. 3,274
---------
$ 0
=========
</TABLE>

22
<PAGE> 23

OUTDOOR SYSTEMS, INC.

NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET -- (CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<C> <S> <C>
4. Entry records the sale of Notes, the use of such proceeds and the repayment
of $56,334 under the Senior Credit Facility.
DEBIT
(CREDIT)
---------
Deferred financing costs..................................................... $ 7,250
Bridge deferred financing costs.............................................. (1,350)
Senior Credit Facility....................................................... 56,334
Subordinated Credit Facility................................................. 162,766
Notes........................................................................ (225,000)
---------
$ 0
=========
5. Entry records the write-off of the bridge deferred financing costs:
Bridge deferred financing costs.............................................. $ (7,450)
Accumulated deficit.......................................................... 7,450
---------
$ 0
=========
</TABLE>

23
<PAGE> 24

OUTDOOR SYSTEMS, INC.

UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ACQUISITION AND
HISTORICAL OFFERING ADJUSTMENTS
--------------------- ---------------------------------------
GANNETT ACQUISITION SUPPLEMENTAL PRO
COMPANY OUTDOOR ADJUSTMENTS TOTAL ADJUSTMENTS FORMA
---------- -------- ----------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising -- net................. $ 64,396 $247,271 $ (1,112)(1) $310,555 $ 310,555
Other income............................... 417 193 3,221(1) 3,831 3,831
---------- -------- -------- -------- ----------
Net revenues......................... 64,813 247,464 2,109 314,386 314,386
---------- -------- -------- -------- ----------
OPERATING EXPENSES:
Direct advertising......................... 30,462 171,091 (756)(1) 200,797 $ (4,080)(4) 174,353
(22,364)(5)
General and administrative................. 4,096 33,101 374(1) 37,571 (10,848)(6) 26,723
Depreciation and amortization.............. 9,970 17,262 172(1) 51,585 51,585
24,181(2)
---------- -------- -------- -------- -------- ----------
Total operating
expenses........................... 44,528 221,454 23,971 289,953 (37,292) 252,661
---------- -------- -------- -------- -------- ----------
OPERATING INCOME............................. 20,285 26,010 (21,862) 24,433 37,292 61,725
INTEREST EXPENSE............................. 17,199 -- 46,650(3)
1,039(1) 64,888 64,888
---------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES............ 3,086 26,010 (69,551) (40,455) 37,292 (3,163)
INCOME TAXES (BENEFIT)....................... 318 -- 318 (2,500)(7) (2,182)
---------- -------- -------- -------- -------- ----------
NET INCOME (LOSS)............................ 2,768 26,010 (69,551) (40,773) 39,792 (981)
LESS PREFERRED AND COMMON STOCK ITEMS........ (2,461) -- (2,461) (2,461)
---------- -------- -------- -------- -------- ----------
INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS............................... $ 307 $ 26,010 $ (69,551) $(43,234) $ 39,792 $ (3,442)
========== ======== ======== ======== ======== ==========
INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARES.......................... $ .02 $ (.14)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING.............. 16,949,385 24,249,385
========== ==========

PRO FORMA
NOTES OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
-------------- -----------
<S> <C> <C>
REVENUES:
Outdoor advertising -- net................. $ 310,555
Other income............................... 3,831
----------
Net revenues......................... 314,386
----------
OPERATING EXPENSES:
Direct advertising......................... 174,353

General and administrative................. 26,723
Depreciation and amortization.............. 51,585

----------
Total operating
expenses........................... 252,661
----------
OPERATING INCOME............................. 61,725
INTEREST EXPENSE.............................
(1,939)(8) 62,949
-------- ----------
INCOME (LOSS) BEFORE INCOME TAXES............ 1,939 (1,224 )
INCOME TAXES (BENEFIT)....................... 776(9) (1,406 )
-------- ----------
NET INCOME (LOSS)............................ 1,163 182
LESS PREFERRED AND COMMON STOCK ITEMS........ (2,461 )
-------- ----------
INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS............................... $ 1,163 $ (2,279 )
======== ==========
INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARES.......................... $ (.09 )
==========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING.............. 24,249,385
==========
</TABLE>

24
<PAGE> 25

OUTDOOR SYSTEMS, INC.

UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA ACQUISITION AND
HISTORICAL OFFERING ADJUSTMENTS PRO FORMA
--------------------- --------------------------------------- NOTES
GANNETT ACQUISITION SUPPLEMENTAL PRO OFFERING PRO FORMA
COMPANY OUTDOOR ADJUSTMENTS TOTAL ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
---------- -------- ----------- -------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Outdoor
advertising --
net............ $ 70,887 $249,116 $ (1,515)(1) $318,488 $ 318,488 $ 318,488
Other income..... 715 128 2,917(1) 3,760 3,760 3,760
------- ------- -------- -------- -------- --------
Net
revenues... 71,602 249,244 1,402 322,248 322,248 322,248
------- ------- -------- -------- -------- --------
OPERATING EXPENSES:
Direct
advertising.... 32,017 171,547 (982)(1) 202,582 $ (3,829)(4) 176,389 176,389
(22,364)(5)
General and
administrative... 4,302 33,146 300(1) 37,748 (11,076)(6) 26,672 26,672
Depreciation and
amortization... 10,271 17,341 9(1)
24,102(2) 51,723 51,723 51,723
------- ------- -------- -------- -------- -------- --------
Total
operating
expenses... 46,590 222,034 23,429 292,053 (37,269) 254,784 254,784
------- ------- -------- -------- -------- -------- --------
OPERATING INCOME... 25,012 27,210 (22,027) 30,195 37,269 67,464 67,464
INTEREST EXPENSE... 47,738(3)
16,111 -- 1,039(1) 64,888 64,888 $(1,939) (8) 62,949
------- ------- -------- -------- -------- -------- ------- --------
INCOME (LOSS)
BEFORE INCOME
TAXES............ 8,901 27,210 (70,804) (34,693) 37,269 2,576 1,939 4,515
INCOME TAXES
(BENEFIT)........ 2,308 -- 2,308 (2,530)(7) (222) 776(9) 554
------- ------- -------- -------- -------- -------- ------- --------
INCOME (LOSS)
BEFORE
EXTRAORDINARY
LOSS............. 6,593 27,210 (70,804) (37,001) 39,799 2,798 1,163 3,961
EXTRAORDINARY
LOSS............. (844) (844) (844) (844 )
------- ------- -------- -------- -------- -------- ------- --------
NET INCOME
(LOSS)........... 5,749 27,210 (70,804) (37,845) 39,799 1,954 1,163 3,117
LESS PREFERRED AND
COMMON STOCK
ITEMS............ (4,727) -- (4,727) (4,727) (4,727 )
------- ------- -------- -------- -------- -------- ------- --------
INCOME (LOSS)
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS..... $ 1,022 $27,210 $ (70,804) $(42,572) $ 39,799 $ (2,773) $ 1,163 $ (1,610 )
======= ======= ======== ======== ======== ======== ======= ========
INCOME (LOSS) PER
COMMON AND COMMON
EQUIVALENT
SHARES........... $ (.07) $ (.12) $ (.07 )
======= ======== ========
WEIGHTED AVERAGE
NUMBER OF COMMON
AND COMMON
EQUIVALENT SHARES
OUTSTANDING...... 15,573,117 22,873,117 22,873,117
======= ======== ========
</TABLE>

25
<PAGE> 26

OUTDOOR SYSTEMS, INC.

UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA ACQUISITION AND
HISTORICAL OFFERING ADJUSTMENTS PRO FORMA
--------------------- --------------------------------------- NOTES
GANNETT ACQUISITION SUPPLEMENTAL PRO OFFERING PRO FORMA
COMPANY OUTDOOR ADJUSTMENTS TOTAL ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
---------- -------- ----------- -------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Outdoor
advertising --
net............ $ 36,229 $117,733 $ (959)(1) $153,003 $ 153,003 $ 153,003
Other income..... 298 201 1,306(1) 1,805 1,805 1,805
---------- ------- -------- -------- ---------- ----------
Net
revenues... 36,527 117,934 347 154,808 154,808 154,808
---------- ------- -------- -------- ---------- ----------
OPERATING EXPENSES:
Direct
advertising.... 16,151 82,410 (604)(1) 97,957 $ (400)(4) 86,375 86,375
(11,182)(5)
General and
administrative... 2,213 17,169 113(1) 19,495 (5,697)(6) 13,798 13,798
Depreciation and
amortization... 5,259 8,822 (77)(1)
11,900(2) 25,904 25,904 25,904
---------- ------- -------- -------- -------- ---------- ----------
Total
operating
expenses... 23,623 108,401 11,332 143,356 (17,279) 126,077 126,077
---------- ------- -------- -------- -------- ---------- ----------
OPERATING INCOME... 12,904 9,533 (10,985) 11,452 17,279 28,731 28,731
INTEREST EXPENSE... 23,995(3)
7,929 -- 520(1) 32,444 32,444 $ (969)(8) 31,475
---------- ------- -------- -------- -------- ---------- ------- ----------
INCOME (LOSS)
BEFORE INCOME
TAXES............ 4,975 9,533 (35,500) (20,992) 17,279 (3,713) 969 (2,744 )
INCOME TAXES
(BENEFIT)........ 1,990 -- 1,990 (3,475)(7) (1,485) 388(9) (1,097 )
---------- ------- -------- -------- -------- ---------- ------- ----------
INCOME (LOSS)
BEFORE
EXTRAORDINARY
LOSS............. 2,985 9,533 (35,500) (22,982) 20,754 (2,228) 581 (1,647 )
EXTRAORDINARY
LOSS............. (844) (844) (844) (844 )
---------- ------- -------- -------- -------- ---------- ------- ----------
NET INCOME
(LOSS)........... 2,141 9,533 (35,500) (23,826) 20,754 (3,072) 581 (2,491 )
LESS PREFERRED AND
COMMON STOCK
ITEMS............ (3,461) -- (3,461) (3,461) (3,461 )
---------- ------- -------- -------- -------- ---------- ------- ----------
INCOME (LOSS)
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS..... $ (1,320) $ 9,533 $ (35,500) $(27,287) $ 20,754 $ (6,533) $ 581 $ (5,952 )
========== ======= ======== ======== ======== ========== ======= ==========
INCOME (LOSS) PER
COMMON AND COMMON
EQUIVALENT
SHARES........... $ (.08) $ (.29) $ (.26 )
========== ========== ==========
WEIGHTED AVERAGE
NUMBER OF COMMON
AND COMMON
EQUIVALENT SHARES
OUTSTANDING...... 15,573,117 22,873,117 22,873,117
========== ========== ==========
</TABLE>

26
<PAGE> 27

OUTDOOR SYSTEMS, INC.

NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995, FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)

The following explanations describe the assumptions used in determining the
pro forma adjustments necessary to present the pro forma results of operations
of the Company and Gannett Outdoor for the year ended December 31, 1995, for the
twelve months ended June 30, 1996 and for the six months ended June 30, 1996.

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996
------------ ------------- ------------
<S> <C> <C> <C>
(1) Entry records pro forma changes in
revenues and expenses arising from the
Bench Ad Acquisition and the CSX Assets
Acquisition in 1996, less revenues and
expenses of outdoor advertising structures
of the Company in Denver that will be sold
in the Denver Disposition:
Revenues.................................. $ (1,112) $ (1,515) $ (959)
Other income.............................. 3,221 2,917 1,306
Direct advertising........................ (756) (982) (604)
General and administrative................ 374 300 113
Depreciation and amortization............. 172 9 (77)
Interest.................................. 1,039 1,039 520
Interest reflects the cost of such acquisitions at the Company's average borrowing rate
less interest on the proceeds from the sale of the certain outdoor advertising structures
that will be sold.
(2) Entry records the increase in depreciation
and amortization expense arising from
purchase accounting adjustments as
follows:
</TABLE>

<TABLE>
<CAPTION>
ASSETS AMORTIZATION PERIOD
--------------------- ---------------------
<S> <C> <C> <C> <C>
Advertising
structures 20 years $ 39,443 $ 39,443 $ 19,722
Goodwill 30 years 2,000 2,000 1,000
--------
Total....................................... 41,443 41,443 20,722
Amount recorded in financial statements..... 17,262 17,341 8,822
--------
Pro forma adjustment........................ $ 24,181 $ 24,102 $ 11,900
========
</TABLE>

27
<PAGE> 28

OUTDOOR SYSTEMS, INC.

NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996
------------ ------------- ------------
<C> <S> <C> <C> <C>
(3) Entry records additional interest expense
and amortization of debt discount expense
on the debt to be issued in connection
with the acquisition less interest on the
10.75% Senior Notes anticipated to be
redeemed, as follows:
Interest expense:
Senior Credit Facility.................... $ 41,895 $ 41,895 $ 20,947
Subordinated Credit Facility.............. 18,718 18,718 9,359
Less interest on 10.75% Senior Notes
and existing senior credit
facility........................... (17,199) (16,111) (7,929)
Amortization of deferred financing
costs.............................. 3,236 3,236 1,618
------------ ------------- ------------
Total interest expense.................... $ 46,650 $ 47,738 $ 23,995
=========== ============= ===========
It is anticipated that the total amount of the bridge deferred financing costs will be
written off when the Bridge Financing is redeemed.
(4) Entry records a decrease in direct
advertising expenses due to differences in
fixed asset capitalization policies....... $ 4,080 $ 3,829 $ 400
=========== ============= ===========
(5) Entry records a decrease in payroll and
payroll related costs due to termination
of employees at date of Acquisition or as
soon as permitted under applicable laws
due to:
Elimination of production and sales
overhead functions................... $ 7,724 $ 7,724 $ 3,862
Consolidation of Canadian production
facility............................. 1,640 1,640 820
Elimination of production support
positions............................ 2,591 2,591 1,295
Elimination of national sales and
marketing support positions.......... 5,053 5,053 2,527
Elimination of administrative support
positions............................ 5,356 5,356 2,678
------------ ------------- ------------
$ 22,364 $ 22,364 $ 11,182
=========== ============= ===========
Amounts for 1995 and the twelve months ended June 30, 1996 have been determined based upon
specific employees identified for termination plus benefits estimated to be 30% of payroll.
Amounts for the six months ended June 30, 1996 have been determined based upon 50% of 1995
amounts.
</TABLE>

28
<PAGE> 29

OUTDOOR SYSTEMS, INC.

NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996
------------ ------------- ------------
<C> <S> <C> <C> <C>
(6) Entry records a decrease in payroll and
payroll related costs due to termination
of employees at date of acquisition or as
soon as permitted under applicable laws
due to:
Elimination of national office
functions................................. $ 4,162 $ 4,162 $ 2,081
Consolidation of accounting and
administrative functions to eliminate
positions or duplicate
efforts.............................. 5,770 5,770 2,885
------------ ------------- ------------
9,932 9,932 4,966
Expenses of national office to be
closed.................................... 916 1,144 731
------------ ------------- ------------
$ 10,848 $ 11,076 $ 5,697
=========== ============= ===========
Amounts for 1995 and the twelve months ended June 30, 1996 have been determined based upon
specific employees identified for termination plus benefits estimated to be 30% of payroll.
Amounts for the six months ended June 30, 1996 have been determined based upon 50% of 1995
amounts adjusted for known changes and actual expenses of the national office.
(7) Entry records the income tax effect of pro
forma adjustments at a blended rate of
40%....................................... $ (2,500) $ (2,530) $ (3,475)
=========== ============= ===========
(8) Entry records interest expense to reflect
the issuance of $225,000 of Notes and the
repayment of $56,334 under the Senior
Credit Facility.
Senior Credit Facility.................... $ 36,803 $ 36,803 $ 18,402
Notes..................................... 23,063 23,063 11,532
Amortization of deferred financing
costs..................................... 3,083 3,083 1,541
Less interest reflected in pro forma...... (64,888) (64,888) (32,444)
------------ ------------- ------------
$ (1,939) $ (1,939) $ (969)
=========== ============= ===========
(9) Entry records the income tax effect of pro
forma adjustments at a blended rate of
40%....................................... $ 776 $ 776 $ 388
=========== ============= ===========
</TABLE>

29
<PAGE> 30

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA(1)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated financial data presented below were derived from
the audited consolidated financial statements of the Company for the five years
ended December 31, 1995 and the unaudited interim consolidated financial
statements for the six-month periods ended June 30, 1995 and 1996. The financial
statements of the Company for the three years in the period ended December 31,
1995 and as of December 31, 1994 and 1995 were audited by Deloitte & Touche LLP,
independent auditors, as indicated in their report included elsewhere in this
Prospectus. The selected balance sheet data as of June 30, 1995 and 1996 and
statement of operations data for the six months ended June 30, 1995 and 1996 are
unaudited, but, in the opinion of management of the Company, reflect all
adjustments (consisting only of normal, recurring adjustments) necessary for
fair presentation of results for such periods. Results for these periods are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(2)................ $ 30,439 $ 44,886 $ 49,151 $ 52,077 $ 64,813 $ 29,738 $ 36,527
Operating Expenses:
Direct advertising
expenses................... 15,341 21,781 23,721 24,433 30,462 14,596 16,151
General and administrative
expenses................... 1,989 2,238 2,777 3,357 4,096 2,007 2,213
Depreciation and
amortization............... 9,706 12,350 10,421 9,165 9,970 4,958 5,259
Gain on 1994 Disposal.......... -- -- -- 4,325 -- -- --
Operating income............... 3,403 8,517 12,232 19,447 20,285 8,177 12,904
Interest expense............... 7,657 9,526 11,894 16,393 17,199 9,017 7,929
Income (loss) before
extraordinary item and change
in accounting principle(3)... (4,254) (955) 111 1,333 2,768 (840) 2,985
Net income (loss).............. (4,254) 5,775 (3,176) 1,333 2,768 (840) 2,141
Net income (loss) attributable
to common stockholders....... (7,182) 1,937 (5,748) (263) 307 (2,035) (1,320)
Net income (loss) per common
share(4)..................... $ (.47) $ 0.10 $ (0.39) $ (0.02) $ 0.02 $ (0.12) $ (0.08)
Shares used in computing per
share computations(4)........ 15,272,250 18,844,920 14,819,223 14,064,269 16,949,385 16,834,464 15,573,117
OTHER DATA:
EBITDA(5)...................... $ 13,109 $ 20,867 $ 22,653 $ 24,287 $ 30,255 $ 13,135 $ 18,163
EBITDA margin(6)............... 43.1% 46.5% 46.1% 46.6% 46.7% 44.2% 49.7%
Capital expenditures........... $ 3,311 $ 5,382 $ 4,387 $ 4,924 $ 7,070 $ 4,251 $ 2,891
Number of advertising
displays..................... 8,200 10,700 10,800 11,900 12,700 12,000 18,000
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital................ $ 7,639 $ 5,218 $ 13,967 $ 15,022 $ 8,221 $ 10,681 $ 7,882
Total assets................... 108,621 129,651 129,433 151,260 138,213 144,599 160,545
Total debt..................... 99,608 109,283 129,812 155,204 142,269 151,021 138,633
Common stockholders' equity
(deficit).................... (25,607) (23,769) (28,811) (29,074) (28,767) (31,110) 10,424
</TABLE>

- ---------------
(1) Prior to the Acquisition, the Company consummated significant acquisitions
during each of 1991, 1992 and 1994. In December 1994, the Company
consummated the Atlanta Transaction. In addition, in 1993 the Company
refinanced a substantial portion of its indebtedness with 10.75% Senior
Notes. Accordingly, operating results are not necessarily comparable on a
year-to-year basis. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
(2) Net revenues are gross revenues minus agency commissions, plus other income
of $1.0 million and $0.4 million for the years ended December 31, 1994 and
1995, and $0.3 million for the six months ended June 30, 1996.
(3) Deferred financing costs of $3.3 million and $0.8 million associated with
borrowings which were retired or redeemed were charged as an extraordinary
loss during 1993 and the six months ended June 30, 1996, respectively. As of
January 1, 1992, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109 Accounting for Income Taxes. SFAS No. 109 allows
the income tax consequences resulting from the utilization of net operating
loss carry forwards to be recorded as a

30
<PAGE> 31

deferred asset. The cumulative effect of this change in accounting principle
was a one-time credit to income of $6.7 million in the first quarter of
1992. See "Management's Discussion and Analysis of Results of Operations and
Financial Condition."
(4) Weighted average share amounts have been adjusted to reflect the
three-for-two Common Stock split effected in the form of a stock dividend
paid on July 22, 1996.
(5) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense and, in 1994, before the gain on the 1994 Disposal.
While EBITDA should not be considered in isolation or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with generally accepted
accounting principles, or as a measure of profitability or liquidity,
management understands that it is customarily used by certain investors as
one measure to evaluate the financial performance of companies in the
outdoor advertising industry.
(6) "EBITDA margin" is EBITDA stated as a percentage of net revenues.

31
<PAGE> 32

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
Prospectus. The following discussion contains certain forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in "Risk
Factors," "Business" and elsewhere in this Prospectus, including, without
limitation, risks and uncertainties relating to leverage, the need for
additional funds, consummation and integration of the Acquisition, the ability
of the Company to achieve certain cost savings, the management of growth and the
popularity of outdoor advertising as an advertising medium.

Except as otherwise indicated, the following discussion relates to Outdoor
Systems on an historical basis, without giving effect to the Acquisition.

GENERAL

The performance of an outdoor advertising business, such as the Company, is
often measured by its ability to generate EBITDA. EBITDA is defined as operating
income (loss) before depreciation and amortization expense and, with respect to
1994, before the gain on the 1994 Disposal. Although EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting
principles, the Company believes that EBITDA is accepted by the outdoor
advertising industry as a generally recognized measure of performance and is
used by analysts who report publicly on the performance of outdoor advertising
companies. Nevertheless, this measure should not be considered in isolation or
as a substitute for operating income, net income, net cash provided by operating
activities or any other measure for determining the Company's operating
performance or liquidity which is calculated in accordance with generally
accepted accounting principles.

Revenues are a function of both the occupancy of the Company's outdoor
advertising display inventory (the amount of time that its display faces contain
advertisements) and the rates that the Company charges for use of its display
faces. Accordingly, the Company focuses its sales efforts on attaining an
optimal "mix" of occupancy and rates in order to maximize revenues, and believes
that there are opportunities for additional improvements to its occupancy and
rate mix with respect to its entire inventory.

Net revenues are gross revenues less commissions paid to advertising
agencies that contract for the use of advertising display faces on behalf of
advertisers plus other income arising from the Company's operations. Advertisers
typically contract for advertising space through agencies, although in some
cases the Company sells advertising space directly to local or national
advertisers. Agency commissions are typically 15% of gross revenues on local
sales and 16 2/3% of gross revenues on national sales. The Company does not
consider agency commissions as "operating expenses," and measures its operating
performance based upon percentages of net revenues rather than gross revenues.

The Company's most significant operating expenses are direct advertising
expenses and general and administrative expenses. Direct advertising expenses
consist of rental payments to property owners for use of land on which
advertising display faces are located, production expenses and selling expenses.
Production expenses consist of salaries for operations personnel and real estate
representatives, materials and supplies used in the preparation and display of
advertising copy, annual permits, property taxes and other similar expenses.
Selling expenses consist of salaries and commissions for salespeople, travel and
entertainment relating to sales, sales administration and other similar
expenses. The Company's general and administrative expenses consist of expenses
related to accounting, administrative functions, insurance, bad debts and other
similar expenses.

32
<PAGE> 33

The Company had Federal income tax net operating losses of approximately
$17.5 million as of December 31, 1995, which will expire over a period of years
beginning in 2003. The Company expects that the annual limit for use of its net
operating losses will be approximately $9.0 million for 1996 and 1997. See Note
8 to the Consolidated Financial Statements. Management believes that the
Company's taxable income will be sufficient to use the $17.5 million of net
operating losses prior to their expiration in 2009. However, there can be no
assurances that the Company will generate taxable income in the future.

CERTAIN EFFECTS OF THE ACQUISITION

The Company currently owns and operates approximately 18,000 advertising
display faces in eight metropolitan United States markets. Following completion
of the Acquisition, the Company will own and operate approximately 58,000
advertising display faces located in 22 metropolitan markets in the United
States and seven metropolitan markets in Canada. Management believes that upon
the successful consolidation of Gannett Outdoor with the existing business of
Outdoor Systems, the Company's position as a leading provider of outdoor
advertising services will be significantly enhanced.

Certain Cost Savings. The Company believes that the consolidation of
certain administrative, sales management and leasing management functions will
result in certain cost savings, including the reduction and consolidation of
duplicative (i) production and sales overhead functions, (ii) production and
administrative support positions, (iii) national sales and marketing support
functions, and (iv) accounting and administrative functions. The Company
believes it will achieve additional cost savings by closing one of Gannett
Outdoor's production facilities in Canada and by consolidating the Canadian
accounting and administrative functions.

The Company believes that, had such cost savings been implemented as of
January 1, 1995, such savings would have approximated $33.2 million and $16.9
million in the aggregate during the fiscal year ended December 31, 1995 and the
six months ended June 30, 1996, respectively, as detailed below.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Elimination of production and sales overhead functions...... $ 7,724 $ 3,862
Elimination of production support positions................. 2,591 1,295
Elimination of national sales and marketing support
positions................................................. 5,053 2,527
Elimination of administrative support positions............. 5,356 2,678
Consolidation of Canadian production facilities............. 1,640 820
Elimination of national office.............................. 5,078 2,812
Consolidation of accounting and administrative positions.... 5,770 2,885
------------ ------------
$ 33,212 $ 16,879
=========== ===========
</TABLE>

In addition to these cost savings, the Company believes that subsequent to
the Acquisition it may be able to achieve additional cost savings arising from
(i) reductions in facility costs arising from renegotiated rents or reduced
space and the reduction of expenses relating to terminated employees, (ii) a
reduction in labor costs arising from production efficiencies and a reduced
number of direct production and direct sales employees, and (iii) increased
sales efficiencies arising from a revision of the sales compensation system.

While management believes that such cost savings are achievable, the
Company's ability to achieve such cost savings is uncertain and subject to
numerous factors, many of which are beyond the Company's control. There can be
no assurance that the Company will realize any such cost savings or that the
realization of such cost savings will not be delayed over an extended period of
time. In addition, the Company may discover currently unknown issues regarding
the cost savings plan after completion of the Acquisition. See "Risk
Factors -- Challenges of Business Integration."

33
<PAGE> 34

Certain Costs Associated with the Acquisition. The Company will incur
significant additional costs as a result of the Acquisition. The Acquisition
Financing will significantly increase the Company's interest expense, adding
approximately $505 million to the Company's total indebtedness assuming
completion of the Offerings. Depreciation and amortization expense also will
increase significantly. The Company will record goodwill and other intangible
assets of approximately $60 million in connection with the Acquisition, which
will be amortized over a period of 30 years. In addition, the cost basis of
advertising structures acquired by the Company from Gannett will increase by
approximately $480 million over the $132.6 million historic cost basis, which
will be amortized over 20 years.

Possible Revenue Enhancement. The Company also believes that there are
significant opportunities for revenue enhancement in its combined operations
after completion of the Acquisition. The increased presence in North America
resulting from the Acquisition should allow the Company to better market its
services to national advertisers through direct sales efforts offering access to
multiple markets. In addition, the Company believes that its operating and sales
strategies will allow it to improve utilization of the Gannett Outdoor
advertising display faces. See "Risk Factors -- Challenges of Business
Integration."

RESULTS OF OPERATIONS

Comparison of Six Months Ended June 30, 1995 and June 30, 1996

Gross revenues increased 22.6% from $34.2 million during the first six
months of 1995 to $41.9 million in the first six months of 1996. This increase
was attributable to increased revenue in all markets, particularly in Atlanta
where the Company has experienced continued growth since the 1994 Acquisition,
and partially to revenues from the acquisition of bus benches and to revenues
from license fees from the acquisition of perpetual easements.

Agency commissions were 13.1% and 13.6% of gross revenues in the first six
months of 1995 and the first six months of 1996, respectively, primarily as a
result of a slightly higher proportion of revenues generated through advertising
agencies in 1996.

Net revenues, including recurring revenues from use licenses acquired with
perpetual easements in May 1996, increased by 22.8% from $29.7 million in the
first six months of 1995 to $36.5 million in the first six months of 1996,
primarily as a result of the increase in gross revenues.

Direct advertising expenses decreased by 4.9% as a percentage of net
revenues from 49.1% in the first six months of 1995 to 44.2% in the first six
months of 1996. This was primarily a result of increased net revenue coverage of
fixed costs included in direct advertising expenses.

General and administrative expenses decreased as a percentage of net
revenues from 6.7% for the first six months of 1995 to 6.1% for the first six
months of 1996. This decrease was due primarily to increased net revenue
coverage of fixed costs included in general and administrative expenses.

As a result of the above factors, EBITDA increased by 38.3% from $13.1
million for the first six months of 1995 to $18.2 million for the first six
months of 1996.

Depreciation and amortization expense increased by 6.1% from $5.0 million
in the first six months of 1995 to $5.3 million in the first six months of 1996,
primarily due to depreciation expense associated with small acquisitions in New
Orleans and Atlanta in the last half of 1995 and in Denver in April 1996, and
amortization expense associated with the May 1996 acquisition of perpetual
easements in the Atlanta market.

Interest expense deceased by 12.1% from $9.0 million in the first six
months of 1995 to $7.9 million in the first six months of 1996, primarily
because of the repayment of subordinated notes and the repayment of borrowings
under the Existing Senior Credit Facility as a result of the Company's initial
public offering completed in April 1996.

Income before income taxes and extraordinary loss increased from a loss of
$0.8 million in the first six months of 1995 to income of $5.0 million in the
first six months of 1996, primarily due to increased revenues and decreased
interest expense.

34
<PAGE> 35

The Company recorded no income tax benefit for the first six months of 1995
compared to an income tax provision of approximately $2.0 million in the first
six months of 1996. The Company reported a $0.8 million extraordinary loss, net
of $0.6 million tax benefit, in the first six months of 1996 resulting from the
redemption of subordinated notes.

The foregoing factors contributed to the change in net income (loss) from a
net loss of $0.8 million for the first six months of 1995 to net income of $2.1
million for the first six months of 1996.

Comparison of Years Ended December 31, 1994 and December 31, 1995

Operating results for 1995 included a full twelve months of revenues from
the 1994 Acquisition, which was completed in December 1994. Gross revenues
increased by 26.3% from $59.2 million in 1994 to $74.7 million in 1995.
Approximately 73% of this increase in gross revenues was attributable to the net
increase in revenues from the 1994 Acquisition, with the remaining 27% of such
increase resulting from increased revenues in all other markets. The inclusion
of a full year of operating results from the 1994 Acquisition was the primary
reason for the increases in agency commissions, direct advertising expenses,
general and administrative expenses and EBITDA.

Agency commissions increased by 27.5% from $8.1 million in 1994 to $10.3
million in 1995. As a percentage of gross revenues, agency commissions increased
from 13.6% in 1994 to 13.8% in 1995 as a result of a slightly higher proportion
of revenues generated through advertising agencies.

Net revenues increased by 24.5% from $52.1 million in 1994 to $64.8 million
in 1995, primarily as a result of the increase in gross revenues which was
partially offset by the reduction of other income from $1.0 million in 1994 to
$0.4 million in 1995.

Direct advertising expenses increased by 24.7% from $24.4 million in 1994
to $30.5 million in 1995, primarily as a result of expenses associated with
increased net revenues. As a percentage of net revenues, direct advertising
expense was approximately 47.0% in both 1994 and 1995.

General and administrative expenses increased by 22.0% from $3.4 million in
1994 to $4.1 million in 1995, primarily due to increased provisions for bad
debts and increases in incentive and management compensation in 1995. As a
percentage of net revenues, general and administrative expenses decreased from
6.4% in 1994 to 6.3% in 1995, primarily due to increased net revenues.

As a result of the above factors, EBITDA increased by 24.6% from $24.3
million in 1994 to $30.3 million in 1995.

Depreciation and amortization expenses increased by 8.8% from $9.2 million
in 1994 to $10.0 million in 1995, primarily due to the net increase in
depreciation as a result of the 1994 Acquisition which was offset in part by
certain assets becoming fully depreciated during 1995. As a percentage of net
revenues, depreciation and amortization expense decreased from 17.6% in 1994 to
15.4% in 1995.

Interest expense increased by 4.9% from $16.4 million in 1994 to $17.2
million in 1995, as a result of interest expense related to obligations incurred
in connection with the 1994 Acquisition. As a percentage of net revenues,
interest expense decreased from 31.5% in 1994 to 26.5% in 1995, primarily due to
the increase in net revenues.

Income before taxes and extraordinary item was approximately $3.1 million
for both 1994 and 1995. Included in 1994 income before taxes and extraordinary
item was a $4.3 million gain on the 1994 Disposal. Disregarding the effect of
this gain, income before taxes and extraordinary item increased from a loss of
$1.3 million in 1994 to income of $3.1 million in 1995.

The Company recorded an income tax provision of $1.7 million in 1994 and
$0.3 million in 1995. The low effective tax rate in 1995 is the result of
reversing a $1.1 million valuation allowance for deferred income taxes. See Note
8 to the Consolidated Financial Statements.

The foregoing factors contributed to the increase of net income by 107.7%
from $1.3 million in 1994 to $2.8 million in 1995.

35
<PAGE> 36

Comparison of Years Ended December 31, 1993 and December 31, 1994

Gross revenues increased by 4.5% from $56.6 million for 1993 to $59.2
million in 1994, primarily as a result of increased sales in 1994 but also due
to the inclusion of a partial month of revenues from the 1994 Acquisition.
Approximately 42% of the increase in gross revenues was attributable to the net
increase in revenues from operations acquired in the 1994 Acquisition, with the
remaining 58% of such increase resulting from increased revenues in the
Company's other markets. During 1994, the Company continued to replace 1993
reductions in tobacco revenues with increases in sales to other customers,
principally to consumer product companies, financial institutions and
professional service firms.

Agency commissions increased by 8.1% from $7.5 million in 1993 to $8.1
million in 1994 as a result of the increase in gross revenues. As a percentage
of gross revenues, agency commissions increased from 13.2% during 1993 to 13.6%
in 1994, primarily due to a slightly higher proportion of revenues being
generated through advertising agencies.

Net revenues increased by 5.9% from $49.2 million in 1993 to $52.1 million
in 1994, due to the increase in gross revenues and the early termination of an
agreement entered into in connection with an acquisition in 1992 in exchange for
a cash payment of $1.0 million, which has been included in other income.

Direct advertising expenses increased by 3.0% from $23.7 million in 1993 to
$24.4 million in 1994, primarily as a result of expenses associated with
increases in net revenues. As a percentage of net revenues, direct advertising
expenses decreased from 48.3% in 1993 to 47.0% in 1994, primarily due to
increases in net revenues as well as operating efficiencies.

General and administrative expenses increased by 20.9% from $2.8 million in
1993 to $3.4 million in 1994, primarily due to increased provisions for bad
debts in 1994, the inclusion of operating results of the 1994 Acquisition and
increased expenses associated with incentive and management compensation. As a
percentage of net revenues, general and administrative expenses increased from
5.6% in 1993 to 6.4% in 1994.

As a result of the above factors, EBITDA increased by 7.2% from $22.7
million in 1993 to $24.3 million in 1994.

Depreciation and amortization expenses decreased by 12.1% from $10.4
million in 1993 to $9.2 million in 1994, primarily due to full depreciation of
certain assets in 1994. As a percentage of net revenues, depreciation and
amortization expenses decreased from 21.2% in 1993 to 17.6% in 1994.

Interest expense increased by 37.8% from $11.9 million in 1993 to $16.4
million in 1994, primarily as a result of additional interest expense on the
Senior Notes which were outstanding for the full year of 1994. As a percentage
of net revenues, interest expense increased from 24.2% in 1993 to 31.5% in 1994.

Income before taxes and extraordinary item increased from $0.3 million in
1993 to $3.1 million in 1994. Included in 1994 income before taxes and
extraordinary item was a $4.3 million gain on the 1994 Disposal. Disregarding
the effect of this gain, income before taxes and extraordinary item decreased
from $0.3 million in 1993 to a loss of $1.3 million in 1994, primarily due to
increased interest expense relating to debt incurred in connection with the 1994
Acquisition.

The Company recorded an income tax provision of $0.2 million in 1993
compared to $1.7 million in 1994, as a result of the higher pre-tax income in
1994 from the gain on the 1994 Disposal. See Note 2 to the Consolidated
Financial Statements. The Company reported a $3.3 million extraordinary loss in
1993 resulting from the write-off of deferred financing costs associated with
borrowings which were retired or redeemed during 1993.

The foregoing factors contributed to the Company's $3.2 million net loss in
1993 compared to $1.3 million net income in 1994.

36
<PAGE> 37

LIQUIDITY AND CAPITAL RESOURCES

On August 17, 1993, the Company sold to the public $115.0 million of the
Existing Notes and entered into a senior credit facility (the "Existing Senior
Credit Facility") permitting borrowings of up to $25.0 million. On December 19,
1994, the permitted borrowings under the Existing Senior Credit Facility were
increased to $40.0 million to permit the Company to finance the 1994
Acquisition. The availability of borrowings under the Existing Senior Credit
Facility are subject to compliance with certain financial ratios, and scheduled
reductions in permitted borrowings of $8.0 million per year will reduce
availability and require annual principal repayments commencing in December
1996. The Existing Senior Credit Facility is scheduled to terminate on December
31, 1999. At the Company's option, the revolving loans under the Existing Senior
Credit Facility bear interest at a floating market interest rate. During 1995,
the Company repaid $12.8 million on its Existing Senior Credit Facility, leaving
$19.0 million available for borrowing as of December 31, 1995. The Existing
Senior Credit Facility is being amended and restated and will become the Senior
Credit Facility upon the consummation of the Acquisition Financing. The Senior
Credit Facility provides for revolving credit loans of up to $60 million prior
to exercise of the Houston Option and $70 million thereafter. The revolving
credit loan commitment automatically reduces on December 31 of each year by an
amount of $10 million, commencing on December 31, 1998, to and including
December 31, 2000, and by an amount of $40 million on December 31, 2001. The
Company may prepay revolving credit loans and reborrow (up to the amount of the
revolving credit loan commitment then in effect, subject to certain conditions)
any amounts that are repaid or prepaid.

The Senior Credit Facility provides for a total term loan commitment of
$460 million, subject to reduction if the Company and its subsidiaries do not
satisfy a certain leverage ratio at closing. The term loans are payable in
quarterly installments on March 31, June 30, September 30 and December 31 of
each year commencing on March 31, 1997, with the final installment due on
December 31, 2003. See "Description of Indebtedness and Other
Commitments -- Acquisition Financing." The revolving credit loans and term loans
may, at the option of the Company, bear interest at a rate per annum equal to
the Eurodollar Rate (as defined in the Senior Credit Facility) plus an
applicable margin (initially 3.25% for revolving credit loans and $160 million
of the term loans and 3.5% for the remaining term loans) or a rate per annum
equal to the ABR (as defined in the Senior Credit Facility) plus an applicable
margin (initially 2.25% for revolving credit loans and $160 million of term
loans and 2.5% for the remaining term loans).

The Company has entered into the Subordinated Credit Facility which
provides for bridge loans of up to $240 million. If and to the extent
consummated, proceeds of the Notes Offering will be used to retire amounts
outstanding under the Subordinated Credit Facility.

The Company's working capital was $15.0 million and $8.2 million at
December 31, 1994 and 1995, respectively, and $7.9 million at June 30, 1996. The
decrease in working capital from December 31, 1994 to December 31, 1995 and from
December 31, 1995 to June 30, 1996 resulted primarily from a reduction in
accounts receivable as a result of improved collection efforts, the proceeds of
which were used to reduce the amount outstanding under the Company's Existing
Senior Credit Facility. After giving effect to the Acquisition, the Company's
pro forma working capital at June 30, 1996 would have increased by $55.5
million.

Net cash provided by operating activities increased from $11.5 million for
the year ended December 31, 1994 to $18.6 million for the year ended December
31, 1995, and increased from $7.1 million for the six months ended June 30, 1995
to $12.6 million for the six months ended June 30, 1996, primarily due to the
decrease in accounts receivable as well as higher income in 1995 and in the
first six months of 1996 compared to 1994 and the first six months of 1995. Net
cash used in investing activities decreased from $27.6 million in 1994 to $6.3
million in 1995, and increased from $4.3 million in the first six months of 1995
to $26.2 million in the first six months of 1996, primarily due to the net
expenditure in 1994 of $22.6 million in connection with the Atlanta Transactions
and expenditures in 1996 in connection with the CSX Assets Acquisition and the
Bench Ad Acquisition.

37
<PAGE> 38

Net cash provided by financing activities was $17.7 million in 1994 compared to
$14.2 million in 1995, and net cash used in financing activities was $4.9
million for the first six months of 1995 compared to net cash provided by
financing activities of $14.6 million for the first six months of 1996. The
changes from 1994 to 1995 were primarily due to the repayment of debt during
1995 as compared to net borrowings of $21.1 million in 1994 under its Existing
Senior Credit Facility to finance the 1994 Acquisition. The changes for the six
month periods were primarily due to the borrowings under the Existing Senior
Credit Facility used to finance the CSX Assets Acquisition and the completion of
the Company's initial public offering in April 1996.

The Company completed its initial public offering (the "IPO") of 4,016,088
shares of its Common Stock on April 24, 1996, resulting in proceeds to the
Company of $37.4 million. The holders of the Common Stock Subject to Put Option
sold their shares upon the completion of the IPO, resulting in the removal of
the put option. The removal of the put option resulted in the liability
representing the Common Stock Subject to Put Option being credited to
stockholders' equity. The Company utilized a portion of the net proceeds from
the IPO to redeem at par or face value all of the outstanding Class A Preferred
Stock and the 1990 Subordinated Notes which were also held by these
stockholders. The Company utilized the remaining portion of the net proceeds to
redeem at par value all of the outstanding Class B Preferred Stock and the
Junior Subordinated Exchange Notes, and to repay $17.0 million of the Existing
Senior Credit Facility.

The Company made approximately $4.9 million of capital expenditures in 1994
compared to approximately $7.1 million in 1995 and approximately $4.3 million
for the first six months of 1995 compared to approximately $2.9 million in the
first six months of 1996. On a pro forma basis giving effect to the Acquisition,
capital expenditures were $21.7 million in 1995 and $8.0 million in the first
six months of 1996. Currently, except for the Acquisition, the Company has no
material commitments for capital expenditures, although it expects ongoing
capital expenditures in the ordinary course of business relating to its display
inventory to continue and to be in amounts not materially greater than the pro
forma amounts of such capital expenditures in 1995.

The Company believes that the net proceeds of this Offering and the Notes
Offering, internally generated funds and amounts available under the Senior
Credit Facility will be sufficient to satisfy its operating cash requirements
and make required interest and principal payments under the Senior Credit
Facility and the Notes for the next twelve to twenty-four months. The Company
may, however, require additional capital through borrowings or securities
offerings if the Notes Offering is not concluded, the Company is not successful
in integrating Gannett Outdoor or the Company requires funding for additional
acquisitions. There can be no assurance that such capital will be available.

INFLATION

Because a significant portion of the Company's costs are fixed, the Company
does not believe that inflation has had or will have a material adverse effect
on its operations. However, there can be no assurance that a high rate of
inflation in the future will not have an adverse effect on the Company's
operations.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, which established a new accounting principle for accounting for
the impairment of certain loans, certain investments in debt and equity
securities, long-lived assets that will be held and used including certain
identifiable intangibles and goodwill related to those assets, and long-lived
assets and certain identifiable intangibles to be disposed of. While the Company
has not completed its evaluation of the impact that will result from adopting
this statement, it does not believe that adoption of the statement will have a
significant impact on the Company's financial position and results of
operations. In addition, the Financial Accounting Standards Board issued SFAS
No. 123, Accounting for Stock-Based Compensa-

38
<PAGE> 39

tion, which allows a Company to record stock-based compensation on the basis of
fair value. The Company will not change to the fair value method and will
continue to use Accounting Principles Board Opinion No. 25 for measurement and
recognition of employee stock based compensation. The Company will present in
its annual financial statements the additional disclosures required under SFAS
No. 123.

39
<PAGE> 40

BUSINESS

GENERAL

Upon completion of the Acquisition, the Company will be the largest outdoor
advertising company in North America, operating approximately 58,000 advertising
display faces in 22 metropolitan markets in the United States and seven
metropolitan markets in Canada. The Company will have significant operations in
seven of the ten largest United States markets and six of the ten largest
Canadian markets. Through the Acquisition, the Company will significantly
increase its presence in North America and diversify into additional major
metropolitan markets following the Acquisition.

INDUSTRY OVERVIEW

The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $1.8 billion in 1995, or approximately 1.1% of the
total advertising expenditures in the United States, and the out-of-home
advertising industry generated revenues in excess of $3.0 billion in 1995,
according to estimates by the OAAA. Outdoor advertising's 1995 revenues
represent growth of approximately 8.2% over estimated total revenues for 1994,
which compares favorably to the growth of total U.S. advertising expenditures of
approximately 7.7% during the same period.

Advertisers purchase outdoor advertising for a number of reasons. Outdoor
advertising offers repetitive impact and a relatively low cost
per-thousand-impressions, a commonly used media measurement, as compared to
television, radio, newspaper, magazines and direct mail marketing. Accordingly,
because of its cost-effective nature, outdoor advertising is a good vehicle to
build "mass market" support. In addition, outdoor advertising can be used to
target a defined audience in a specific location and, therefore, can be relied
upon by local businesses concentrating on a particular geographic area where
customers have specific demographic characteristics. For instance, restaurants,
motels, service stations and similar roadside businesses may use outdoor
advertising to reach potential customers close to the point of sale and provide
directional information. Other local businesses such as television and radio
stations and consumer products companies may wish to appeal more broadly to
customers and consumers in the local market. National brand name advertisers may
use the medium to attract customers generally and build brand awareness. In all
cases, outdoor advertising can be combined with other media such as radio and
television to reinforce messages being provided to consumers.

The outdoor advertising industry has experienced significant changes due to
a number of factors. First, the entire "out-of-home" advertising category has
expanded to include, in addition to traditional billboards and roadside
displays, displays in shopping centers and malls, airports, stadiums, movie
theaters and supermarkets, as well as on taxis, trains, buses and subways.
Second, while the outdoor advertising industry has experienced a decline in the
use of outdoor advertising by tobacco companies, it has increased its visibility
with and attractiveness to local advertisers as well as national retail and
consumer products-oriented companies. Third, the industry has benefited
significantly from improvements in production technology, including the use of
computer printing, vinyl advertising copy and improved lighting techniques,
which have facilitated a more dynamic, colorful and creative use of the medium.
This technological advance has permitted the outdoor advertising industry to
respond more promptly and cost effectively to the changing needs of its
advertising customers and to make greater use of advertising copy used in other
media. Lastly, the outdoor advertising industry has benefited from the growth in
automobile travel time for business and leisure due to increased highway
congestion and continued demographic shifts of residences and businesses from
the cities to outlying suburbs. The Company believes that the foregoing trends
have resulted in increased consumer exposure to existing billboard structures at
a time when other media have been fragmenting their audiences as the number of
broadcast and cable networks and other narrowly targeted formats has increased.

40
<PAGE> 41

An expanding opportunity within the out-of-home advertising industry is
transit advertising. Local governments are providing transit shelters and
benches to enhance the service and image of local transit systems and these
locations, as well as buses, are increasingly being used for out-of-
home-advertising. Municipalities have begun to issue contracts for transit
displays on bus shelters, subways, benches and buses to private enterprises.
Under these contracts, the private party constructs the shelters or benches,
which it can use for advertising displays. The primary benefits of privatizing
transit advertising are the avoidance of capital expenditures by the
municipality, the prospect of additional revenue for the municipality, the
consistent quality that a coordinated transit program can provide and the
benefits of regular cleaning and maintenance undertaken by private enterprises.

The outdoor advertising industry is comprised of several large outdoor
advertising and media companies with operations in multiple markets, as well as
many smaller and local companies operating a limited number of structures in a
single or a few local markets. While the industry has experienced some
consolidation within the past few years, the OAAA estimates that there are still
approximately 1,000 companies in the outdoor advertising industry operating
approximately 396,000 billboard displays. The Company expects the trend of
consolidation in the outdoor advertising industry to continue.

BUSINESS STRATEGY

- - Optimal Inventory Management. The Company seeks to balance advertising rate
growth with optimal occupancy of its displays in order to maximize revenues.
The Company's variety of outdoor advertising displays in its geographically
diverse markets permits flexibility in pricing and packaging its display
inventory.

- - Centralized Administration. Outdoor Systems has historically consolidated
substantially all of its administration, accounting, sales management and
leasing management functions at its Phoenix headquarters and plans to
consolidate a significant amount of these functions relating to the business
of Gannett Outdoor into its Phoenix headquarters and four regional markets.
This centralization allows the Company to focus local efforts on customer
service and sales and to exercise greater control over administrative costs
and expenditures, resulting in general and administrative expenses for Outdoor
Systems of 6.3% and 6.1% of net revenues for the year ended December 31, 1995
and the six months ended June 30, 1996, respectively. For the year ended
December 31, 1995 and the six months ended June 30, 1996, Gannett Outdoor's
general and administrative expenses were 13.4% and 14.6%, respectively, of net
revenues. The Company believes that it will be able to significantly reduce
the general and administrative expenses of Gannett Outdoor as part of the
integration of Gannett Outdoor's business with Outdoor Systems' operations.

41
<PAGE> 42

- - Strategic Acquisitions. Although the Company's focus in the near term will be
the consolidation and integration of the Acquisition and the promotion of
internal growth of both new and existing properties, the Company will continue
to pursue strategic acquisitions in existing and new markets to achieve
increased operating efficiencies, greater geographic diversification and
increased market penetration. The Company is primarily interested in further
expansion in the 50 largest United States markets, because these markets
typically generate greater outdoor market revenues, readily attract national
advertisers, provide a better basis for regional advertising, attract quality
management and offer opportunities to gain a larger market share from
competitive media.

MARKETS

The Company's markets generally possess demographic characteristics that
are attractive to national advertisers, allowing the Company to package displays
in several of its markets in a single contract for advertisers in national and
regional campaigns. Each market also has unique local industries, businesses,
sports franchises and special events that are frequent users of outdoor
advertising. The following sets forth certain information for each of the
Company's markets as of June 30, 1996 or for the indicated periods after giving
effect to the Acquisition and the Denver Disposition (dollars in thousands):

<TABLE>
<CAPTION>
PERCENTAGE
1995 OF 1995 MALL AND TOTAL
MARKET PRO FORMA PRO FORMA 30-SHEET 8-SHEET AIRPORT DISPLAY
MARKET RANK NET REVENUES NET REVENUES BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- -------------------------- ------ ------------ ------------ --------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES:
New York/New Jersey(1).... 1 $ 53,188 16.9% 579 2,730 125 -- 3,507 6,941
Los Angeles............... 2 41,739 13.3 785 2,962 -- -- 2,804 6,551
Chicago................... 3 6,499 2.1 155 -- 638 -- -- 793
Philadelphia.............. 4 1,941 0.6 -- -- -- -- 690 690
San Francisco............. 5 18,679 5.9 202 972 571 -- 1,346 3,091
Detroit................... 9 20,264 6.4 438 1,340 104 -- 800 2,682
Houston(2)................ 10 5,480 1.7 377 -- -- -- -- 377
Atlanta................... 11 21,654 6.9 748 1,910 -- -- -- 2,658
Sacramento(3)............. 17 -- -- 60 291 -- -- -- 351
Phoenix................... 18 16,745 5.4 605 1,530 677 -- 1,418 4,230
St. Louis................. 19 8,010 2.6 268 852 -- -- -- 1,120
Denver.................... 21 7,975 2.5 163 775 -- -- 5,300 6,238
San Diego................. 22 5,349 1.7 114 540 -- -- 668 1,322
New Haven(4).............. 26 5,496 1.8 149 835 -- -- -- 984
Kansas City............... 33 6,988 2.2 198 849 -- -- -- 1,047
Grand Rapids.............. 38 4,339 1.4 110 550 -- -- 80 740
New Orleans............... 40 9,532 3.0 346 1,053 481 -- 213 2,093
Louisville................ 49 8,002 2.6 320 1,067 264 -- -- 1,651
Flint..................... 59 2,705 0.9 93 450 20 -- -- 563
Rochester................. 72 308 0.1 -- -- -- -- 240 240
Tucson.................... 81 1,700 0.5 112 6 345 -- -- 463
Columbus, GA.............. 127 2,596 0.8 180 422 100 -- -- 702
CANADA:
Toronto................... 1 $ 39,280 12.5% 303 1,834 -- 418 2,474 5,029
Montreal.................. 2 12,045 3.8 134 770 -- 322 1,794 3,020
Ottawa.................... 6 1,691 0.5 23 214 -- 68 -- 305
Winnipeg.................. 7 4,959 1.6 154 415 -- 77 406 1,052
Quebec City............... 8 3,530 1.1 71 782 -- 194 296 1,343
Hamilton(5)............... 9 -- -- 36 288 -- 80 576 980
Halifax................... 14 1,612 0.5 11 122 -- 26 214 373
Other..................... N/A 2,080 0.7 24 108 -- 108 94 334
------------ ------ --------- -------- ------- -------- ------- -------
Total.................. $314,386 100.0% 6,758 23,667 3,325 1,293 22,920 57,963
================ ================ ========== ========== ======== ========== ======== =========
</TABLE>

42
<PAGE> 43

INVENTORY

The Company operates four standard types of outdoor advertising billboards
and displays:

- - Bulletins generally are 14 feet high and 48 feet wide (672 square feet) and
consist of panels on which advertising copy is displayed. The advertising copy
is either hand painted onto the panels at the facilities of the outdoor
advertising company in accordance with design specifications supplied by the
advertiser and attached to the outdoor advertising structure, or is printed
with computer-generated graphics on a single sheet of vinyl that is "wrapped"
around the structure. On occasion, to attract more attention, some of the
panels may extend beyond the linear edges of the display face and may include
three-dimensional embellishments. Because of their greater impact and higher
cost, bulletins are usually located on major highways.

- - 30-sheet posters generally are 12 feet high by 25 feet wide (300 square feet)
and are the most common type of billboard. Advertising copy for 30-sheet
posters consists of lithographed or silk-screened paper sheets supplied by the
advertiser that are pasted and applied like wallpaper to the face of the
display, or single sheets of vinyl with computer-generated advertising copy
that are wrapped around the structure. 30-sheet posters are concentrated on
major traffic arteries.

- - Junior (8-sheet) posters usually are 6 feet high by 12 feet wide (72 square
feet). Displays are prepared and mounted in the same manner as 30-sheet
posters, except that vinyl sheets are not typically used on junior posters.
Most junior posters, because of their smaller size, are concentrated on city
streets and target pedestrian traffic.

- - Transit displays include displays on bus shelters, subways and bus benches.
Bus shelters and benches are usually constructed, owned and maintained by the
outdoor advertising company under a contract with the municipality or transit
authority which receives a share of the shelter's advertising revenues. Bus
shelter displays are enclosed within glassed, backlighted cases on sides of a
pedestrian shelter at an urban bus stop on city easements or sidewalks. Subway
displays are located within subway stations and walkways as well as in subway
trains. Advertisements appear on lithographed or silk-screened posters
supplied in a single sheet by the advertiser. Transit displays are an
attractive medium to advertisers using "vertical" advertising copy, such as
magazines and movie posters, because the advertising copy is easily adapted
for use in transit shelters.

Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Billboard structures, bus
shelters and benches are durable, have long useful lives and do not require
substantial maintenance. When disassembled, they typically can be moved and
relocated at new sites.

SALES AND SERVICE

The Company devotes considerable time and resources to recruiting, training
and coordinating the activities of its sales force. Sales personnel are
compensated primarily on a commission basis to maximize the incentive to
perform. Messrs. Moreno and Kelly, the Company's two principal officers
responsible for day-to-day operations, have an aggregate of 40 years of
experience in the outdoor advertising industry, virtually all of which has been
spent in sales and management positions. The industry experience of Mr. Moreno
and other members of Outdoor Systems' management team includes significant prior
experience with Gannett Outdoor. Outdoor Systems' general managers in its
existing markets have an average of nearly 14 years of experience in the outdoor
advertising industry.

43
<PAGE> 44

CUSTOMERS

Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising as well as the choice of media and the planning and
implementation of the overall campaign. The Company pays commissions to the
agencies for advertising contracts that are procured by or through those
agencies. Advertising rates are based on a particular display's exposure (or
number of "impressions" delivered) in relation to the demographics of the
particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent auditing companies.

The size and geographic diversity of the Company's markets will expand
significantly with the completion of the Acquisition, which the Company expects
will strengthen its ability to attract national advertisers by providing the
opportunity to package displays in several of its markets in a single contract
to allow a national advertiser to simplify its purchasing process and present
its message in several markets. National advertisers generally seek wide
exposure in major markets and therefore tend to make larger purchases. The
Company competes for national advertisers primarily on the basis of price,
availability and service.

The Company also focuses its efforts on local sales, and approximately
65.3% of the Company's pro forma gross revenues in 1995 were generated from
local advertisers. Local advertisers tend to have smaller advertising budgets
and require greater assistance from the Company's production and creative
personnel to design and produce advertising copy. In local sales, the Company
often expends more sales efforts on educating customers regarding the benefits
of outdoor media and helping potential customers develop an advertising strategy
using outdoor advertising. While price and availability are important
competitive factors, service and customer relationships are also critical
components of local sales.

Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. In the 1990s, due to a declining population of
smokers, societal pressures, consolidation in the tobacco industry and price
competition from generic brands, the leading tobacco companies substantially
reduced their expenditures for outdoor advertising. Because tobacco advertisers
often utilized some of the industry's prime inventory, the decline in
tobacco-related advertising expenditures made this space available for other
advertisers, including those that had not traditionally utilized outdoor
advertising. As a result of this decline in tobacco-related advertising revenues
and the increased use of outdoor advertising by other advertisers, the range of
the Company's advertisers has become quite diverse, with no single category of
advertisers accounting for more than 23% of

44
<PAGE> 45

pro forma net revenues in 1995. The following table illustrates the diversity of
the Company's advertising base:

1995 PRO FORMA NET REVENUES BY CATEGORY

<TABLE>
<CAPTION>
PERCENTAGE OF
NET REVENUES
---------------
<S> <C>
Retail/Consumer products.......................................... 22.8%
Travel and Entertainment.......................................... 22.6
Tobacco........................................................... 9.6
Liquor............................................................ 6.7
Media............................................................. 6.1
Banking........................................................... 6.1
Restaurants....................................................... 4.5
Health............................................................ 4.4
Automotive........................................................ 2.8
Beer.............................................................. 1.3
Home Building..................................................... 1.1
Miscellaneous..................................................... 12.0
-----
Total................................................... 100.0%
=====
</TABLE>

PRODUCTION

The Company has internal production facilities and staff to perform the
full range of activities required to develop, create and install outdoor
advertising. Production work includes creating the advertising copy design and
layout, painting the design or coordinating its printing and installing the
designs on its displays. The Company usually provides its full range of
production services to local advertisers and to advertisers that are not
represented by advertising agencies, since national advertisers and advertisers
represented by advertising agencies often use preprinted designs that require
only installation. However, the Company's creative and production personnel
frequently are involved in production activities even when advertisers are
represented by agencies by developing new designs or adapting copy from other
media for use on billboards. The Company's artists also assist in the
development of marketing presentations, demonstrations and strategies to attract
new advertisers.

With the increased use of vinyl and pre-printed advertising copy furnished
to the outdoor advertising company by the advertiser or its agency, outdoor
advertising companies are becoming less responsible for labor-intensive
production work since vinyl and pre-printed copy is typically produced by the
advertiser or its agency and can be installed quickly. The Company believes that
this trend over time will reduce operating expenses associated with production
activities.

COMPETITION

The Company competes in each of its markets with other outdoor advertisers
as well as other media, including broadcast and cable television, radio, print
media and direct mail marketers. In addition, the Company also competes with a
wide variety of "out-of-home" media, including advertising in shopping centers
and malls, airports, stadiums, movie theaters and supermarkets, as well as on
taxis, trains, buses and subways. Advertisers compare relative costs of
available media and cost-per-thousand impressions, particularly when delivering
a message to customers with distinct demographic characteristics. In competing
with other media, outdoor advertising relies on its low cost per-thousand
impressions and its ability to reach a broad segment of the population in a
specific

45
<PAGE> 46

market or to target a particular geographic area or population with a particular
set of demographic characteristics within that market.

The outdoor advertising industry is highly fragmented, consisting of
several large outdoor advertising and media companies with operations in
multiple markets as well as smaller and local companies operating a limited
number of structures in single or a few local markets. Although some
consolidation has occurred over the past few years, according to the OAAA there
are approximately 1,000 companies in the outdoor advertising industry operating
approximately 396,000 billboard displays. In several of its markets, the Company
encounters direct competition from other major outdoor media companies. The
Company believes that its strong emphasis on sales and customer service and its
position as a major provider of advertising services in each of its markets
enable it to compete effectively with the other outdoor advertising companies,
as well as other media, within those markets. See, however, "Risk
Factors -- Competition."

GOVERNMENT REGULATION

U.S. Regulations. The outdoor advertising industry is subject to
governmental regulation at the federal, state and local level. Federal law,
principally the Highway Beautification Act of 1965, encourages states, by the
threat of withholding 10% of the federal appropriations for the construction and
improvement of highways within such states, to implement legislation to prohibit
billboards located within 660 feet of, or visible from, interstate and primary
highways except in commercial or industrial areas where off-site signage is
permitted provided it meets spacing and size restrictions. All of the states
have implemented regulations at least as restrictive as the Highway
Beautification Act, including the prohibition on the construction of new
billboards adjacent to federally-aided highways and the removal at the owner's
expense and without any compensation of any illegal signs on such highways. The
Highway Beautification Act, and the various state statutes implementing it,
require the payment of just compensation whenever governmental authorities
require legally erected and maintained billboards to be removed from areas
adjacent to federally-aided highways.

The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of outdoor advertising structures adjacent to federally-aided
highways and other thoroughfares. Such regulations, often in the form of
municipal building, sign or zoning ordinances, specify minimum standards for the
height, size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel or from nonilluminated to
illuminated structures, and/or restrict the reconstruction of billboards which
are substantially destroyed as a result of storms or other causes. From time to
time governmental authorities order the removal of billboards by the exercise of
eminent domain. Thus far, the Company believes it has been able to obtain
satisfactory compensation for any of its structures removed at the direction of
governmental authorities, although there is no assurance that it will be able to
continue to do so in the future.

Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. In theory, amortization permits the billboard owner to
operate its billboard as a non-conforming use for a specified period of time
until it has recouped its investment, after which it must remove or otherwise
conform its billboard to the applicable regulations at its own cost without any
compensation. Amortization and other regulations requiring the removal of
billboards without compensation have been subject to vigorous litigation in the
state and federal courts and cases have reached differing conclusions as to the
constitutionality of these regulations. Several municipalities in the Company's
markets, including municipalities or townships in Houston, Kansas City and St.
Louis, currently have amortization ordinances or regulations. In Houston,
litigation is pending over the amortization and other provisions of the Houston
Sign Code, and the city is currently not enforcing its amortization
requirements. In other cities, amortization ordinances or regulations are not
being

46
<PAGE> 47

enforced or have been held unconstitutional. There can be no assurance, however,
that these ordinances or regulations will not be enforced in the future.

In recent years, there have been movements to restrict billboard
advertising of certain products, including tobacco and alcohol. Congress has
passed no legislation at the federal level except legislation requiring health
hazard warnings similar to those on cigarette packages and print advertisements.
Certain states in which the Company operates have historically prohibited the
outdoor advertising of distilled spirits. In California, transit shelter
advertising posters are maintained on public right of way, and most of the
contracts prohibit tobacco and/or alcohol advertising. San Francisco has adopted
an ordinance banning all tobacco and alcohol advertising on public property, but
has "grandfathered" Gannett Outdoor's existing contract through 2002. For each
of the past three years, the California legislature has considered proposed
legislation which would ban, or substantially limit, all tobacco advertising on
outdoor advertising. While that legislation has not been passed, the proponents
have publicly stated they will continue to attempt to have such bans/limitations
enacted. It is uncertain whether additional legislation of this type will be
enacted on the national level or in any of the Company's markets.

Canadian Regulations. Outdoor advertising in Canada is subject to
regulation at the federal, provincial and municipal levels. These regulations
may prohibit outdoor signs advertising certain products in certain locations.
For example, in Ontario, billboards and posters advertising liquor may not be
placed within 200 meters of a primary or secondary school. A Federal Canadian
law banning tobacco advertising was recently overturned by the courts. However,
it is anticipated that new legislation may be introduced to regulate or restrict
tobacco advertising. Currently the tobacco industry is operating under a
voluntary advertising code. The placement of outdoor billboards and posters is
primarily regulated at the provincial and local level. For example, Quebec
regulates the placement of advertising adjacent to highways, as well as the
language of outdoor signs.

General. To date, regulations in the Company's markets have not materially
adversely affected its operations. However, the outdoor advertising industry is
heavily regulated and at various times and in various markets can be expected to
be subject to varying degrees of regulatory pressure affecting the operation of
advertising displays. Accordingly, although the Company's experience to date is
that the regulatory environment can be managed, no assurance can be given that
existing or future laws or regulations will not materially adversely affect the
Company.

47
<PAGE> 48

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
YEARS
WITH
NAME AGE POSITION COMPANY
- --------------------------------- --- -------------------------------------------- -------
<S> <C> <C> <C>
William S. Levine................ 64 Chairman of the Board and Director 16
Arthur R. Moreno................. 50 President, Chief Executive Officer and 12
Director
Wally C. Kelly................... 39 Senior Vice President 12
Bill M. Beverage................. 45 Treasurer, Secretary, Chief Financial 6
Officer
Brian J. O'Connor................ 39 Director 3
Stephen F. Butterfield........... 43 Director --
</TABLE>

Mr. Levine, a founder and principal stockholder of the Company, has been
Chairman of the Board and a director of the Company since its formation. Mr.
Levine has 16 years of experience in the outdoor advertising industry. He is an
owner and officer of numerous privately-owned firms and commercial real estate
operations. Since 1990, Mr. Levine has dedicated a substantial portion of his
time to the Company's affairs.

Mr. Moreno has served as the Company's President and Chief Executive
Officer and has been a director of the Company since April 1984. Mr. Moreno has
23 years of experience in the outdoor advertising industry. From 1981 to 1984,
Mr. Moreno served as President and General Manager of Gannett Outdoor of New
Jersey. From 1979 to 1981, he was President and General Manager of Gannett
Outdoor of Kansas City (Missouri). From 1973 to 1981, Mr. Moreno worked in
Phoenix as a Vice President of Sales for Gannett Outdoor and its predecessor
company.

Mr. Kelly has been the Company's Senior Vice President since 1984. Mr.
Kelly has 17 years of experience in the outdoor advertising business. From 1979
to 1984, Mr. Kelly worked for Whiteco Metrocom, Inc. in Tucson (1979 to 1981) as
Sales Manager and in Chicago as Vice President of National Sales (1982 to 1984).

Mr. Beverage has served as the Company's controller since 1992, its
Treasurer and Secretary since May 1993, and its Chief Financial Officer since
October 1995. Mr. Beverage has 16 years of experience in the accounting
departments of various outdoor advertising companies. From 1990 to 1992, he
served as the Company's Atlanta real estate manager. From 1988 until 1990, he
worked for Outdoor Today, Inc. in Atlanta (which was acquired by the Company in
1990) as a consultant and as its accounting manager. Prior to 1988, he worked
for five years for Turner Outdoor Advertising in Atlanta and for four years for
Creative Displays in Atlanta. From 1976 to 1979, he was an auditor for Arthur
Young & Co. (now known as Ernst & Young).

Mr. O'Connor has been a Senior Vice President and financial principal of
Alden Capital Markets, Inc., which underwrites and trades securities for various
local governments in Arizona and the western United States, since 1990. From
1988 to 1990, he was a Senior Vice President with Capital Markets Corporation, a
financial advisor and underwriter of tax exempt securities for state and local
governments. From 1987 to 1988, he was a Vice President for Security Pacific
Merchant Bank in Phoenix. From 1983 to 1987, Mr. O'Connor was with Boettcher &
Company, Inc., a regional investment banking firm specializing in municipal
finance. Mr. O'Connor has been a director of the Company since 1993.

Mr. Butterfield has been President of Student Loan Acquisition Authority of
Arizona, a not-for-profit firm which participates in the secondary market for
student loans, since 1991. From 1988 to 1991, Mr. Butterfield served as
President of Western Loan Marketing Association. From 1987 to 1988,

48
<PAGE> 49

Mr. Butterfield served as Vice President of Security Pacific Merchant Bank, and
from 1983 to 1987 he was a partner of Boettcher & Company, Inc., a regional
investment banking firm specializing in municipal finance. From 1974 to 1983,
Mr. Butterfield served in various positions with Young Smith & Peacock, an
Arizona-based municipal bond house. Mr. Butterfield was elected a director of
the Company in April 1996.

The Company instituted a classified Board of Directors on April 17, 1996.
Upon the completion of their initial terms, which vary from one to three years,
all directors of the Company hold office for three year terms until the next
annual meeting of stockholders of the Company and until their successors are
duly elected and qualified. See "Description of Capital Stock -- Special
Provisions of Certificate of Incorporation and Delaware Law." Executive officers
of the Company are elected by the Board of Directors on an annual basis and
serve at the discretion of the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors formed an Audit Committee on April 15, 1996, which
will be responsible for reviewing the Company's accounting controls and
recommending to the Board of Directors the engagement of the Company's outside
auditors. The members of the Company's Audit Committee are Messrs. O'Connor and
Butterfield.

The Board of Directors formed a Compensation Committee on April 15, 1996,
which will be responsible for reviewing and approving the amount and type of
consideration to be paid to senior management and for administering the
Company's stock option plans. The members of the Company's Compensation
Committee are Messrs. Levine, O'Connor and Butterfield.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the
compensation paid to the Company's Chief Executive Officer and the two other
executive officers whose total annual salary and bonus exceeded $100,000 for the
fiscal year ended December 31, 1995:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
NAME AND ---------------------------------- RESTRICTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS COMPENSATION(1)
- -------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Arthur R. Moreno.... 1995 $375,000(2) $311,614(3) -- $ 1,305
President and 1994 275,000 283,163(3) -- 1,349
Chief Executive 1993 275,000 268,239(3) -- 1,309
Officer
William S. Levine... 1995 $350,000(2)(4) -- -- --
Chairman of the 1994 250,000(4) -- -- --
Board 1993 351,000(4) -- -- --
Wally C. Kelly...... 1995 $283,987 -- -- 330
Senior Vice 1994 244,890 -- -- --
President 1993 239,231 -- $ 15,000(5) --
</TABLE>

- ---------------
(1) Represents contributions made by the Company on behalf of the named
executive officers to a 401(k) plan.
(2) Reflects an increase in annual salary as of July 1, 1995. In 1996, Mr.
Moreno's salary will be $475,000 and Mr. Levine's salary will be $450,000.
(3) Earned and paid in the current year in an amount determined by reference to
operating results for the prior year. Based upon an understanding between
the Company and Mr. Moreno, for so long as Mr. Moreno is the Chief Executive
Officer and President of the Company, Mr. Moreno may be awarded an annual
bonus in an amount equal to 1.25% of the Company's EBITDA for the
immediately preceding fiscal year as reported in the Company's audited
financial statements. The bonus will be awarded at the discretion of the
Board of Directors following a review by the Compensation Committee, and
will be made after the audited financial

49
<PAGE> 50

statements for the previous fiscal year have been released by the Company's
auditors. The bonus is paid to Mr. Moreno in the year awarded. Based upon
this formula, the amount of bonus paid to Mr. Moreno in 1996 upon the
approval of the Compensation Committee was $378,185 (1.25% of EBITDA for
1995), and would have been approximately $1.4 million based upon pro forma
EBITDA for 1995.

(4) Mr. Levine received no salary, bonus or other compensation from the Company
in 1995, 1994 or 1993 for his services as Chairman of the Board. However, in
1995, 1994 and 1993 the Company agreed to pay an aggregate of $350,000,
$250,000 and $351,000, respectively, to two entities controlled by Mr.
Levine as a management fee for providing Mr. Levine's services to the
Company. The Company intends to continue to compensate Mr. Levine through
these entities pursuant to this arrangement at an annual rate of $450,000.
See Note 10 to the Consolidated Financial Statements.

(5) Represents the value of Incentive Units awarded to Mr. Kelly pursuant to the
Incentive Plan as of the date of grant. Mr. Kelly received awards under the
Incentive Plan in prior years, which have increased in value pursuant to the
terms of the Plan. As of January 1, 1996, the total value of Mr. Kelly's
Incentive Units was $646,000. Mr. Kelly may elect to have the value of his
Incentive Units settled in cash or up to 51,595 shares of the Company's
Common Stock. The award in 1993 represents 1,198 of the total shares of
Common Stock that could ultimately be issued to Mr. Kelly in settlement of
his account.

50
<PAGE> 51

PRINCIPAL AND SELLING STOCKHOLDERS

The table below sets forth the number and percentage of outstanding shares
of Common Stock beneficially owned by (i) each director of the Company, (ii)
each executive officer identified under "Management -- Executive Compensation,"
(iii) all directors and executive officers of the Company as a group, (iv) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, and (v) each of the Selling Stockholders. The Company
believes that each individual or entity named has sole investment and voting
power with respect to shares of Common Stock indicated as beneficially owned by
such stockholder, except as otherwise noted.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP OF
OF COMMON STOCK COMMON STOCK
PRIOR TO OFFERING AFTER THIS OFFERING
------------------------ ------------------------
NUMBER PERCENT SHARES NUMBER PERCENT
NAME OF BENEFICIAL OWNER OF SHARES OF CLASS BEING OFFERED OF SHARES OF CLASS
- --------------------------------- ---------- --------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
William S. Levine................ 10,577,660(1) 58.5% 500,000 9,877,660(1) 38.8%
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Arthur R. Moreno................. 8,673,275(2) 41.9 500,000 7,973,275(2) 28.4
2502 N. Black Canyon Highway
Phoenix, Arizona 85009
Stephen J. Haberkorn............. 3,874,410(3) 21.4 200,000 3,674,410(3) 14.4
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Putnam Investments, Inc.......... 1,869,150(4) 10.3 -- 1,869,150 7.3
One Post Office Square
Boston, Massachusetts 02109
Brian J. O'Connor................ 10,500 * -- 10,500 *
Stephen J. Butterfield........... 30,000 * -- 30,000 *
Wally C. Kelly................... 351,758(5) 1.9 100,000 251,758 *
2502 N. Black Canyon Highway
Phoenix, Arizona 85009
All directors and executive
officers as a group (6
persons)....................... 15,768,783 74.9 1,300,000 14,468,783 51.0
</TABLE>

- ---------------
* Represents less than 1% of the number of outstanding shares of Common Stock.

(1) Includes 3,874,410 shares (3,674,410 shares after this Offering) of Common
Stock owned by M-K Link Investments Limited Partnership ("M-K Link") over
which Mr. Levine shares voting control with Mr. Moreno and over which
Messrs. Levine and Moreno have certain rights of first refusal with respect
to certain private sales; of those 3,874,410 shares (3,674,410 shares after
this Offering), 201,005 shares are subject to an option granted to Mr.
Levine (now held by Mr. Levine's family partnership) and 1,328,945 shares
are subject to an option granted to Mr. Moreno (see Note 2 below). Mr.
Levine disclaims beneficial ownership of the shares owned by M-K Link except
to the extent of the 201,005 shares subject to the options granted to Mr.
Levine. The options for the 201,005 shares of Common Stock of M-K Link and
the remaining 6,703,250 shares of Common Stock (6,203,250 shares after the
Offering) attributed to Mr. Levine are owned by Levine Investments Limited
Partnership, 1702 E. Highland, Suite 310, Phoenix, Arizona 85016. Mr. Levine
is the sole general partner of Levine Investments Limited Partnership; Mr.
Levine, his wife and children are the limited partners. Mr. Levine disclaims
beneficial ownership of such shares and options except in his capacity as
general partner to the extent of his interest.

(2) Includes 3,874,410 shares (3,674,410 shares after this Offering) of Common
Stock owned by M-K Link over which Mr. Moreno shares voting control with Mr.
Levine and over which Messrs. Levine and Moreno have certain rights of first
refusal with respect to certain private sales. Of those 3,874,410 shares
(3,674,410 shares after this Offering), 1,328,945 shares are subject to an
option granted to Mr. Moreno and 201,005 shares are subject to an option
granted to Mr. Levine now held by Mr. Levine's family partnership (see Note
1 above). Mr. Moreno disclaims beneficial ownership of those shares owned by
M-K Link except to the extent of the 1,328,945 shares subject to the options
granted to Mr. Moreno. Also includes

51
<PAGE> 52

(i) 2,632,377 shares of Common Stock that may be purchased by Mr. Moreno
pursuant to options granted by the Company; (ii) 852,422 shares of Common
Stock held directly by Mr. Moreno, all of which are subject to a pledge in
favor of Mr. Haberkorn securing a note payable to Mr. Haberkorn; and (iii)
1,314,077 shares (814,077 shares after the Offering) held by BRN Properties
Limited Partnership, an Arizona limited partnership, of which Mr. Moreno and
his wife are the sole general partners and his children are limited
partners, over which shares Mr. Moreno retains voting and dispositive power.
Does not include 457,524 shares of Common Stock subject to options under the
Omnibus Plan that vest ratably over four years.

(3) This number represents shares owned by M-K Link, 1,529,950 of which shares
are subject to options granted to Levine Investments Limited Partnership and
to Mr. Moreno. Mr. Haberkorn disclaims beneficial ownership of shares owned
by his family partnership, except to the extent of his interest therein, and
both he and his family partnership disclaim beneficial ownership of shares
subject to options in favor of Messrs. Levine and Moreno. Messrs. Levine and
Moreno hold certain voting and rights of refusal power as to shares owned by
M-K Link. See Notes 1 and 2 above.

(4) Based on Schedule 13G filed by the indicated person with the Securities and
Exchange Commission reporting beneficial ownership as of July 10, 1996. Each
of Putnam Investment Management, Inc. and the Putnam Advisory Company, Inc.,
wholly-owned registered investment advisors of Putnam Investments, Inc.
having the same address, also filed a Schedule 13G with the Commission
reporting beneficial ownership of 1,591,350 shares and 277,800 shares,
respectively, of the outstanding Common Stock.

(5) Represents an option to purchase shares of Common Stock from the Company.
Does not include any shares of Common Stock that Mr. Kelly may receive in
settlement of his Incentive Unit Awards or 225,000 shares of Common Stock
subject to options under the Omnibus Plan that vest ratably over four years.

52
<PAGE> 53

DESCRIPTION OF CAPITAL STOCK

As of the date of this Prospectus, the Company's authorized capital stock
consists of 60,000,000 shares of Common Stock, $.01 par value per share, and
12,000,000 shares of preferred stock, $1.00 par value each ("Preferred Stock"),
the terms and provisions of which may be designated by the Board of Directors in
the future. The following summary of the Company's capital stock is qualified in
its entirety by reference to the Company's Third Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") and Amended
and Restated Bylaws (the "Bylaws"), each of which was filed as an exhibit to the
registration statement of which this Prospectus is a part.

COMMON STOCK

The Company is authorized to issue 60,000,000 shares of Common Stock, $0.01
par value per share. Following the Offering, 25,480,398 shares of Common Stock
will be issued and outstanding (assuming no exercise of the over-allotment
option and excluding (i) 4,100,184 shares of Common Stock issuable upon the
exercise of outstanding options, of which 2,884,135 are exercisable immediately
and 1,216,049 vest ratably over a four-year period, and (ii) 156,797 shares
issuable in settlement of Incentive Units). See "Capitalization."

Holders of Common Stock are entitled to one vote per share on all matters
on which the holders of Common Stock are entitled to vote. Because holders of
Common Stock do not have cumulative voting rights and the Company has a
classified Board of Directors, the holders of a majority of the shares of Common
Stock voting for the election of directors can elect all of the members of the
Board of Directors standing for election at any particular meeting. The Common
Stock is not redeemable and has no conversion or preemptive rights. All of the
outstanding shares of Common Stock are, and all of the shares of Common Stock
sold in the Offering will be, when issued and paid for, fully paid and
nonassessable. In the event of the liquidation or dissolution of the Company,
subject to the rights of the holders of any outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to share pro rata in any balance
of the corporate assets available for distribution to them. The Company may pay
dividends if, when and as declared by the Board of Directors from funds legally
available therefor, subject to the dividend provisions of any outstanding shares
of Preferred Stock and restrictions set forth in the Company's debt instruments.
See "Dividend Policy."

PREFERRED STOCK

Holders of shares of Preferred Stock have no preemptive rights or
cumulative voting rights. In addition to specific prohibitions set forth in the
Certificate of Incorporation, under Delaware law holders of preferred stock are
entitled to vote as a class upon any proposed amendment, whether or not entitled
to vote thereon by the Certificate of Incorporation, if such amendment would
increase or decrease the par value of the shares of such class, or alter or
change the powers, preferences, or special rights of the shares of such class so
as to affect them adversely.

SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW

Certain provisions of the Company's Certificate of Incorporation and Bylaws
as well as certain provisions of Delaware law may be deemed to have an
anti-takeover effect or may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in such stockholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by a stockholder.

The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or that involve
intentional

53
<PAGE> 54

misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases as provided in Section 174
of the Delaware General Corporation Law or (iv) for any transaction from which
the director derived an improper personal benefit. The effect of these
provisions is 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 grossly negligent behavior), except in the
situations described above. The Securities and Exchange Commission has taken the
position that the provision will have no effect on claims arising under federal
securities laws.

The Company's Bylaws provide that the Company will indemnify its directors
and officers to the fullest extent permissible under Delaware law. These
indemnification provisions require the Company to indemnify such persons against
certain liabilities and expenses to which they may become subject by reason of
their service as a director or officer of the Company. The provisions also set
forth certain procedures, including the advancement of expenses, that apply in
the event of a claim for indemnification.

Delaware Anti-Takeover Law. Section 203 of the Delaware General
Corporation Law ("Section 203") generally provides that a person who, together
with affiliates and associates owns, or within three years did own, 15% or more
of the outstanding voting stock of a corporation (an "Interested Stockholder")
but less than 85% of such stock may not engage in certain business combinations
with the corporation for a period of three years after the date on which the
person became an Interested Stockholder unless (i) prior to such date, the
corporation's board of directors approved either the business combination or the
transaction in which the stockholder became an Interested Stockholder or (ii)
subsequent to such date, the business combination is approved by the
corporation's board of directors and authorized at a stockholders' meeting by a
vote of at least two-thirds of the corporation's outstanding voting stock not
owned by the Interested Stockholder. Section 203 defines the term "business
combination" to encompass a wide variety of transactions with or caused by an
Interested Stockholder, including mergers, asset sales, and other transactions
in which the Interested Stockholder receives or could receive a benefit on other
than a pro rata basis with other stockholders.

The provisions of Section 203, coupled with the Board's authority to issue
Preferred Stock without further stockholder action, could delay or frustrate the
removal of incumbent directors or a change in control of the Company. The
provisions also could discourage, impede or prevent a merger, tender offer or
proxy contest, even if such event would be favorable to the interests of
stockholders. The Company's stockholders, by adopting an amendment to the
Certificate of Incorporation, may elect not to be governed by Section 203 which
election would be effective twelve months after such adoption. Neither the
Certificate of Incorporation nor the Bylaws exclude the Company from the
restrictions imposed by Section 203. These restrictions will not apply to
stockholders who were interested stockholders prior to the date of this
offering.

Classified Board of Directors. The Company's Certificate of Incorporation
classifies the Board of Directors into three classes. The first class ("Class
I") consists of one director whose term expires in 1997. The second class
("Class II") consists of two directors (one of which positions is presently
vacant) whose terms expire 1998. The third class ("Class III") consists of two
directors whose terms of office expire in 1999. At each annual meeting, the
number of directors equal to the number of directors in the class whose terms
expire at the time of such meeting shall be elected to hold office until the
third succeeding annual meeting. Mr. Butterfield is the sole Class I Director;
Mr. O'Connor is currently the sole Class II Director; and Messrs. Levine and
Moreno are the Class III Directors. As a result of this classification of
directors, no stockholder or group of stockholders would be able to elect a
majority of the Board of Directors at any single meeting for the election of
directors.

Notice Provisions. The Bylaws provide that only business or proposals,
properly brought before an annual meeting of shareholders may be conducted at
such meeting. In order to bring

54
<PAGE> 55

business or a proposal before an annual meeting, a stockholder is required to
provide written notice to the Company at least 45 days prior to the annual
meeting which describes the business or proposal to be brought before the annual
meeting, the name and address of the stockholder proposing the business, the
class and number of shares of stock held by such stockholder, and any material
interest of the stockholder in the business to be brought before the meeting.
These procedures may operate to limit the ability of stockholders to bring
business before the annual meeting or consider any transaction that could result
in a change of control of the Company. In addition, the Bylaws provide that in
order for a stockholder to nominate a candidate for election to the Board of
Directors, the stockholder must provide written notice of intent to nominate a
candidate at least 45 days prior to the meeting of stockholders called for the
election of directors. Such written notice is required to contain the name and
address of the stockholder, a representation that the stockholder is a holder of
record of the Company's voting stock and intends to appear in person or by proxy
at the meeting to nominate the persons specified in the notice, such information
regarding each nominee as would have been required to have been included in a
proxy statement filed pursuant to Regulation 14A of the rules and regulations of
the Securities and Exchange Commission under the Securities Exchange Act of 1934
had proxies been solicited with respect to such nominee by the Board of
Directors, a description of all arrangements or other understandings among the
stockholder and any other person pursuant to which such nominations are to be
made by the stockholder and the written consent of each nominee to serve as a
director of the Company if elected. These requirements will limit the ability of
stockholders to nominate candidates for election to the Board of Directors to
the extent that the notice requirements are not satisfied.

Procedures for Special Meetings of Stockholders; Prohibition on Actions of
Stockholders by Written Consent. The Bylaws provide for special meetings of
stockholders only upon the direction of the Chairman of the Board of Directors,
the President, or a majority of the Board of Directors. Furthermore, the
Certificate of Incorporation prohibits stockholders from taking action by
written consent in lieu of meeting. These provisions may have the effect of
delaying or preventing a change in control of the Company to the extent that
they would require formal solicitation of proxies in connection with a proposed
transactions that would result in a change in control of the Company.

TRANSFER AGENT

The Company's transfer agent and registrar for the Common Stock is First
Union National Bank of North Carolina.

55
<PAGE> 56

DESCRIPTION OF INDEBTEDNESS AND OTHER COMMITMENTS

The following is a description of the principal agreements that will govern
the indebtedness of the Company following the consummation of the Acquisition
and the Acquisition Financing. The following summaries of certain provisions of
the Senior Credit Facility and the Subordinated Credit Facility (as such terms
are defined below) are qualified in their entirety by reference to the agreement
to which each summary relates, a copy of which is filed or incorporated by
reference as an exhibit to the registration statement of which this Prospectus
is a part. See "Available Information." Capitalized terms used below and not
defined have the meanings set forth in the respective agreements.

THE NOTES

The Notes, which are offered in the Notes Offering, are to be issued under
an indenture among the Company, the Subsidiary Guarantors (as defined) and a
trustee (the "Indenture") to be selected by the Company. The Indenture will
provide for the issuance of up to $225 million aggregate principal amount of the
Notes, which will be general unsecured obligations of the Company subordinate in
right of payment to all existing and future senior indebtedness of the Company.
The Notes will be unconditionally guaranteed, on an unsecured senior
subordinated basis, as to payment of principal, premium, if any, and interest,
jointly and severally, by all of the Subsidiary Guarantors.

The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after the fifth anniversary of the date of original
issuance thereof, at the redemption prices set forth in the Indenture plus
accrued and unpaid interest, if any, to but excluding the date of redemption.
Also, on or prior to the third anniversary of the date of original issuance
thereof, the Company may redeem up to 35% of principal amount of the Notes with
the net proceeds of one or more future public equity offerings, in cash, at 110%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of redemption; provided that Notes having an aggregate
principal amount of at least $146.3 million remain outstanding immediately after
any such redemption. Upon the occurrence of a change of control, the Company
will be required to make an offer to purchase all Notes then outstanding at a
purchase price, in cash, equal to 101% of the principal amount thereof, together
with accrued and unpaid interest, if any, to the date of purchase.

The Indenture will contain certain restrictive covenants, including
limitations on (i) the incurrence of indebtedness; (ii) the payment of dividends
and the making of restricted payments; (iii) transactions with affiliates; (iv)
the existence of liens; (v) the disposition of proceeds of asset sales; (vi)
entering into sale and lease-back transactions; (vii) the making of guarantees
by the Company and its subsidiaries; (viii) transfers and issuances of stock of
its subsidiaries; (ix) the imposition of restrictions on certain payments by the
Company or its subsidiaries; (x) the making of certain investments by the
Company or its subsidiaries; and (xi) certain mergers and consolidations.

The Indenture will contain customary events of default, including, without
limitation, the following: (i) the failure to pay principal or interest when
due; (ii) certain defaults under agreements relating to other indebtedness;
(iii) the material breach of any covenant; (iv) the levy of certain judgments;
and (v) certain bankruptcy, reorganization and insolvency events. The occurrence
of an event of default will permit the holders of the Notes to accelerate the
Notes and to pursue other remedies.

ACQUISITION FINANCING

The Company will finance the purchase price of the Acquisition and the
related refinancing of certain existing indebtedness, including the Existing
Notes, of the Company and will pay the fees and expenses associated with the
Acquisition and the Acquisition Financing through borrowings under the Senior
Credit Facility and the Subordinated Credit Facility and from the net proceeds
of the Offering.

56
<PAGE> 57

The Senior Credit Facility

The Senior Credit Facility is being made available to the Company pursuant
to the Second Amended and Restated Senior Credit Agreement dated as of July 9,
1996, as amended, among the Company, the several banks and other financial
institutions (collectively, the "Lenders") from time to time parties thereto and
Canadian Imperial Bank of Commerce ("CIBC"), as administrative agent for the
Lenders. The Senior Credit Facility provides for revolving credit loans, letters
of credit, and term loans at the option of the Company.

Revolving Credit Loans. The Senior Credit Facility provides for revolving
credit loans of up to $60 million prior to exercise of the Houston Option and
$70 million upon and after exercise of the Houston Option (See "The
Transactions -- The Houston Option"). The revolving credit loan commitment
automatically reduces on December 31 of each year by an amount of $10 million,
commencing on December 31, 1998, to and including December 31, 2000, and by an
amount of $40 million on December 31, 2001. The Company may prepay revolving
credit loans in whole or in part, without premium or penalty, and it may
reborrow (up to the amount of the revolving credit loan commitment then in
effect) any amounts that are repaid or prepaid.

Term Loans. The Senior Credit Facility provides for term loans designated
as "Tranche A", "Tranche B" and "Tranche C" term loans. The total term loan
commitment is $160 million for Tranche A term loans, $150 million for Tranche B
term loans and $150 million for Tranche C term loans. The term loan commitments
are subject to reduction to the extent of cash proceeds, if any, received by the
Company from the issuance of shares of Common Stock to William S. Levine and/or
Arthur R. Moreno, for the purpose of causing the total leverage ratio of the
Company and its subsidiaries to be equal to or less than 6.50 to 1.00. (See
"-- Closing Date and Conditions Precedent" below.)

The Tranche A loans are payable in equal quarterly installments on March
31, June 30, September 30 and December 31 of each year commencing on March 31,
1997, in the aggregate annual principal amount of $28 million for 1997; $43.75
million for 1998; $64.75 million for 1999; and the balance for 2000, with such
amounts being reduced ratably in the event of a reduction in the Tranche A term
loan commitment. The Tranche B loans are payable in equal quarterly installments
on March 31, June 30, September 30 and December 31 of each year commencing on
March 31, 1997, in the aggregate annual principal amount of $1.5 million for
1997; $1.5 million for 1998; $1.5 million for 1999; $37.5 million for 2000; $75
million for 2001; and $33 million for 2002, with such amounts being reduced
ratably in the event of a reduction in the Tranche B term loan commitment. The
Tranche C loans are payable in equal quarterly installments on March 31, June
30, September 30 and December 31 of each year commencing on March 31, 1997, in
the aggregate annual principal amount of $1.5 million for 1997; $1.5 million for
1998; $1.5 million for 1999; $1.5 million for 2000; $1.5 million for 2001; $60
million for 2002; and $82.5 million for 2003, with such amounts being reduced
ratably in the event of a reduction in the Tranche C term loan commitment. Term
loans can be prepaid at the option of the Company in whole or in part without
premium or penalty.

Letters of Credit. The Lenders have agreed to issue letters of credit
under the Senior Credit Facility for the account of the Company during the
revolving credit commitment period (which expires December 31, 2001) up to the
letter of credit commitment amount of $30 million (but only to the extent there
is available revolving credit commitment which is not being utilized for
revolving credit loans). The Company is required to pay fees in connection with
the letter of credit commitment and to reimburse CIBC for amounts drawn
thereunder. Interest is payable on the amounts drawn until reimbursed at the
rate which would be payable on any outstanding ABR loan plus 2% (see "General
Terms -- Interest" below).

General Terms. The revolving credit loans and term loans are subject to
the following terms:

Interest. The revolving credit loans and term loans may be, at the
option of the Company, "Eurodollar loans," "ABR loans," or a combination
thereof. Eurodollar loans bear interest at a

57
<PAGE> 58

rate per annum equal to the Eurodollar rate (as hereafter described) plus
an applicable margin (initially 3.25% for revolving credit loans and
Tranche A term loans, and 3.5% for Tranche B and Tranche C term loans). The
"Eurodollar rate" is a rate per annum determined by CIBC, as administrative
agent, based upon the rates at which U.S. dollar deposits with a term
comparable to the interest period applicable to the Eurodollar loan being
made are offered by leading banks in the London interbank deposit market
(adjusted for maximum reserves). ABR loans bear interest at a rate per
annum equal to the ABR (as defined below) plus an applicable margin
(initially 2.25% for revolving credit loans and Tranche A term loans and
2.5% for Tranche B and Tranche C term loans). "ABR" means, on a particular
date, a rate per annum equal to the highest of (a) the rate of interest
most recently announced by CIBC as its Base Rate, (b) the rate of interest
for such date offered in the interbank market to CIBC, as administrative
agent, as the overnight Federal Funds Rate, plus 1%, and (c) the rate
determined by CIBC, as administrative agent, based on the latest 3-week
moving average of daily secondary market morning offering rates in the
United States for 3-month certificates of deposit of major United States
money market lenders as published by the Federal Reserve Bank of New York
(as adjusted for reserves and assessments), plus 1%.

Security. The obligations of the Company under the Senior Credit
Facility will be secured by a security interest in substantially all of the
Company's assets, including both real and personal property.

Covenants. The Senior Credit Facility restricts the ability of the
Company and its subsidiaries to, among other things: (i) incur
indebtedness; (ii) incur liens or guarantee obligations; (iii) enter into
mergers or consolidations or liquidate, wind up or otherwise dispose of all
or substantially all of its property, or make any material change in its
method of conducting business; (iv) with certain exceptions, sell or
otherwise dispose of property, business or assets; (v) declare or pay
dividends or distributions or purchase or redeem any shares of capital
stock of the Company, or pay interest on subordinated indebtedness in cash
at a rate per annum greater than 15% or in any other form at a rate per
annum greater than 20%; (vi) make capital expenditures; (vii) make loans or
investments; (viii) make optional payments or prepay or redeem indebtedness
or amend or modify payment terms or interest on indebtedness; (ix) enter
into transactions with affiliates; (x) enter into sale and leaseback
arrangements; (xi) enter into any business except for the business in which
the Company and its subsidiaries were engaged on the date of the Senior
Credit Facility or which are directly related thereto; and (xii) enter into
agreements prohibiting or limiting the ability of the Company or any of its
subsidiaries to create liens upon its assets or revenues to secure the
obligations under the Senior Credit Facility. The Senior Credit Facility
also requires the Company and its subsidiaries to maintain a total leverage
ratio and a senior leverage ratio at certain levels and to maintain certain
interest expense coverage and fixed charges coverage. In addition, for the
12-month period ending on the closing date and on the last day of any
fiscal quarter of the Company thereafter, net revenues derived by the
Company from posting tobacco advertisements on advertising displays may not
exceed 15% of the net revenues from all advertising displays. The Senior
Credit Facility contains various affirmative covenants including, without
limitation, a covenant to maintain key man life insurance covering Arthur
R. Moreno in an amount not less than $5 million and a covenant to enter
into hedging arrangements to provide interest rate protection in respect of
at least $265 million of the Company's indebtedness.

Events of Default and Restrictions. The Senior Credit Facility
contains customary events of default, including, without limitation, the
following: (i) the Company's failure to pay principal or interest when due;
(ii) the Company's material breach of any covenant, representation or
warranty; (iii) customary cross-default provisions; (iv) certain events of
bankruptcy, insolvency or reorganization of the Company or its
subsidiaries; (v) certain adverse events under ERISA plans of the Company
or its subsidiaries; (vi) the levy of certain judgments against the Company
or any of its subsidiaries; (vii) any of the agreements or liens securing
payment of the

58
<PAGE> 59

obligations of the Company or the Subsidiary Guarantors under the Senior
Credit Facility cease to be enforceable or (viii) the destruction or loss
without replacement of a certain percentage of the total number of signs
owned by the Company during a 12-month period. In addition, the following
events constitute events of default under the Senior Credit Facility: (i)
except for the Designated Holders (as defined below), any person or group
(within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended) (A) acquires beneficial ownership of 20% or more
of any outstanding class of capital stock having ordinary voting power in
the election of directors of the Company or (B) obtains the power to elect
a majority of the Company's directors; or (ii) the aggregate amount of
capital stock having ordinary voting power in the election of directors of
the Company held by the Designated Holders no longer constitutes 40% (or
25% under certain circumstances) of the issued and outstanding capital
stock having such voting power; or (iii) either of the Designated Holders
owns fewer than 60% of the shares of capital stock of the Company of any
class held by them on the date of the closing of the Acquisition Financing;
or (iv) a Change of Control (as defined in the Subordinated Credit Facility
or in any agreement under which indebtedness is issued to replace
indebtedness thereunder) occurs; or (v) the Board of Directors of the
Company does not consist of a majority of Continuing Directors. The term
"Continuing Directors" means the directors of the Company on the Closing
Date and each other director, if such other director's nomination for
election to the Board of Directors is recommended by a majority of the then
Continuing Directors. The term "Designated Holders" means William S. Levine
and Arthur R. Moreno or any trust solely for the benefit of Mr. Levine or
his immediate family members or Mr. Moreno or his immediate family members,
as the case may be, or any partnership all of the ownership interests in
which are beneficially owned or controlled by any of the foregoing;
provided that with respect to any such trust or partnership Mr. Levine or
Mr. Moreno, as the case may be, has the power to direct the voting of the
shares of capital stock held by such trust or partnership. The occurrence
of an event of default permits the Lenders to terminate the commitments and
accelerate the indebtedness under the Senior Credit Facility.

Mandatory Prepayments and Reduction in Revolving Credit
Commitments. The Senior Credit Facility requires with certain exceptions
that net cash proceeds from certain sales or transfers of assets of the
Company or its subsidiaries or from the issuance, sale or other disposition
of capital stock or debt securities by the Company or its subsidiaries be
applied first, to payment of outstanding term loans and second, to the
permanent reduction of the revolving credit loan commitment then in effect.
However, if certain conditions are met, such net cash proceeds may be
applied by the Company to refinancing of indebtedness under the
Subordinated Credit Facility. In addition, in certain events cash flow of
the Company in excess of certain amounts is also required to be applied
first, to payment of outstanding term loans and second, to the permanent
reduction of the revolving credit loan commitments.

Purpose of Loans. The proceeds of the loans under the Senior Credit
Facility may be used for working capital purposes in the ordinary course of
business, retirement of certain indebtedness and financing the Acquisition.

Closing Date and Conditions Precedent. The closing date under the
Senior Credit Facility is the date on which the conditions precedent to
making an initial extension of credit thereunder occurs, which conditions
are required to be satisfied on or prior to September 30, 1996. One such
condition is the requirement that the only condition to consummation of the
Acquisition remaining to be satisfied under the Asset Purchase Agreement is
the delivery of funds sufficient to pay the purchase price. In addition,
the Company is required to have received not less than (i) $240 million in
gross cash proceeds of loans under the Subordinated Credit Facility; and
(ii) in the event that the total leverage ratio on the closing date of the
Acquisition Financing exceeds 6.50 to 1.00, such additional amount of gross
cash proceeds from the issuance of Common Stock to Mr. Levine and/or Mr.
Moreno as shall be necessary to cause such ratio to be equal to or less
than 6.50 to 1.00.

59
<PAGE> 60

Guarantee and Collateral Agreement. The Company's obligations under
the Senior Credit Facility will be guaranteed by the Company's subsidiaries
(the "Subsidiary Guarantors") pursuant to a Guaranty and Collateral
Agreement in favor of CIBC, as administrative agent for the Lenders, and
the Lenders. Each Subsidiary Guarantor's obligations under the Guaranty and
Collateral Agreement will be secured by a security interest in all
accounts, chattel paper, contracts, documents, equipment, general
intangibles, instruments, intellectual property, and inventory of such
Subsidiary Guarantor and certain pledged securities.

Canadian Facility. It is contemplated that a portion of the revolving
credit commitment, the Tranche A term loan commitment, the Tranche C term
loan commitment and the letter of credit commitment will be provided
pursuant to a credit facility (the "Canadian Credit Facility") with
Mediacom Inc. ("Mediacom"), a Canadian company being acquired by the
Company in the Acquisition, as the borrower. In such event, the
corresponding loan commitments and amortization under the Senior Credit
Facility will be reduced by the amounts provided under the Canadian Credit
Facility. It is contemplated that the Canadian Credit Facility will be
incorporated in the Senior Credit Facility and will thus contain terms and
provisions substantially similar to those in the Senior Credit Facility and
will be secured by a security interest in substantially all of Mediacom's
assets, including both real and personal property. Certain terms of the
Senior Credit Facility will be amended in connection with the incorporation
of the Canadian Credit Facility therein. Mediacom's obligations under the
Canadian Credit Facility will be guaranteed by the subsidiaries of
Mediacom, the Company and the Subsidiary Guarantors. The guarantee of the
Company and the Subsidiary Guarantors will be secured by a security
interest in the assets securing the Senior Credit Facility.

The Subordinated Credit Facility

The Subordinated Credit Facility is being made available to the Company
pursuant to a Senior Subordinated Credit Agreement dated as of July 9, 1996,
among the Company, the Subsidiary Guarantors, CIBC, Inc., as the sole initial
lender (together with its successors and assigns, the "Bridge Lenders"), and
CIBC, as agent for the Bridge Lenders (the "Agent"), the Bridge Lenders have
agreed to lend the Company $240 million (the "Bridge Loans"). The Bridge Loans
will constitute unsecured, senior subordinated indebtedness of the Company.

Conversion to Term Loans. Subject to the absence of any existing default
or event of default and certain other conditions, the Bridge Lenders have agreed
to convert any unpaid Bridge Loans, on the first anniversary of the closing of
the Bridge Loans (the "Conversion Date"), into term loans (the "Term Loans"),
which will mature on the 10th anniversary of the closing date (the "Maturity
Date").

Interest. Interest on the Bridge Loans and any Term Loans will be a
variable rate which will fluctuate monthly in relation to the three-month LIBOR,
plus the Applicable Spread. The "Applicable Spread" is an increasing percentage
per annum which rises prior to the Conversion Date from the initial Applicable
Spread of 6% to 7.5%. On the Conversion Date, the Applicable Spread will
increase by 0.5% over the then current Applicable Spread, and will continue to
increase by the same increment on each third monthly anniversary following the
Conversion Date, subject to a maximum interest rate of 20% per annum. The
Subordinated Credit Facility provides that the Company shall have the option to
pay any portion of the interest on the Bridge Loans and the Term Loans in excess
of 15% per annum by issuing additional Bridge Loan Promissory Notes ("Subsequent
Bridge Notes") or additional Term Loan Promissory Notes ("Subsequent Term
Notes"), as applicable. Interest is payable with respect to the Bridge Loans on
October 15, 1996, January 15, 1997, April 15, 1997 and July 15, 1997, and upon
any prepayment and maturity. Interest on the Term Loans is payable on each
October 15, January 15, April 15 and July 15 of each year after the Conversion
Date, and upon any prepayment and at maturity.

60
<PAGE> 61

Voluntary Prepayments. The Company may prepay the Bridge Loans without
penalty or premium, in whole or in part. The Term Loans may be prepaid in whole
or in part at a prepayment price initially at 101% of the principal amount
thereof on the first anniversary of the closing date, increasing annually
thereafter to 104% of the principal amount thereof on the fourth and fifth
anniversaries and then declining annually to 100% of the principal amount
thereof on the ninth anniversary of the closing date, plus accrued interest to
the prepayment date. Partial prepayments of Bridge Loans and Term Loans can be
made only to the extent that at least $100 million in principal will remain
outstanding following such prepayment.

Mandatory Prepayments. The Company is required to apply net cash proceeds
from certain asset sales in excess of $5 million to prepay a portion of the
Bridge Loans or Term Loans (collectively, "Loans"), as the case may be, to the
extent that such net cash proceeds are not used to prepay term loans and
revolving credit loans under the Senior Credit Facility or to make an investment
in a related business. The Company is also required, subject to compliance with
the terms of the Senior Credit Facility, to apply net proceeds received from the
issuance of securities to the prepayment of the Loans.

Change of Control. Upon a Change of Control (as defined in the
Subordinated Credit Facility), each holder of Bridge Loans may require the
Company to purchase all or a portion of such holder's Bridge Loans at a purchase
price equal to 101% of the outstanding principal amount thereof, plus accrued
interest thereon to the date of purchase. Prior to any purchase of the Bridge
Loans, the Company is required to either repay its obligations under the Senior
Credit Facility or to obtain the consent of the lenders thereunder.

Conditions Precedent. The obligation of the Bridge Lenders to fund the
Bridge Loans is subject to a number of conditions precedent, including, without
limitation, satisfaction of the conditions to the consummation of the
Acquisition and receipt by the Company of not more than $460 million on a term
loan basis under the Senior Credit Facility and an available revolving credit
commitment thereunder of not less than $70 million (of which there is required
to be at least $40 million of undrawn availability after giving effect to
advances initially made thereunder, excluding outstanding letters of credit).

Covenants. The Subordinated Credit Facility restricts the ability of the
Company and its subsidiaries to, among other things: (i) incur indebtedness;
(ii) incur liens; (iii) declare dividends, repurchase its capital stock or
prepay, repurchase or make sinking fund payments in respect of any subordinated
indebtedness; (iv) make certain investments; (v) guarantee indebtedness; (vi)
incur indebtedness unless subordinated to the Bridge Loans; (vii) enter into
mergers or consolidations or sell all or substantially all of its business,
property or assets, except for the Acquisition and in certain other
circumstances; (viii) enter into agreements prohibiting or limiting the ability
of subsidiaries of the Company to pay dividends, transfer property or assets to
the Company or any other subsidiary of the Company; (ix) enter into transactions
with affiliates; (x) sell capital stock of any of the Company's subsidiaries;
(xi) enter into amendments or waivers with respect to the Senior Credit Facility
materially adversely affecting the issuance of the Demand Take Out Notes (as
defined below); (xii) amend its charter documents; (xiii) refinance the Bridge
Loans in part other than through the Demand Take Out Notes or the Exchange Notes
(as defined below), except under certain circumstances; (xiv) enter into asset
sales, (xv) transfer assets to a subsidiary of the Company other than for
payment of fair market value except under certain circumstances; and (xvi)
permit its subsidiaries to guarantee certain indebtedness.

Subordination of Loans and Guarantees of Subsidiaries. The obligations of
the Company and of the Subsidiary Guarantors under the Subordinated Credit
Facility are subordinated to the rights of holders of senior indebtedness of the
Company and the Subsidiary Guarantors, as the case may be.

Events of Default. The Subordinated Credit Facility contains customary
events of default, including, without limitation, the following: (i) the failure
to pay principal or interest when due; (ii) certain defaults under agreements
relating to other indebtedness; (iii) the material breach of

61
<PAGE> 62

any covenant, representation or warranty; (iv) the levy of certain judgments;
(v) default under a guarantee of a Subsidiary Guarantor relating to the
Company's obligations under certain agreements; (vi) the commencement of a
proceeding in foreclosure with respect to collateral securing the Senior Credit
Facility; and (vii) certain bankruptcy, reorganization and insolvency events.
The occurrence of an event of default permits the Bridge Lenders to accelerate
the indebtedness under the Subordinated Credit Facility and to pursue other
remedies.

Demand Take Out Notes. The Company is required to take all reasonable
actions necessary to the extent within its power, upon request by one or more
investment banks (the "Take Out Banks") prior to the Conversion Date to enable
the Take Out Banks to publicly sell or privately place senior subordinated notes
that the Company issues under an indenture substantially similar to the Senior
Subordinated Indenture (as defined below), the proceeds of which are to be used
to repay the Bridge Loans in whole or in part and which will be guaranteed by
each subsidiary of the Company that guarantees the Bridge Loans (the "Demand
Take Out Notes"). The Demand Take Out Notes must be issued either through a
public offering or a private placement (and if the latter, must be accompanied
by customary registration rights); will mature not earlier than one year after
the scheduled final maturity of the term loans under the Senior Credit Facility;
will bear interest at a rate determined in accordance with customary procedures
for pricing comparable securities and by reference to the current yield on
senior subordinated high yield debt securities having a maturity of not less
than 10 years and having no principal payments due prior to maturity, provided
that the interest rate will in no event exceed the market rate for comparable
securities if such Demand Take Out Notes are to be issued on or prior to the
six-month anniversary of the closing of the Acquisition Financing, or if issued
thereafter, in no event higher than the rate borne by direct obligations of the
United States with a maturity date as close as possible to that of the Demand
Take Out Notes proposed to be issued, plus 6% per annum; and shall not be issued
in an amount greater than the amount necessary to repay the Bridge Loans in
full.

Exchange Notes. At the written request (an "Exchange Request") of the
holder of any Term Loan, the Company and each Subsidiary Guarantor are required
to enter into a trust indenture in substantially the form attached as an exhibit
to the Subordinated Credit Facility (the "Subordinated Indenture") and to issue
notes (the "Exchange Notes") thereunder in the form attached to the Subordinated
Indenture in exchange for the same principal amount of Term Loans or portion
thereof being exchanged. Under the terms of the Subordinated Indenture, Exchange
Notes may be issued up to the aggregate principal amount of $240 million plus
the amount of any additional Exchange Notes that may become issuable in lieu of
cash interest. The Exchange Notes will bear interest at the initial interest
rate specified therein, which rate will increase on each three month anniversary
of the date of issuance by an additional 0.5%, up to a maximum interest rate of
20% per annum. Interest on the Exchange Notes in excess of 15% per annum may be
paid by the Company at its election, by the issuance of additional notes.
Interest will be payable quarterly on each January 15, April 15, July 15 and
October 15 of each calendar year. The principal will be payable in full on the
10th anniversary of the closing of the Acquisition Financing.

Mandatory and Optional Redemption. Exchange Notes will be redeemable at
the option of the Company in whole or in part at any time at a redemption price
beginning at 101% of the principal amount theroef on the first anniversary of
the closing date, increasing annually thereafter to 104% of the principal amount
thereof on the fourth and fifth anniversaries and then declining annually to
100% of the principal amount thereof on the ninth anniversary of the issue date,
plus accrued and unpaid interest to the redemption date.

Change of Control and Asset Sales. Upon a Change of Control (as defined in
the Subordinated Indenture), each holder of Exchange Notes will have the right
to require the repurchase by the Company of such holder's Exchange Notes at a
purchase price equal to 101% of the outstanding principal amount thereof plus
accrued interest to the date of purchase. Under certain circumstances, the
Company will be obligated to apply net cash proceeds from sales of assets or
securities which are not applied to the repayment of pari passu indebtedness or
senior indebtedness or to make

62
<PAGE> 63

investments in related businesses, to repurchase Exchange Notes. The Company
will also be obligated to make an offer to purchase the Exchange Notes at a
price of 100% of the principal amount thereof plus accrued interest to the date
of repurchase, from the net proceeds of a sale of certain debt and equity
securities.

Covenants and Events of Default. The Subordinated Indenture will contain
covenants and events of default substantially similar to those contained in the
Subordinated Credit Facility.

Subordination. The Exchange Notes will be subordinated to senior
indebtedness of the Company, and the guarantees of the Exchange Notes by the
Subsidiary Guarantors will be subordinated to senior indebtedness of such
Subsidiary Guarantors, to substantially the same extent and in substantially the
same manner as the Loans and guarantees of the Subsidiary Guarantors are
subordinated to senior indebtedness of the Company and the Subsidiary
Guarantors.

REGISTRATION RIGHTS

In connection with the Acquisition Financing, the Company agreed to grant
to the holders of Exchange Notes (see "Description of Indebtedness and Other
Commitments -- The Subordinated Credit Facility") certain registration rights
pursuant to a Registration Rights Agreement (the "Bridge Registration Rights
Agreement") to be entered into by and among the Company and such holders upon
the closing of the Acquisition Financing. Under the Bridge Registration Rights
Agreement, holders of at least 25% of the outstanding Exchange Notes may request
that the Company file a Registration Statement with the Commission with respect
to a continuous offering of Exchange Notes (a "Shelf Registration") pursuant to
Rule 415 under the Securities Act. Such request must be made subsequent to 365
days following the closing of the Acquisition Financing. The holders of Exchange
Notes may, as a group, request that the Company effect one Shelf Registration.
Following the expiration of the 36 month period after the effectiveness of the
Shelf Registration, the holders of at least $25 million in aggregate principal
amount of Exchange Notes may request that the Company file with the Commission a
Registration Statement (the "Exchange Registration") and offer to exchange the
Exchange Notes for a like aggregate principal amount of debt securities of the
Company, identical in all material respects to the Exchange Notes and entitled
to the benefits of the indenture pursuant to which the Exchange Notes were
issued, except that such new debt securities shall be registered under the
Securities Act pursuant to the Exchange Registration. The holders of Exchange
Notes are entitled to request that the Company file one Exchange Registration.

63
<PAGE> 64

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to purchase
from the Company and the Selling Stockholders, the following respective numbers
of shares of Common Stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of the Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.................................................. 3,440,000
Donaldson, Lufkin & Jenrette Securities Corporation.............................. 3,440,000
CIBC Wood Gundy Securities Corp. ................................................ 1,720,000
---------
Total.................................................................. 8,600,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.

The Company and the Selling Stockholders have been advised by the
Underwriters that the Underwriters propose to offer the shares of Common Stock
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $0.83 per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers. After the
public offering, the offering price and other selling terms may be changed by
the Underwriters.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to
1,290,000 additional shares of Common Stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 8,600,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those in
which the 8,600,000 shares are being offered.

In connection with the Offering, certain Underwriters may engage in passive
market making transactions in the Common Stock on the Nasdaq National Market
immediately prior to the commencement of sales in the Offering in accordance
with Rule 10b-6A under the Exchange Act. Passive market making consists of
displaying bids on the Nasdaq National Market limited by the bid prices of
independent market makers and making purchases limited by such prices and
effected in response to order flow. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the Common Stock during a specified period and
must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain
liabilities, including liabilities under the Securities Act.

The Selling Stockholders and certain other stockholders of the Company, who
will hold in the aggregate 14,468,783 shares of Common Stock after the Offering
(including currently exercisable options to purchase 2,884,135 shares of Common
Stock) have agreed not to offer, sell or otherwise dispose of any of such Common
Stock for a period of 180 days after the date of this Prospectus without the
prior consent of the Underwriters.

64
<PAGE> 65

CIBC Wood Gundy Securities Corp. ("CIBC Wood Gundy") is an affiliate of
CIBC which is the administrative agent and a lender under the Senior Credit
Facility and the Agent under the Subordinated Credit Facility. CIBC, Inc., an
affiliate of CIBC Wood Gundy, is expected to hold approximately $93 million in
aggregate principal amount of the Bridge Loans. CIBC Wood Gundy acted as dealer
manager in connection with the Debt Tender Offer for which it was reimbursed for
its costs and expenses and has also provided the Company with financial advisory
services in connection with the Acquisition for which it has received customary
fees.

CERTAIN LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Powell, Goldstein, Frazer & Murphy,
Atlanta, Georgia. Piper & Marbury L.L.P., Baltimore, Maryland, will pass on
certain legal matters for the Underwriters in connection with this offering.

EXPERTS

The Consolidated Financial Statements of the Company as of December 31,
1995 and 1994 and for each of the three years ended December 31, 1995 included
in this Prospectus and the Registration Statement of which it is a part have
been audited by Deloitte & Touche, LLP, independent auditors, as stated in their
report appearing elsewhere herein and in the Registration Statement, and have
been so included in reliance upon such reports given upon their authority as
experts in accounting and auditing.

The Consolidated Statement of Operations of Capitol Outdoor Advertising,
Inc. and Subsidiary and its predecessor company, Creative Outdoor Advertising of
Atlanta, Inc. for the seven month period ended July 31, 1993, the five month
period ended December 31, 1993 and the nine month period ended September 30,
1994, included in this Prospectus and Registration Statement of which it is a
part have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report appearing elsewhere herein and in the Registration Statement and
have been so included in reliance upon such reports given upon their authority
as experts in accounting and auditing.

The Gannett Outdoor Combined Statement of Net Assets to be Acquired by
Outdoor Systems, Inc. as of December 31, 1994 and 1995 and the Gannett Outdoor
Combined Statements of Revenues and Direct Expenses of Net Assets to be Acquired
by Outdoor Systems, Inc. for the years ended December 31, 1993, 1994 and 1995
included in this Prospectus and Registration Statement of which it is a part
have been audited by Deloitte & Touche, LLP, independent auditors, as stated in
their report appearing elsewhere herein and in the Registration Statement, and
have been so included in reliance upon such reports given upon their authority
as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission").

The Company has filed with the Commission a Registration Statement (which
term shall include all amendments thereto) on Form S-3 under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, 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. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete.

65
<PAGE> 66

With respect to each report or other information filed with the Commission
pursuant to the Exchange Act, and such contract, agreement or document filed as
an exhibit to the Registration Statement, reference is made to such exhibit for
a more complete description, and each such statement is deemed to be qualified
in all respects by such reference. The Registration Statement may be inspected,
without charge, at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its regional offices at Seven World Trade Center,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the public
reference section of the Commission at its Washington address upon payment of
the prescribed fee.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended by Form 10-K/A and Form 10-K/A2, (ii) Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996,
and (iii) Current Report on Form 8-K dated May 22, 1996 and its Current Report
on Form 8-K dated July 16, 1996, as amended by Form 8-K/A dated July 18, 1996
and Form 8-K/A2 dated July 30, 1996 have been filed with the Commission and are
incorporated in this Prospectus by reference and made a part hereof.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the respective dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus.

The Company undertakes to provide without charge to each person, including
any beneficial owner of Common Stock, to whom a copy of this Prospectus has been
delivered, upon written or oral request, a copy of any or all information
incorporated by reference in this Prospectus (not including exhibits to such
information, unless such exhibits are specifically incorporated by reference
into such information). Such requests should be directed to Outdoor Systems,
Inc., Attention: Bill M. Beverage, Chief Financial Officer, Treasurer and
Secretary, at 2502 North Black Canyon Highway, Phoenix, Arizona 85009, telephone
number (602) 246-9569.

66
<PAGE> 67

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY:
Independent Auditors' Report.......................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June
30, 1996............................................................ F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995 and the six months ended June 30, 1995 and
1996................................................................ F-4
Consolidated Statements of Common Stockholders' Equity (Deficiency)
for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1996.......................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and the six months ended June 30, 1995 and
1996................................................................ F-6
Notes to Consolidated Financial Statements............................ F-7
CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY:
Independent Auditors' Report.......................................... F-19
Consolidated Statements of Operations for the Periods ended July 30,
1993, December 31, 1993 and September 30, 1994...................... F-20
Notes to Consolidated Statements of Operations........................ F-21
GANNETT OUTDOOR:
Independent Auditors' Report.......................................... F-24
Combined Statements of Net Assets to be Acquired as of December 31,
1994 and 1995 and June 30, 1996..................................... F-25
Combined Statements of Revenues and Direct Expenses of Net Assets to
be Acquired for the years ended December 31, 1993, 1994 and 1995 and
six months ended June 30, 1995 and 1996............................. F-26
Notes to Combined Financial Statements................................ F-27
</TABLE>

F-1
<PAGE> 68

INDEPENDENT AUDITORS' REPORT

Board of Directors
Outdoor Systems, Inc.
Phoenix, Arizona

We have audited the accompanying consolidated balance sheets of Outdoor
Systems, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1994,
and the related consolidated statements of operations, common stockholders'
equity (deficiency) and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Outdoor Systems, Inc. and
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Phoenix, Arizona
January 31, 1996, except as to Note 12, the date of which is April 17, 1996
and as to Note 13, the date of which is July 22, 1996

F-2
<PAGE> 69

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 3,658 $ 1,739 $ 2,655
Accounts receivable, less allowance for doubtful accounts of
$1,016, $1,010 and $1,057........................................ 16,271 10,971 9,649
Other current assets, principally prepaid land leases, including
amounts due from related parties of $59, $62 and $36 (Note 10)... 3,691 2,304 2,351
Deferred income taxes (Note 8)..................................... 421 415 415
-------- --------
Total current assets........................................ 24,041 15,429 15,070
PROPERTY AND EQUIPMENT -- Net (Notes 3 and 4)........................ 114,923 111,729 112,457
PERPETUAL LAND EASEMENT LEASED TO OUTDOOR ADVERTISING COMPANIES (Note
13)................................................................ 23,674
PREPAID LAND LEASES AND OTHER ASSETS................................. 1,545 1,525 1,597
DEFERRED FINANCING COSTS -- Net...................................... 5,411 4,275 3,920
DEFERRED INCOME TAXES (Note 8)....................................... 5,340 5,255 3,827
-------- --------
$ 151,260 $ 138,213 $ 160,545
======== ========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable................................................... $ 1,338 $ 642 $ 193
Accrued interest................................................... 4,927 4,843 4,714
Accrued commissions................................................ 1,489 483 413
Unearned revenue................................................... -- -- 739
Accrued expenses and other liabilities............................. 1,139 690 956
Current maturities of long-term debt (Note 4)...................... 126 550 173
-------- --------
Total current liabilities................................... 9,019 7,208 7,188
LONG-TERM DEBT (Note 4).............................................. 155,078 141,719 138,460
OTHER LONG-TERM OBLIGATIONS (Notes 7 and 12)......................... 757 984 4,473
-------- --------
Total liabilities........................................... 164,854 149,911 150,121
-------- --------
COMMON STOCK -- Subject to put option (estimated redemption value
$4,758 in 1998) (Notes 9 and 12)................................... 2,756 3,420 --
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9):
REDEEMABLE PREFERRED STOCK (Notes 2, 5 and 12):
Exchangeable preferred stock -- 10% cumulative, $1 par value,
authorized, issued and outstanding, 24,235 shares (redemption
value $4,000).................................................... 3,422 3,504 --
Class A preferred stock -- $1 par value, authorized, issued and
outstanding, 40,000 shares (redemption value $8,000)............. 4,683 5,526 --
Class B preferred stock -- 9% cumulative, $1 par value, authorized
5,000 shares; issued and outstanding, 4,619 shares............... 4,619 4,619 --
-------- --------
Total redeemable preferred stock............................ 12,724 13,649 --
-------- --------
COMMON STOCKHOLDERS' EQUITY (DEFICIENCY) (Notes 2, 4,
5, 6 and 13):
Common stock -- $.01 par value, authorized, 60,000,000 shares;
issued, 21,714,566 shares; outstanding, 14,064,269 (1994 and
1995)............................................................ 4 4 180
Additional Paid in Capital......................................... -- -- 33,987
Accumulated deficit................................................ (25,025) (24,718) (19,690)
Treasury stock at cost, 5,100,198 shares........................... (4,053) (4,053) (4,053)
-------- --------
Total common stockholders' equity (deficiency).............. (29,074) (28,767) 10,424
-------- --------
$ 151,260 $ 138,213 $ 160,545
======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 70

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising............... $ 56,622 $ 59,150 $ 74,690 $ 34,209 $ 41,929
Less agency commissions........... 7,471 8,073 10,294 4,471 5,700
---------- ---------- ---------- ---------- ----------
49,151 51,077 64,396 29,738 36,229
Other income (Note 11)............ -- 1,000 417 -- 298
---------- ---------- ---------- ---------- ----------
Net revenues.............. 49,151 52,077 64,813 29,738 36,527
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Direct advertising, including
$140, $139, $139, $70 and $70
to related parties (Note 10)... 23,721 24,433 30,462 14,596 16,151
General and administrative,
including $34, $59, $261, $124
and $225 to related parties
(Note 10)...................... 2,777 3,357 4,096 2,007 2,213
Depreciation and amortization..... 10,421 9,165 9,970 4,958 5,259
---------- ---------- ---------- ---------- ----------
Total operating
expenses................ 36,919 36,955 44,528 21,561 23,623
---------- ---------- ---------- ---------- ----------
GAIN ON 1994 DISPOSAL (Notes 2 and
13)............................... -- 4,325 -- -- --
---------- ---------- ---------- ---------- ----------
OPERATING INCOME.................... 12,232 19,447 20,285 8,177 12,904
INTEREST EXPENSE.................... 11,894 16,393 17,199 9,017 7,929
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE ITEMS SET FORTH
BELOW............................. 338 3,054 3,086 (840) 4,975
INCOME TAX PROVISION
(Note 8).......................... 227 1,721 318 -- 1,990
---------- ---------- ---------- ---------- ----------
INCOME (LOSS)BEFORE EXTRAORDINARY
LOSS.............................. 111 1,333 2,768 (840) 2,985
EXTRAORDINARY LOSS (Note 2)......... 3,287 -- -- -- 844
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)................... $ (3,176) $ 1,333 $ 2,768 $ (840) $ 2,141
========== ========== ========== ========== ==========
LESS STOCK DIVIDENDS, ACCRETIONS AND
DISCOUNTS ON REDEMPTION (Note
13)............................... 2,572 1,596 2,461 1,195 3,461
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS............... $ (5,748) $ (263) $ 307 $ (2,035) $ (1,320)
========== ========== ========== ========== ==========
NET INCOME (LOSS) PER COMMON AND
EQUIVALENT SHARE
(Notes 1 and 13)
Income (loss) before extraordinary
loss........................... $ (.17) $ (.02) $ .02 $ (.12) $ (.03)
Extraordinary loss................ (.22) -- -- -- (.05)
---------- ---------- ---------- ---------- ----------
Net income (loss) per common
share.......................... $ (.39) $ (.02) $ .02 $ (.12) $ (.08)
========== ========== ========== ========== ==========
Weighted average number of
shares......................... 14,819,223 14,064,269 16,949,385 16,834,464 15,573,117
========== ========== ========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 71

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
---------------------------------- ENDED
1993 1994 1995 JUNE 30, 1996
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
COMMON STOCK:
Balance, beginning of year.................. $ 1 $ 4 $ 4 $ 4
Additional common shares issued in stock
exchange (Note 2)........................ 3 -- -- --
Stock split................................. -- -- -- 150
Initial public offering..................... -- -- -- 26
-------- -------- -------- --------
Balance, end of year........................ 4 4 4 180
-------- -------- -------- --------
ADDITIONAL PAID IN CAPITAL:
Balance, beginning of year.................. -- -- -- --
Stock split................................. -- -- -- (150)
Initial public offering..................... -- -- -- 36,616
Preferred stock accretion and discount on
redemption (Note 13)..................... -- -- -- (2,479)
-------- -------- -------- --------
Balance, end of year........................ -- -- -- 33,987
-------- -------- -------- --------
ACCUMULATED DEFICIT:
Balance, beginning of year.................. (19,717) (24,762) (25,025) (24,718)
Net income (loss)........................... (3,176) 1,333 2,768 2,141
Common and preferred stock accretion (Notes
2, 5 and 9).............................. (545) (714) (1,507) (689)
Redemption of warrants, increasing rate
redeemable preferred stock and exchange
of common stock in connection with
refinancing (Notes 2, 5 and 9)........... 703 -- -- --
Preferred stock dividends................... (2,027) (882) (954) (293)
Redemption of common stock subject to put
option................................... -- -- -- 3,869
-------- -------- -------- --------
Balance, end of year........................ (24,762) (25,025) (24,718) (19,690)
-------- -------- -------- --------
COMMON STOCK IN TREASURY:
Balance, beginning of year.................. (4,053) (4,053) (4,053) (4,053)
-------- -------- -------- --------
Balance, end of year........................ (4,053) (4,053) (4,053) (4,053)
-------- -------- -------- --------
TOTAL COMMON STOCKHOLDERS' EQUITY
(DEFICIENCY)................................ $(28,811) $(29,074) $(28,767) $ 10,424
======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 72

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- --------------------
1993 1994 1995 1995 1996
--------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................................... $ (3,176) $ 1,333 $ 2,768 $ (840) $ 2,141
Gain on sale of land................................................ -- -- (417) -- --
Gain on 1994 Disposal............................................... -- (4,325) -- -- --
Extraordinary loss.................................................. 3,287 -- -- -- 844
Decrease in deferred taxes.......................................... -- 1,324 90 -- 1,428
Amortization of discounts on notes payable.......................... 420 383 363 177 912
Increase in obligations under warrants.............................. 133 -- -- -- --
Depreciation and amortization....................................... 10,421 9,165 9,970 4,958 5,259
Changes in assets and liabilities, net of effects from acquisitions
and disposal (Note 2):
(Increase) decrease in accounts receivable.......................... (3,247) 1,884 5,300 3,697 1,322
Decrease in prepaid expenses and other.............................. 668 704 2,486 196 210
Increase (decrease) in accrued interest............................. 3,028 187 (84) 7 (123)
Increase (decrease) in accounts payable and other liabilities....... 350 850 (1,924) (1,078) 566
Decrease in due to related parties.................................. (351) -- -- -- --
--------- -------- -------- -------- --------
Net cash provided by operating activities..................... 11,533 11,505 18,552 7,117 12,559
--------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Investment in bus benches........................................... -- -- -- -- (1,817)
Capital expenditures................................................ (4,387) (4,924) (7,070) (4,251) (2,891)
Proceeds from sale of land.......................................... -- -- 769 -- --
Payments for 1994 Acquisition....................................... -- (44,347) -- -- --
Net Proceeds from 1994 Disposal..................................... -- 21,715 -- -- --
Acquisition of perpetual easements.................................. -- -- -- -- (21,525)
--------- -------- -------- -------- --------
Net cash (used in) investing activities....................... (4,387) (27,556) (6,301) (4,251) (26,233)
--------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt........................................ 125,935 39,252 10,679 5,500 28,353
Principal payments on long-term debt and capital leases............. (104,948) (20,051) (23,977) (10,011) (33,744)
Principal payments on short-term debt............................... -- (675) -- -- --
Redemption of preferred stock and common stock warrants............. (21,328) -- -- -- --
Cash dividends paid on preferred stock.............................. (282) (800) (872) (416) (293)
Transaction fees and expenses relating to refinancing............... (5,408) -- -- -- --
Redemption of preferred and exchangeable preferred stock............ -- -- -- -- (16,369)
Initial public offering............................................. -- -- -- -- 36,643
--------- -------- -------- -------- --------
Net cash (used in) provided by financing activities........... (6,031) 17,726 (14,170) (4,927) 14,590
--------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 1,115 1,675 (1,919) (2,061) 916
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................ 868 1,983 3,658 3,658 1,739
--------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................. $ 1,983 $ 3,658 $ 1,739 $ 1,597 $ 2,655
========= ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION --
Cash paid for interest.............................................. $ 7,346 $ 14,095 $ 16,162 $ 8,479 $ 7,616
========= ======== ======== ======== ========
Cash paid for income taxes.......................................... $ 254 $ 343 $ 227 $ 158 $ 244
========= ======== ======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with acquisitions described in Note 2, liabilities
were
assumed as follows:
Fair value of assets acquired....................................... $ -- $ 45,696 $ -- -- -- --
Cash paid........................................................... -- (42,636) -- -- --
--------- -------- -------- -------- --------
Liabilities assumed and incurred and issuance of notes payable...... $ -- $ 3,060 $ -- -- --
========= ======== ======== ======== ========
Accretion of common and preferred stock (Notes 2, 5 and 9).......... $ 545 $ 714 $ 1,507 -- $ 689
========= ======== ======== ======== ========
Accrued dividends on exchangeable preferred stock................... $ 31 $ 82 $ 82 94 --
========= ======== ======== ======== ========
Increasing rate redeemable preferred stock dividends
(Note 5).......................................................... $ 1,714 $ -- $ -- -- --
========= ======== ======== ======== ========
Forgiveness of dividends on increasing rate redeemable preferred
stock (Note 5).................................................... $ 2,719 $ -- $ -- -- --
========= ======== ======== ======== ========
Exchange of common stock for Class B preferred stock, charged
to accumulated stockholders capital deficiency (Note 2)........... $ 1,900 $ -- $ -- -- --
========= ======== ======== ======== ========
Additional obligation on CSX transaction (Note 13).................. $ -- $ -- $ -- -- $ 2,198
========= ======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 73

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization -- Outdoor Systems, Inc. was incorporated on February 22,
1980, and is engaged principally in the rental of advertising space on outdoor
advertising structures in Houston, Atlanta, Phoenix, Denver, New Orleans,
Louisville, Tucson and Columbus, Ga.

Principles of Consolidation -- The consolidated financial statements
include the accounts of Outdoor Systems, Inc. and its subsidiaries
(collectively, the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.

Significant accounting policies are as follows:

a. Cash and cash equivalents -- For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid
investments with an initial maturity of three months or less to be cash
equivalents.

b. Property and equipment are recorded at cost. Normal maintenance and
repair costs are expensed. Improvements which extend the life or usefulness
of an asset are capitalized. Depreciation is computed principally on a
straight-line method based upon the following useful lives:

<TABLE>
<S> <C>
Buildings............................................ 25 to 32 years
Advertising structures............................... 5 to 15 years
Vehicles............................................. 3 to 5 years
Furniture and fixtures............................... 5 years
</TABLE>

c. Deferred financing costs are amortized using the effective interest
method over the terms of the related loans.

d. Intangibles include the excess purchase price over net assets
acquired and are amortized over a 15 year period. Amortization expense was
$435, $47, and $47 in 1993, 1994 and 1995, respectively.

e. Revenue recognition -- The Company recognizes revenue from
advertising contracts when billed, which is on a straight-line pro rata
monthly basis in accordance with contract terms. Costs associated with
providing service for specific contracts are expensed as incurred, although
such contracts generally extend beyond one month.

f. Net income (loss) per share -- Primary income (loss) per common and
common equivalent share is computed on the weighted average number of
common shares outstanding during each year and includes shares issuable
upon exercise of stock options when the effect of such issuance is
dilutive. Such amounts have been adjusted to reflect the 36.4535-for-1
stock split as discussed in Note 12 and the three for two stock split
discussed in Note 13.

g. New accounting pronouncements -- In March 1995, the Financial
Accounting Standards Board issued SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The Company has not completed the process of evaluating the impact
that will result from adopting this Statement. However, management does not
believe the adoption will have a significant impact on the Company's
financial position and results of operations. SFAS No. 121 is required to
be adopted in the first quarter of 1996. In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123 "Accounting for Stock Based
Compensation". The Company has determined that it will not change to the
fair

F-7
<PAGE> 74

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

value method and will continue to use Accounting Principles Board Opinion
No. 25 for measurement and recognition of employee stock based
compensation. SFAS No. 123 will require additional disclosures in the 1996
financial statements.

h. Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from these estimates.

2. REFINANCING, ACQUISITIONS AND DISPOSALS

1994 ACQUISITION

On December 19, 1994, the Company acquired the assets of Capitol Outdoor
Advertising, Inc. (the "1994 Acquisition") located in Atlanta, Georgia. This
acquisition has been accounted for using the purchase method of accounting, and
the results of operations have been included in the consolidated financial
statements subsequent to the acquisition. Consideration for this transaction
consisted of the following:

<TABLE>
<S> <C>
Cash paid................................................................. $42,636
Liabilities assumed....................................................... 1,345
-------
Total........................................................... 43,981
Acquisition costs......................................................... 1,715
-------
Total cost of acquisition....................................... $45,696
=======
The Company has recorded the assets acquired as shown below:
Current assets.......................................................... $ 2,789
Property and equipment, principally advertising structures.............. 42,626
Other long-term assets.................................................. 281
-------
Total........................................................... $45,696
=======
</TABLE>

1994 DISPOSAL

As a condition of allowing the 1994 Acquisition, the United States Justice
Department required the Company to sell substantially all the operating assets
of its business then operating in Atlanta (the "1994 Disposal"). This disposal
was effective December 19, 1994. Assets sold included billboards, certain other
depreciable assets and certain non-cash current assets. These assets were sold
for $22,000 plus a short-term note receivable of $1,355 for the non-cash current
assets. The resulting gain on sale of $4,325 is included in income for 1994.

The following table summarizes unaudited pro forma operating results for
the Company for the two years in the two-year period ended December 31, 1994,
assuming that the 1994 Acquisition and 1994 Disposal had occurred at the
beginning of the applicable year and after giving effect to financing costs and
purchase accounting adjustments.

<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Consolidated gross revenues..................................... $66,704 $70,324
======= =======
Income (loss) before extraordinary loss......................... $ 308 $ (563)
======= =======
Net income (loss)............................................... $ 185 $ (338)
======= =======
</TABLE>

F-8
<PAGE> 75

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REFINANCING

On August 17, 1993, the Company issued $115.0 million of Senior Notes due
2003 (the "Senior Notes"). The Company used the net proceeds of the Senior Notes
and borrowings under a New Credit Facility (Note 4) (which under certain
circumstances may be up to $40.0 million), to (i) repay all outstanding
borrowings under the Revolving Credit Agreement, (ii) redeem all outstanding
shares of the Company's Increasing Rate Redeemable Preferred Stock, (iii) retire
the 10% Subordinated Notes and purchase all of the Warrants related thereto and
(iv) pay associated transaction fees and expenses. The redemption of the
Increasing Rate Redeemable Preferred Stock resulted in the Company issuing
shares of a new series of redeemable preferred stock designated Class B
Preferred Stock (Note 5) for 50% of the accrued and unpaid dividends. The
balance of the accrued and unpaid dividends have been credited to accumulated
deficit. The Class B Preferred Stock will be redeemable on December 31, 2003 and
will pay dividends at the rate of 9.0% per annum. In connection with the
refinancing the Company: (i) issued Class B Preferred Stock in exchange for
certain shares of Common Stock owned by one stockholder; (ii) exchanged a
portion of the Junior Subordinated Exchange Notes for Exchangeable Preferred
Stock (Note 4), the redemption date of which will be July 1, 2004; (iii)
modified the 1990 Subordinated Notes to extend their respective maturities to
December 31, 2003, to accrue interest at 7.9% until March 2000 and at 18.0%
thereafter and to amend certain covenants relating thereto; (iv) amended the
terms of its Series A Preferred Stock (which was redesignated as "Class A
Preferred Stock"); and (v) issued to the holders of Common Stock approximately
353 shares of Common Stock for every share of outstanding Common Stock.

Deferred financing costs of $3,287, associated with borrowings which were
retired or redeemed, have been charged as an extraordinary loss as of December
31, 1993.

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Advertising structures....................................... $148,107 $153,080
Vehicles..................................................... 1,560 1,832
Furniture and fixtures....................................... 2,406 2,654
Buildings.................................................... 4,674 4,747
Other........................................................ 148 481
Land......................................................... 5,834 6,628
-------- --------
Total.............................................. 162,729 169,422
Less accumulated depreciation................................ 47,806 57,693
-------- --------
Property and equipment -- net.............................. $114,923 $111,729
======== ========
</TABLE>

The Company has granted a security interest in substantially all of its
assets to lenders in connection with its existing credit facility.

F-9
<PAGE> 76

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM DEBT

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
10.75% Senior Notes.......................................... $115,000 $114,670
Credit Facility, interest at 8.75% as of December 31, 1995... 33,777 21,000
1990 Subordinated Notes, due through December, 2003, net of
unamortized discount of $816 and $517, respectively........ 5,184 5,483
Junior subordinated exchange notes, net of unamortized
discount of $348 and $284, respectively.................... 877 941
Other notes payable, interest at 9.5% as of December 31,
1995....................................................... 366 175
-------- --------
Total.............................................. 155,204 142,269
Less current maturities.................................... 126 550
-------- --------
Total long-term debt -- net........................ $155,078 $141,719
======== ========
</TABLE>

Future maturities of long-term debt as of December 31 are as follows:

<TABLE>
<CAPTION>
1995
--------
<S> <C>
1996............................................................. $ 550
1997............................................................. 750
1998............................................................. 6,598
1999............................................................. 16,750
2000............................................................. --
Thereafter....................................................... 117,621
--------
Total.................................................. $142,269
========
</TABLE>

At December 31, 1995, the Company was in compliance with the covenants of
its debt agreements.

10.75% SENIOR NOTES

In connection with the refinancing discussed in Note 2, on August 17, 1993,
the Company issued the Senior Notes which mature on August 17, 2003. The Senior
Notes are senior, unsecured obligations of the Company ranking pari passu with
all other present and future indebtedness of the Company and prior in right of
payment to all present subordinated indebtedness of the Company and any future
indebtedness of the Company that by its terms is subordinated in right of
payment to the Senior Notes. The Company's obligations under the Credit Facility
(discussed below) are secured by substantially all the Company's assets and, as
a consequence thereof, the holders of such indebtedness will have a prior claim
upon those assets.

The Senior Notes require the Company to comply with certain restrictive
covenants which limit, among other things, the amount of additional indebtedness
the Company or any of its subsidiaries may incur and the payment of dividends
and include other payment restrictions affecting subsidiaries, and prohibits the
Company from incurring transactions with affiliates which are less favorable to
the Company than if conducted with a third party. Under the Indenture, dividends
on Common Stock can be paid when Cumulative Cash Flow (as defined in the
Indenture), exceeds specified multiples of interest expense. As of December 31,
1995, the Company is not able to pay dividends on its Common Stock under this
restriction.

F-10
<PAGE> 77

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CREDIT FACILITY

In connection with the refinancing discussed in Note 2, the Company entered
into a Credit Facility, due December 1999, which consists of a revolving line of
credit facility, providing for (i) up to $40.0 million in borrowings that may be
used for general corporate purposes, including working capital requirements and
acquisitions and (ii) a $1.5 million letter of credit subfacility.

The commitments of the lenders under the Credit Facility will be reduced by
20% on each December 31, commencing December 31, 1996 through December 31, 1998
and by the remaining 40% on December 31, 1999. The Company is required to repay
any borrowings to the extent the aggregate amount outstanding under the Credit
Facility exceeds the aggregate commitments in effect from time to time. The
Company may prepay borrowings under the Credit Facility.

At the Company's option, the revolving loans bear interest at a rate per
annum based upon moving CD rates or LIBOR. LIBOR loans are available for
interest periods of one, two, three, six or twelve months. The applicable margin
will vary depending on the Leverage Ratio at the time loans are made.

The Company's obligations under the Credit Facility are secured by first
priority liens (subject to certain permitted encumbrances) on substantially all
the assets of the Company.

The Credit Facility restricts the Company and its subsidiaries other than
Unrestricted Subsidiaries (as defined) from, among other things, (i) incurring
additional indebtedness and contingent liabilities, (ii) creating liens, (iii)
entering into sale and leaseback transactions, (iv) paying dividends (other than
to the Company) in excess of certain amounts and effecting certain other
transactions involving the capital stock of the Company, and (v) amending the
Notes and other material agreements of the Company.

Moreover, conditions of default arise if tobacco advertisement revenues
exceed 20% of the Company's net revenues in 1994 and 15% in any year thereafter.
The Credit Facility also restricts the Company's ability to make capital
expenditures, investments or consummate acquisitions and requires the Company to
comply with financial covenants concerning cash interest coverage and leverage.

1990 SUBORDINATED NOTES

The Company has the right to prepay the 1990 Subordinated Notes provided
that the Company also redeems, pro rata based on face amount outstanding, the
Class A Preferred shares (Note 5) at the same time. The 1990 Subordinated Notes
pay interest on a cash basis, subject to a deferral provision, at 7.9% of the
$6,000 principal amount and were recorded at a discount from the face amount
using an imputed interest rate of 16%. The 1990 Subordinated Notes are
subordinated and junior in right of payment to the borrowings under the Credit
Facility and Senior Notes and are subject to various covenants and restrictions.

FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments". The carrying amounts
and estimated fair values of the Company's financial instruments are as follows:

The carrying values of cash and cash equivalents, receivables, accounts
payable and accrued expenses approximate fair values due to the short-term
maturities of these instruments. Variable rate

F-11
<PAGE> 78

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

long-term debt instruments are estimated to approximate fair values as rates are
tied to short-term indices.

The Senior Notes are estimated to approximate market value as the trade
price of those notes approximates par value at December 31, 1995. Other fixed
rate long-term debt instruments are estimated to approximate fair values as
actual rates are consistent with rates estimated to be currently available for
debt of similar terms and remaining maturities.

5. REDEEMABLE PREFERRED STOCK

Redeemable preferred stock at December 31 consists of the following:

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Exchangeable Preferred Stock, 10% cumulative dividend, $1 par
value -- authorized, issued and outstanding, 24,235 shares... $ 3,422 $ 3,504
Class A Preferred Stock, $1 par value -- authorized, issued and
outstanding 40,000 shares.................................... 4,683 5,526
Class B Preferred Stock, 9% cumulative, $1 par value --
authorized, 5,000 shares; issued and outstanding, 4,619
shares....................................................... 4,619 4,619
------- -------
Total redeemable preferred stock..................... $12,724 $13,649
======= =======
</TABLE>

Exchangeable Preferred Stock has a required redemption in 2004 at a par
value of $4,000 and has a dividend rate of 10%. The Company has the option to
exchange such preferred stock for Junior Subordinated Exchange Notes.

Class A Preferred Stock has a mandatory redemption date of December 31,
2003, at a par value of $200 per share or $8,000 plus all accrued and unpaid
dividends through the redemption date. The Class A Preferred Stock has been
recorded at a discount of 16% which is being accreted through March 31, 1998 by
a charge to accumulated deficit. Dividends are declared and paid at the
discretion of the Company's Board of Directors. As of December 31, 1994 and
1995, no dividends have been declared or paid. The Company has the option to
redeem any or all shares of the Class A Preferred Stock prior to the mandatory
redemption date at the redemption rate plus declared and unpaid dividends, if
any. The preferred stock also requires mandatory redemption at specified amounts
prior to maturity upon the occurrence of the Company's early repayment of its
1990 Subordinated Notes, a significant change in the Company's common
stockholders, or a substantial asset transfer. The mandatory redemption price is
the greater of the redemption value or the alternative redemption price, as
defined in the Company's Articles of Incorporation. The Company is subject to
several negative covenants under the Class A Preferred Stock purchase agreement,
which limits the Company regarding the subsequent issuances of capital stock. In
addition, the holder of the Class A Preferred Stock has the right to elect one
member of the Company's Board of Directors.

Class B Preferred Stock is redeemable in 2003 at a par value of $4,619 plus
all accrued and unpaid dividends through the redemption date, and was issued by
the Company in connection with the refinancing discussed in Note 2.

6. STOCK OPTIONS

The Company has issued options to purchase shares of the Company's common
stock at values believed to represent the fair value of such shares at date of
grant. No options were issued during 1994 or 1995. As of December 31, 1994 and
1995, outstanding options were 2,984,132 shares (2,309,804 at $.07 and 674,328
at $1.24 per share).

F-12
<PAGE> 79

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The options outstanding are fully exercisable and have no expiration date.
As of December 31, 1995, no options have been exercised.

7. BENEFIT PLANS

The Company has established an Incentive Plan (the "Plan") covering certain
managers and key employees. Incentive Awards ("Awards") made under the Plan in
the form of shares of phantom stock are at the discretion of the Board of
Directors and are based on the individual's performance. Awards are valued each
year based upon the estimated value of the Company. The awards are vested at the
date of grant and any increases in value vest over a four year period.
Distributions are made over a ten year period, which begins upon termination of
employment. For the years ended December 31, 1993, 1994 and 1995, the Company
charged earnings for compensation expense of $134, $218 and $304, respectively.

The Company has a 401(k) savings plan under which it has the discretion of
making contributions as a percentage of employee contributions. For the years
ended December 31, 1993, 1994 and 1995, the Company's contributions to the
401(k) plan were $43, $49 and $56, respectively.

8. INCOME TAXES

The provision (benefit) for income taxes is composed of the following for
the years ended December 31,

<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ----
<S> <C> <C> <C>
Current
Federal.................................................. $ -- $ 179 $ 50
State -- including franchise taxes....................... 227 218 177
---- ------ ----
Total current.............................................. 227 397 227
Deferred................................................. -- 1,324 91
---- ------ ----
Total income tax provision....................... $227 $1,721 $318
==== ====== ====
</TABLE>

The Company has federal net operating loss carryforwards of approximately
$17,457 as of December 31, 1995. These net operating loss carryforwards expire
as follows: $1,047 (2003), $3,494 (2004), $4,308 (2005), $4,104 (2006), $1,193
(2007), $3,243 (2008), and $68 (2009).

On January 1, 1992, the Company experienced a change in ownership, as
defined, under Section 382 of the Internal Revenue Code. The effect of this is
to place an annual limit of $4,500 on the use of historic net operating losses
through December 31, 1991. To the extent that this limit exceeds the actual loss
used in any taxable year, such excess may be carried forward to the following
year.

The Company believes, based on operating results in 1995, and its
expectations for the future, that taxable income of the Company will more likely
than not be sufficient to utilize all of the $17,457 net operating loss
carryforwards prior to their ultimate expiration in the year 2009. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.

F-13
<PAGE> 80

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effected temporary differences and carryforwards comprising
deferred taxes at December 31, are as follows:

<TABLE>
<CAPTION>
1994 1995
------- ----------
<S> <C> <C>
Current:
Financial statement expenses not currently deductible for
income tax purposes....................................... $ 421 $ 415
------- -------
Non-current:
Financial statement expenses not currently deductible for
income tax purposes....................................... 181 393
Excess of tax over book depreciation......................... (1,184) (1,992)
Tax loss and other credit carryforwards...................... 7,428 6,854
Valuation allowance.......................................... (1,085) --
------- -------
5,340 5,255
------- -------
Total deferred tax asset............................. $ 5,761 $ 5,670
======= =======
</TABLE>

The following is a reconciliation of the income taxes to the statutory
rates:

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate................................................. 34 % 34% 34 %
Impact of adjustment to valuation allowance.................... -- -- (34 )
Impact of the net operating losses............................. (34 ) -- --
State income taxes, franchise tax.............................. 67 20 7
Other.......................................................... -- 2 3
--
--- ---
Reported rate.................................................. 67 % 56% 10 %
=== == ===
</TABLE>

9. COMMITMENTS AND OTHER

COMMON STOCK SUBJECT TO PUT OPTION

In 1990, the Company issued 1,072,662 shares of common stock in connection
with the financing of an acquisition. Under certain circumstances, the Company
has the option to redeem the common stock at any time prior to March 1998;
however, subsequent to March 1998, at the request of the holder, the Company is
required to redeem the common stock at a redemption price based upon the
appraised value of the common stock as of the redemption date.

Because this common stock is subject to redemption at the option of the
holder, the Company is accreting the stock to its estimated appraised value over
the redemption period based upon annual estimates of value determined as a
multiple of cash flow. Accretion is calculated on a straight-line basis and is
charged directly to stockholders' deficit. Annual changes in value are reflected
retroactively.

F-14
<PAGE> 81

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LEASES

The Company leases land and equipment under operating leases with various
terms expiring at various dates. Certain of the land leases provide for periodic
rental increases. At December 31, 1995, minimum annual rentals under all
operating leases for the next five years are as follows:

<TABLE>
<S> <C>
1996.............................................................. $12,659
1997.............................................................. 8,418
1998.............................................................. 5,128
1999.............................................................. 2,347
2000.............................................................. 799
Thereafter........................................................ 4,660
-------
Total................................................... $34,011
========
</TABLE>

Operating lease expense was $9,757, $9,969 and $13,533 for 1993, 1994 and
1995, respectively.

LITIGATION

The Company is involved in various legal matters that management considers
to be in the normal course of business. In management's opinion, based upon the
advice of legal counsel, such matters will be settled without material effect on
the Company's financial position or results of operations.

10. TRANSACTIONS WITH RELATED PARTIES

During 1993, 1994 and 1995, the Company entered into a number of
transactions with officers and/or stockholders of the Company, affiliated
companies and affiliated partnerships.

The following summarizes those transactions as of and for the years ended
December 31:

<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Due from employees and related parties, included in other
current assets............................................ $ 101 $ 59 $ 62
==== ==== ====
Rental income from affiliated company....................... $ 60 $ 45 $ 24
==== ==== ====
Land rent paid to affiliated company and related parties.... $ 140 $ 139 $ 139
==== ==== ====
Administrative services agreement........................... $ 94 $ 104 $ 35
==== ==== ====
Services agreement.......................................... $ 351 $ 250 $ 350
==== ==== ====
</TABLE>

11. QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
--------- -------- -------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1994:
Net revenues................................. $ 10,502 $ 12,798 $ 13,457 $ 15,320
Operating income............................. 1,661 3,891 4,308 5,262
Gain on 1994 Disposal........................ -- -- -- 4,325
Net income (loss)............................ (1,397) (5) (546) 3,281
Net income (loss) per common share........... (.14) (.04) (.08) .24
</TABLE>

F-15
<PAGE> 82

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fourth quarter of 1994 includes other income of $1.0 million relating
to cash payments received from the early termination of agreements made in
connection with an acquisition in 1992.

<TABLE>
<S> <C> <C> <C> <C>
1995:
Net revenues................................. $ 13,758 $ 15,979 $ 16,886 $ 18,190
Operating income............................. 3,048 5,128 5,586 6,523
Net income (loss)............................ (1,265) 425 1,400 2,208
Net income (loss) per common share........... (.11) (.01) .04 .10
</TABLE>

12. SUBSEQUENT EVENTS

INITIAL PUBLIC OFFERING

In February 1996, the Company reached an agreement with the holders of the
Common Stock Subject to Put Option (Note 9) under which such stockholders will
sell these shares at the time the Company completes an initial public offering
("IPO") if the IPO occurs in 1996. The Company will utilize a portion of the net
proceeds from the IPO to redeem at par or face value all of the outstanding
Class A Preferred Stock and the 1990 Subordinated Notes which are also held by
these shareholders.

The Company is preparing for an IPO of its common stock, which if
successful will result in the removal of the put option as discussed above. The
removal of the put option will result in the liability representing the Common
Stock Subject to Put Option to be credited to stockholders' equity.

In connection with the IPO contemplated during 1996, the Company's Board of
Directors adopted a resolution which on April 17, 1996 increased the authorized
number of common shares to 60,000,000 and split the common stock 36.4535 for 1.
In addition, the Board of Directors authorized the issuance of 12,000,000 shares
of preferred stock, the terms of which will be designated at the time of
issuance. All per share information in these financial statements has been
adjusted to give effect to this split.

In connection with the IPO, effective January 1, 1996, the Company ceased
allocating amounts to the accounts maintained under the Incentive Plan (Note 7).
The Company is offering to each current employee who is a participant in the
Incentive Plan the alternative of having their account settled in cash, in
shares of the Common Stock of the Company, or both, with actual distributions of
cash or Common Stock subject to both vesting requirements and terms and
conditions similar to those under which distributions would have been made under
the Incentive Plan. To the extent participants elect to settle their accounts in
Common Stock, the Company would issue (subject to the vesting requirements and
distribution terms and conditions) to such participants Common Stock at the
initial public offering price. As of December 31, 1995, approximately $1.0
million has been previously charged to expense and is accrued as a liability.
Those portions of accounts under the Incentive Plan that were not vested as of
January 1, 1996 aggregating $0.6 million will vest and will be charged to
expense over a four-year period under a new vesting schedule following the
settlement.

Upon completion of the IPO, the Company will issue options for 1,216,049
common shares to key employees at an exercise price equal to the IPO price. Such
options will vest over a four year period.

F-16
<PAGE> 83

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include all
of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments and reclassifications considered necessary for a fair and comparable
presentation have been included and are of a normal recurring nature. Operating
results for the six months ended June 30, 1996, are not necessarily indicative
of the results that may be expected for the year ending December 31, 1996.

COMPLETION OF INITIAL PUBLIC OFFERING

On April 24, 1996, the Company completed its IPO by selling 4,016,088
shares of its Common Stock. The Company received approximately $37.4 million net
of underwriting discounts and commissions.

REDEMPTION OF DEBENTURES AND PREFERRED STOCK

As contemplated in the IPO completed April 24, 1996, the Company redeemed
$6,108 of Subordinated Debt and $10,364 of Preferred Stock for cash of $7,514
and $12,619, respectively. These redemptions of the subordinated debt resulted
in an extraordinary loss of $844, net of tax benefit of $562 and the redemption
of the Preferred Stock resulted in a reduction of income attributable to common
share holdings of $2,254, representing the unamortized discount on the Preferred
Stock.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS

On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
to be Disposed Of". The adoption of SFAS No. 121 had no effect on these interim
unaudited financial statements.

ACQUISITIONS

On May 22, 1996, the Company completed the acquisition of perpetual
easements from CSX Realty Development Corporation ("CSX") for $21.6 million in
cash and certain future payments in an aggregate amount not to exceed $10.0
million payable over a period of ten years beginning no later than the year 2006
with the exact amount and timing to be determined based upon the results of the
Company's operations of the easements. The perpetual easements are located on
real property interests of CSX for the purpose of licensing rights to operate
outdoor advertising displays which are leased to independent outdoor advertising
companies and will be amortized on a straight line basis over 40 years.

On July 9, 1996, the Company signed a purchase agreement with Gannett Co.,
Inc. under which the Company will acquire Gannett Outdoor for $690.0 million
cash, subject to certain working capital adjustments on the date of closing. The
Company has obtained a commitment for the financing. The completion of the
transaction is subject to a number of conditions, including the expiration or
early termination of the waiting period under the Hart Scott Rodino Anti-Trust
Improvement Act of 1976.

F-17
<PAGE> 84

OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK SPLIT

On June 27, 1996, the Board of Directors authorized a 3 for 2 stock split
in the form of a stock dividend payable on July 22, 1996 to holders of record on
July 8, 1996. All share and per share data in these financial statements have
been adjusted to reflect the split.

F-18
<PAGE> 85

INDEPENDENT AUDITORS' REPORT

Board of Directors
Outdoor Systems, Inc.
Phoenix, Arizona

We have audited the accompanying consolidated statements of operations of
Capitol Outdoor Advertising, Inc. and Subsidiary and its predecessor company,
Creative Outdoor Advertising of Atlanta, Inc. ("historical information")
(together the "Company"), for the seven month period ended July 30, 1993, the
five month period ended December 31, 1993 and the nine month period ended
September 30, 1994. The Company was acquired in December 1994 by Outdoor
Systems, Inc. (Note 1). This historical information is the responsibility of
Company management. Our responsibility is to express an opinion on the
historical information based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the historical information is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical information. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation of the historical information. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the historical information referred to above presents
fairly, in all material respects, the results of operations of the Company for
the seven month period ended July 30, 1993, the five month period ended December
31, 1993 and the nine month period ended September 30, 1994 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Phoenix, Arizona
January 16, 1995

F-19
<PAGE> 86

CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
1993
--------------------------- 1994
SEVEN MONTH FIVE MONTH -------------
PERIOD ENDED PERIOD ENDED NINE MONTH
JULY 30, DECEMBER 31, PERIOD ENDED
1993 1993 SEPTEMBER 30,
------------ ------------ -------------
(000'S OMITTED)
<S> <C> <C> <C>
REVENUES:
Outdoor advertising............................... $ 10,516 $ 8,108 $15,559
Less agency commission............................ (1,461) (1,151) (2,245)
------- ------- -------
Net revenues.............................. 9,055 6,957 13,314
------- ------- -------
OPERATING EXPENSES:
Direct advertising................................ 5,362 3,557 6,838
General and administrative........................ 1,949 1,165 2,233
Depreciation and amortization..................... 1,464 1,016 1,837
Other -- net...................................... 2 691 966
------- ------- -------
Total operating expenses.................. 8,777 6,429 11,874
------- ------- -------
OPERATING INCOME.................................... 278 528 1,440
INTEREST EXPENSE -- Net............................. 5,156 1,438 2,733
------- ------- -------
LOSS BEFORE INCOME TAX BENEFIT...................... (4,878) (910) (1,293)
INCOME TAX BENEFIT.................................. -- 318 512
------- ------- -------
NET LOSS............................................ $ (4,878) $ (592) $ (781)
======= ======= =======
</TABLE>

See notes to consolidated statements of operations.

F-20
<PAGE> 87

CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS
SEVEN MONTH PERIOD ENDED JULY 30, 1993,
FIVE MONTH PERIOD ENDED DECEMBER 31, 1993 AND
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1994

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

On December 19, 1994, Outdoor Systems Inc., ("OSI") acquired from a
subsidiary of CIGNA Corporation ("CIGNA") all of the outdoor operating assets of
Capitol Outdoor Advertising, Inc. ("Capitol"), a company engaged in the outdoor
advertising business in Atlanta, Georgia, for $38,750,000 plus additional
consideration for certain working capital assets. This statement of operations
of Capitol, is prepared on the basis set forth below:

During the seven month period ended July 30, 1993, Capitol operated as
Creative Outdoor Advertising of Atlanta, Inc. ("Creative") which was a
subsidiary of Adams Outdoor Advertising ("Adams"). On July 30, 1993, in partial
settlement of amounts owed CIGNA by Adams, a subsidiary of CIGNA acquired from
Adams substantially all of the assets of Creative and assumed its liabilities.
At that date, the name was changed from Creative to Capitol. As a result, during
the period covered by these consolidated financial statements, Capitol was a
subsidiary of two different parent companies with two different cost bases. The
statement of operations for the seven month period ended July 30, 1993, when
Creative was a subsidiary of Adams, is, therefore, not comparable to the
statements of operations for the five and nine month periods ended December 31,
1993 and September 30, 1994, respectively, when Capitol was a subsidiary of
CIGNA.

The consolidated statements of operations includes historical operations of
the operations of Capitol under the ownership discussed above and may not be
representative of the operations under different ownership. Management fees of
$369,700 during the seven month period ended July 30, 1993, have been included
in administrative expenses.

A summary of significant accounting policies:

a. Revenues are recognized from advertising contracts when billed, which is
on a monthly basis in accordance with contract terms. Costs associated with
providing service for specific contracts are charged to expense as incurred,
although such contracts generally extend beyond one month.

b. Depreciation expense is computed using the straight-line method at rates
estimated to depreciate the applicable assets over their estimated useful lives.

c. Barter Transactions -- In the normal course of business, the Company
enters into barter transactions which represent the exchange of advertising for
goods or services recorded generally at the estimated fair value of the products
or services received. Barter revenue is recognized when advertising services are
rendered, and barter expense is recognized when the related product or services
are received.

2. INCOME TAXES

During the five month period ended December 31, 1993 and the nine month
period ended September 30, 1994, the Company was included in the consolidated
United States federal income tax return filed by CIGNA. In accordance with a tax
sharing agreement, the provision for federal income tax expense or benefit
allocated to the Company is computed as if the Company was filing a separate
federal income tax return and includes benefits that were available by virtue of
the Company being included in CIGNA's consolidated tax return filing.

F-21
<PAGE> 88

CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)

The components of the benefit for income taxes are as follows:

<TABLE>
<CAPTION>
FIVE MONTH NINE MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(000'S OMITTED)
<S> <C> <C>
Current:
Federal...................................... -- $ (796)
State........................................ -- (231)
-------------
Total current.................................. -- (1,027)
Deferred....................................... $ (318) 515
------------ ----------- --
Total benefit for income taxes....... $ (318) $ (512)
============ =============
</TABLE>

A reconciliation of the difference between the benefit for income taxes at
the statutory United States federal income tax rate is as follows for the nine
month period ended September 30, 1994:

<TABLE>
<CAPTION>
FIVE MONTH NINE MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(000'S OMITTED)
<S> <C> <C>
Income tax at statutory United States federal
income tax rate.............................. $ (318) $ (440)
(Decrease) increase in taxes:
State taxes -- net........................... -- (76)
Other........................................ -- 4
------------ ----------- --
Total................................ $ (318) $ (512)
============ =============
</TABLE>

Deferred income taxes are generally recognized when assets and liabilities
have different carrying values for financial statement and tax reporting
purposes. These differences result primarily from depreciation

3. INTEREST

Substantially all interest expense reflected in the consolidated statements
of operations for the periods ended December 31, 1993 and September 30, 1994
arose from debt due to affiliates. All such debt was repaid from the proceeds
from the sale to OSI.

Substantially all interest expense for the seven month period ended July
31, 1993 arose from debt due to CIGNA, which as explained in Note 1, was
partially settled through the acquisition of Creative by CIGNA.

4. COMMITMENTS AND CONTINGENCIES

The Company leases signs and space on which to place signs in commercial
and industrial zoned areas along high-traffic routes in cities or close to
highly populated urban areas. The Company also leases a building used in its
operations. These leases have terms ranging from one to fifteen years.

F-22
<PAGE> 89

CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)

Creative entered into a master lease agreement in 1991 with Adams Outdoor
Leasing Company, Inc. ("AOL"), a company related through common ownership. Lease
rents of approximately $266,000 were paid to AOL in the seven month period ended
July 31, 1993.

At September 30, 1994, minimum rental payments under these noncancelable
operating leases having terms greater than one year are approximately as
follows:

<TABLE>
<S> <C>
1994.................................................... $ 792,750
1995.................................................... 2,200,409
1996.................................................... 1,687,344
1997.................................................... 1,337,313
1998.................................................... 929,407
1999.................................................... 637,145
----------
Total......................................... $ 7,584,368
==========
</TABLE>

In some of the localities in which the Company operates, outdoor
advertising is the object of restrictive, and in some cases, prohibitive zoning
regulations. Management expects federal, state and local regulations to continue
to be a significant factor in the operation of the Company's business. It is not
possible to predict the extent to which such regulations could affect future
earnings.

The Company is the defendant in certain legal matters, the outcome of which
is currently unknown. Management believes the Company's liability, if any, will
not have a material effect in the accompanying consolidated financial
statements.

5. DEFERRED SAVINGS AND PROFIT SHARING PLAN

The Company has a 401(k) deferred savings and profit sharing plan.
Employees must have attained age 21 and completed one year of service to
participate in the Plan. Employees may contribute up to 10% of their salaries,
and the Company matches employee contributions at the rate of 50% (to a maximum
of 3% of the employee's compensation). The Company's expense related to the plan
totaled approximately $27,000, $28,000 and $9,000 for the seven, five and nine
month periods ended September 30, 1994, respectively.

* * * * * *

F-23
<PAGE> 90

INDEPENDENT AUDITORS' REPORT

Gannett Co., Inc.
Arlington, Virginia

We have audited the accompanying combined statements of net assets to be
acquired by Outdoor Systems, Inc. as of December 31, 1995 and 1994, and the
related combined statements of revenues and direct expenses of net assets of
Gannett Outdoor to be acquired by Outdoor Systems, Inc. (collectively, "the
financial statements") for each of the three years in the period ended December
31, 1995, pursuant to the Asset Purchase Agreement among Gannett Co., Inc. and
Outdoor Systems, Inc. dated July 9, 1996, as described in Note 1 to the
financial statements. The financial statements include the accounts of the
entities set forth in Note 1, all of which (collectively "Gannett Outdoor") are
under common ownership and common management of Gannett Co., Inc. These
financial statements are the responsibility of the management of Gannett
Outdoor. Our responsibility is to express an opinion on the financial statements
based on our audits.

The accompanying financial statements were prepared to present the combined
net assets and the revenues and direct expenses of net assets of Gannett Outdoor
to be acquired by Outdoor Systems, Inc. pursuant to the Asset Purchase Agreement
described in Note 1, and are not intended to be a complete presentation of
Gannett Outdoor's assets and liabilities or revenues and direct expenses.

In our opinion, such combined financial statements present fairly, in all
material respects, the combined net assets of Gannett Outdoor to be acquired by
Outdoor Systems, Inc. pursuant to the Asset Purchase Agreement described in Note
1, as of December 31, 1995 and 1994, and the combined revenues and direct
expenses of net assets of Gannett Outdoor to be acquired by Outdoor Systems,
Inc. for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Phoenix, Arizona

July 25, 1996

F-24
<PAGE> 91

GANNETT OUTDOOR

COMBINED STATEMENTS OF NET ASSETS TO BE ACQUIRED BY
OUTDOOR SYSTEMS, INC.
(DOLLARS IN THOUSANDS)

ASSETS TO BE ACQUIRED

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash........................................................... $ 2,460
Marketable securities.......................................... 12 $ 12
Receivables -- net............................................. 46,598 53,127 $ 60,426
Other current assets -- principally prepaid leases............. 13,843 15,038 20,776
-------- -------- --------
Total current assets.................................... 62,913 68,177 81,202
PROPERTY AND EQUIPMENT -- Net (Note 3)........................... 141,204 136,183 132,636
INTANGIBLES -- Net (Note 3)...................................... 43,841 42,046 41,243
OTHER ASSETS..................................................... 1,235 1,242 1,175
-------- -------- --------
Total assets to be acquired............................. 249,193 247,648 256,256
-------- -------- --------
LIABILITIES TO BE ASSUMED AND NET ASSETS
CURRENT LIABILITIES:
Accounts payable............................................... 8,983 8,042 13,136
Accrued liabilities............................................ 6,757 7,652 8,914
Deferred income................................................ 1,381 878 1,063
-------- -------- --------
Total current liabilities............................... 17,121 16,572 23,113
DEFERRED TAXES (Note 8).......................................... 6,737 6,853 6,856
OTHER LIABILITIES................................................ 653 283 349
-------- -------- --------
Total liabilities to be assumed......................... 24,511 23,708 30,318
COMMITMENTS AND CONTINGENCIES (Note 5)
-------- -------- --------
NET ASSETS TO BE ACQUIRED........................................ $ 224,682 $ 223,940 $ 225,938
======== ======== ========
</TABLE>

See notes to combined financial statements.

F-25
<PAGE> 92

GANNETT OUTDOOR

COMBINED STATEMENTS OF REVENUES
AND DIRECT EXPENSES OF NET ASSETS
TO BE ACQUIRED BY OUTDOOR SYSTEMS, INC.
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTH PERIODS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net advertising revenues.............. $225,165 $235,236 $247,271 $115,888 $117,733
Other income (loss)................... 25 (67) 193 266 201
-------- -------- -------- -------- --------
Total revenues................ 225,190 235,169 247,464 116,154 117,934
-------- -------- -------- -------- --------
DIRECT EXPENSES (Note 6):
Direct advertising.................... 159,927 163,362 171,091 82,955 82,410
General and administrative............ 30,572 33,866 33,101 16,123 17,169
Depreciation and amortization......... 19,669 19,692 17,262 8,743 8,822
-------- -------- -------- -------- --------
Total operating expenses...... 210,168 216,920 221,454 107,821 108,401
-------- -------- -------- -------- --------
EXCESS OF REVENUES OVER DIRECT
EXPENSES.............................. $ 15,022 $ 18,249 $ 26,010 $ 8,333 $ 9,533
======== ======== ======== ======== ========
</TABLE>

See notes to combined financial statements.

F-26
<PAGE> 93

GANNETT OUTDOOR

NOTES TO COMBINED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
UNAUDITED SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
(DOLLARS IN THOUSANDS)

1. BASIS OF PRESENTATION

On July 9, 1996, Gannett Co., Inc. ("Gannett") and Outdoor Systems, Inc.
("Outdoor Systems") signed an agreement under which Outdoor Systems will acquire
substantially all of the outdoor advertising business of Gannett ("the Purchase
Agreement"). The Gannett Outdoor Advertising Business in Houston, Texas is not
reflected in these financial statements because it is not covered by the
Purchase Agreement. Consummation of the Purchase Agreement is subject to a
number of conditions, including the expiration or early termination of the
waiting period under the Hart Scott Rodino Anti-Trust Improvement Act of 1976.

The accompanying combined statements of net assets to be acquired by
Outdoor Systems and the related combined statements of revenues and direct
expenses of net assets to be acquired by Outdoor Systems include the accounts of
the outdoor advertising division of Gannett and the accounts of its outdoor
advertising subsidiaries, Mediacom Inc. and New York Subways Advertising Co.
(referred to collectively as "Gannett Outdoor" or "the Companies"). The
Companies operate the outdoor advertising business of Gannett and have no
separate legal status or existence.

The statement of net assets to be acquired by Outdoor Systems includes the
assets and liabilities of Gannett Outdoor on the historical cost basis of
Gannett. The related statement of revenues and direct expenses includes
historical revenues and direct expenses of the Companies when owned by Gannett
and may not be representative of the revenues and direct expenses when under
different ownership. These financial statements reflect certain direct expenses
that are administered by Gannett and are allocated to Gannett Outdoor (Note 6).
Certain other indirect expenses which are reflected as a part of Outdoor
Advertising operations of Gannett have been excluded from these financial
statements because of their indirect nature. The expenses reflected in these
statements are not necessarily indicative of the costs and expenses that would
have resulted had the Companies been operated by Outdoor Systems. Charges for
interest and taxes have not been included in these financial statements because
they are considered to be corporate expenses of Gannett and not allocable to the
Companies.

Because the financial statements are not those of a separate legal entity
and the related cash flow activities for the years would not be practicable to
obtain or meaningful, a separate statement of cash flows is not presented.

The Companies are engaged principally in the rental of advertising space on
outdoor advertising structures in the New York Tri State area, Michigan,
Chicago, California, Kansas City, St. Louis, Denver, and throughout Canada.

2. SIGNIFICANT ACCOUNTING POLICIES

Revenues -- The Companies recognize revenues when billed, which is on a
monthly straight-line pro rata basis in accordance with contract terms. Costs
associated with providing service for specific contracts are expensed as
incurred, although such contracts generally extend beyond one month.

F-27
<PAGE> 94

GANNETT OUTDOOR

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Property and equipment are recorded at cost. Normal repairs and maintenance
are expensed while improvements which extend the useful life of the asset are
capitalized. Depreciation is computed on a straight-line basis over the
following useful lives:

<TABLE>
<S> <C>
Buildings............................................ 30 to 40 years
Advertising structures............................... 10 to 30 years
Vehicles............................................. 4 to 15 years
Other equipment...................................... 5 to 10 years
</TABLE>

Intangibles are principally excess of purchase price over net assets
acquired and those acquired after October 31, 1970 are amortized over 40 years.
The Companies periodically review for changes in circumstances to determine
whether there are conditions that indicate that the carrying amount of such
assets may not be recoverable. If such conditions are deemed to exist, the
Companies will determine whether estimated future undiscounted cash flows are
less than the carrying amount of such assets, in which case the Companies will
calculate an impairment loss. Any impairment loss will be recorded as a
component of the operating expenses.

Foreign Currency assets and liabilities are generally translated into U.S.
dollars using the exchange rates in effect at the statement of net assets date.
Revenue and direct expenses are generally translated using the average exchange
rate throughout the period.

Use of Estimates -- The preparation of these financial statements
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from these estimates.

3. PROPERTY AND EQUIPMENT AND INTANGIBLES

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Advertising structures....................................... $249,971 $253,716
Equipment.................................................... 33,694 35,612
Buildings and improvements................................... 23,953 24,186
Construction in progress..................................... 2,099 3,816
Land......................................................... 9,936 10,437
-------- --------
Total.............................................. 319,653 327,767
Less accumulated depreciation................................ 178,449 191,584
-------- --------
Property and equipment -- net.............................. $141,204 $136,183
======== ========
</TABLE>

Depreciation expense was $16,628, $16,725 and $15,467 for the three years
ended December 31, 1993, 1994 and 1995, respectively.

Intangibles consist of the following at December 31:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Total intangibles............................................ $ 57,673 $ 57,255
Less accumulated amortization................................ 13,832 15,209
-------- --------
Intangibles -- net........................................... $ 43,841 $ 42,046
======== ========
</TABLE>

F-28
<PAGE> 95

GANNETT OUTDOOR

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense was $3,041, $2,967 and $1,795 for the three years
ended December 31, 1993, 1994 and 1995, respectively.

4. EMPLOYEE BENEFIT PLANS

Substantially all of the Companies' non-union domestic employees are
covered by Gannett's principle defined benefit retirement plan. (Note 6) Under
the terms of the Purchase Agreement, Gannett will retain all domestic pension
obligations and will retain all plan assets.

Mediacom, Inc., Gannett Outdoor's Canadian operation, maintains a
combination of a defined benefit/defined contribution pension plan which
provides retirement benefits for substantially all employees based on length of
service and remuneration. Pension obligations are funded with independent
trustees in accordance with legal requirements.

The Plan's funded status at December 31, 1994, the date of the most recent
actuarial valuation, less amounts applicable to the defined contribution plan
and amounts recognized in the combined statement of net assets to be acquired at
December 31, 1995 are as follows:

<TABLE>
<S> <C>
Accumulated benefit obligation.................................... $ 9,512
Effect of projected future compensation increases................. 4,362
-------
Projected benefit obligation...................................... 13,874
Plan assets at fair value......................................... 13,540
-------
Plan assets less than projected benefit obligation................ 334
Unrecognized loss................................................. 67
-------
Accrued pension cost.............................................. $ 267
========
</TABLE>

Assumptions at December 31 used in accounting for the Plan were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Discount or settlement rate............................ 8.0 % 8.0 % 8.0 %
Rate of increase in compensation levels................ 6.5 % 6.5 % 6.5 %
Expected long-term rate of return on Plan assets....... 8.0 % 8.0 % 8.0 %
</TABLE>

The Plan's assets consist of money market accounts and investments in
common stocks, mutual funds, real estate and corporate bonds.

In addition, the Company has 401(k) plans for substantially all United
States employees and certain locations have union sponsored pension plans for
union employees to which the Company makes contractual contributions. The
companies contributed $116, $136 and $153 to these plans for the three years
ended December 31, 1993, 1994 and 1995, respectively.

F-29
<PAGE> 96

GANNETT OUTDOOR

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES

Leases -- The Companies lease land, buildings and equipment under operating
leases with various terms expiring at various dates. At December 31, 1995,
minimum annual rentals under all non cancellable operating leases are as
follows:

<TABLE>
<S> <C>
1996.............................................................. $ 3,141
1997.............................................................. 3,125
1998.............................................................. 3,071
1999.............................................................. 2,536
2000.............................................................. 1,609
Thereafter........................................................ 2,964
-------
Total................................................... $16,446
=======
</TABLE>

Operating lease expense was $61,553, $61,302 and $62,616 for the three
years ended December 31, 1993, 1994 and 1995. The majority of such leases are
for advertising structures on a month to month basis.

The Companies operate under exclusive sales contracts with various
municipalities including the Department of Transportation ("DOT") in various
cities and the Metropolitan Transit Authority of New York ("MTA") expiring from
1996 through 2009. Such contracts allow for the exclusive right to advertise on
buses, subways and transit shelters within these communities in exchange for a
percentage of the revenues generated under the contracts. Annual consideration
on the contract with the MTA is subject to an annual minimum guarantee of
$6,010,000.

Litigation -- The Companies are involved in various legal matters that
management considers to be in the normal course of business. In the Companies
management's opinion, based upon the advice of legal counsel, such matters will
be settled without material effect on the Companies' financial position or
results of operations.

6. TRANSACTIONS WITH GANNETT

During 1993, 1994 and 1995, the Companies received corporate charges from
Gannett for insurance and substantially all employee benefit costs. Such amounts
were allocated to the Companies based upon estimates of the Companies' pro rata
portion of such costs. Amounts included in the statements of revenues and direct
expenses for such items are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Insurance.............................................. $3,162 $2,450 $2,862
Employee benefits...................................... $2,897 $3,158 $3,262
</TABLE>

7. CANADIAN OPERATIONS

For the three years ended December 31 amounts included in the combined
financial statements applicable to Canadian operations were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Revenues............................................ $56,417 $57,686 $66,380
Excess of revenues over direct expenses............. $ 5,294 $ 5,738 $ 7,712
Assets.............................................. $84,376 $47,714 $51,888
</TABLE>

F-30
<PAGE> 97

GANNETT OUTDOOR

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

8. OTHER

Deferred taxes are applicable to Mediacom Inc. the Companies' Canadian
subsidiary. Such taxes arise principally from the amortization of advertising
structures for tax purposes over a shorter period than amortized for financial
statement purposes.

9. NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS

Basis of Presentation -- The accompanying unaudited interim combined
financial statements have been prepared utilizing generally accepted accounting
principles applicable to interim financial statements. Accordingly, such
financial statements are limited as set forth in Note 1 and also do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments and reclassifications considered necessary for a fair and comparable
presentation have been included and are of a normal recurring nature. Operating
results for the six month period ended June 30, 1996, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.

Gannett Acquisition -- On July 9, 1996, Gannett signed the Purchase
Agreement with Outdoor Systems under which Outdoor Systems will acquire Gannett
Outdoor for approximately $690,000 cash, subject to certain working capital
adjustments on the date of closing. The completion of the Agreement is subject
to a number of conditions, including the expiration or early termination of the
waiting period under the Hart Scott Rodino Anti-Trust Improvement Act of 1976.

Accounting Matters -- On January 1, 1996, the Companies adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, Accounting for the
Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed Of. The
adoption of SFAS No. 121 had no effect on these combined financial statements.

F-31
<PAGE> 98

[Inside Back Cover]

[Map of United States and Canada under the
caption "Outdoor Systems Advertising" showing
state and principal bounderies and
identifying various cities]

<PAGE> 99

------------------------------------------------------
------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Transactions...................... 10
Risk Factors.......................... 12
Use of Proceeds....................... 18
Price Range of Common Stock........... 18
Dividend Policy....................... 18
Capitalization........................ 19
Unaudited Consolidated Pro Forma
Financial Information............... 20
Selected Consolidated Financial and
Other Data.......................... 30
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 32
Business.............................. 40
Management............................ 48
Principal and Selling Stockholders.... 51
Description of Capital Stock.......... 53
Description of Indebtedness and Other
Commitments......................... 56
Underwriting.......................... 64
Certain Legal Matters................. 65
Experts............................... 65
Available Information................. 65
Incorporation of Certain Documents by
Reference........................... 66
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
8,600,000 SHARES
(LOGO) OUTDOOR SYSTEMS
COMMON STOCK
-------------------
PROSPECTUS
-------------------
ALEX. BROWN & SONS
INCORPORATED

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

CIBC WOOD GUNDY SECURITIES CORP.
AUGUST 19, 1996
------------------------------------------------------
------------------------------------------------------