<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
UNIVERSAL OUTDOOR HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7312 36-3766705
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification
No.)
</TABLE>
321 CLARK STREET, SUITE 1010
CHICAGO, ILLINOIS 60610
(312) 644-8673
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive office)
----------------
PAUL G. SIMON
GENERAL COUNSEL
UNIVERSAL OUTDOOR HOLDINGS, INC.
321 CLARK STREET, SUITE 1010
CHICAGO, ILLINOIS 60610
(312) 644-8673
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
WITH COPIES TO:
<TABLE>
<S> <C>
Leland E. Hutchinson Stacy J. Kanter
Winston & Strawn Skadden, Arps, Slate, Meagher & Flom
35 West Wacker Drive 919 Third Avenue
Chicago, Illinois 60601 New York, New York 10022
(312) 558-5600 (212) 735-3000
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Section 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value per share........................ $106,636,400 $36,771.17
</TABLE>
(1) Estimated in accordance with Rule 457(c) solely for the purpose of
determining the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING PROSPECTUS CAPTION OR PAGE
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Registration Statement Cover; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Available Information;
Outside Back Cover Page
3. Summary Information and Risk Factors and Ratio of
Earnings to Fixed/Charges........................... Prospectus Summary; Risk Factors; Business
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling Stockholders
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to Be Registered........... Description of Capital Stock
10. Interests of Named Experts and Counsel............... Not Applicable
11. Information with Respect to the Registrant........... Prospectus Summary; Risk Factors; Use of Proceeds;
Dividend Policy; Dilution; Capitalization; Selected
Consolidated Financial and Operating Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal and
Selling Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Description of
Indebtedness and Other Commitments; Experts;
Available Information; Consolidated Financial
Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
SUBJECT TO COMPLETION
JUNE 6, 1996
SHARES
UNIVERSAL OUTDOOR HOLDINGS, INC.
COMMON STOCK
---------
Of the shares of Common Stock ("Common Stock") offered hereby,
shares are being sold by Universal Outdoor Holdings, Inc. ("Universal Outdoor"
or the "Company") and shares are being sold by certain selling
stockholders named herein (the "Selling Stockholders"). See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from the
sale of Common Stock by the Selling Stockholders. Prior to this offering (the
"Offering") there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be between
$ and $ per share. See "Underwriting" for the factors to be considered
in determining the initial offering price.
The Company intends to have the Common Stock approved for quotation on the
Nasdaq National Market under the symbol " ."
--------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 6 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 (1) COMPANY (1) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total (2)............... $ $ $ $
</TABLE>
(1) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(2) The Company has granted the Underwriters a 30-day option to purchase up to
additional 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 $ , $ and
$ , 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
, 1996.
ALEX. BROWN & SONS
INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
The inside front cover consists of a map of the United States indicating the
existing markets in which the Company owns and operates outdoor advertising
display faces.
The inside back cover consists of photographs of certain outdoor advertising
display faces owned and operated by the Company in the markets indicated
therein.
--------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
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. AS USED HEREIN, THE "COMPANY" MEANS
UNIVERSAL OUTDOOR HOLDINGS, INC., TOGETHER WITH ITS CONSOLIDATED SUBSIDIARIES,
UNLESS THE CONTEXT OTHERWISE REQUIRES. "UOI" REFERS TO UNIVERSAL OUTDOOR, INC.
AND ITS CONSOLIDATED SUBSIDIARIES, WHICH CONSTITUTE THE OPERATING SUBSIDIARIES
OF THE COMPANY. UNLESS OTHERWISE SPECIFIED, THE PROSPECTUS ASSUMES (I) THE
COMPLETION OF A FOR 1 SPLIT OF COMMON STOCK OF THE COMPANY TO BE EFFECTED
IMMEDIATELY PRIOR TO THE CLOSING OF THE OFFERING OF COMMON STOCK CONTEMPLATED
HEREBY, (II) THE EXCHANGE ON A SHARE-FOR-SHARE BASIS OF THE COMPANY'S CLASS B
COMMON STOCK AND CLASS C COMMON STOCK FOR COMMON STOCK AND THE AMENDMENT OF
CERTAIN PROVISIONS OF CERTAIN OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK AND
THE PLAN RELATED THERETO, BOTH OF WHICH WILL OCCUR IMMEDIATELY PRIOR TO THE
CLOSING OF THE OFFERING, (III) THE EXERCISE OF CERTAIN OUTSTANDING RIGHTS AND
OPTIONS TO PURCHASE COMMON STOCK, AND (IV) NO EXERCISE OF THE UNDERWRITER'S
OVER-ALLOTMENT OPTION. THE TERM "MARKET" REFERS TO THE GEOGRAPHIC AREA
CONSTITUTING A METROPOLITAN STATISTICAL AREA DELINEATED BY THE U.S. CENSUS
BUREAU. "OPERATING CASH FLOW" HAS THE MEANING SET FORTH IN FOOTNOTE (3) ON PAGE
5 HEREOF AND "OPERATING CASH FLOW MARGIN" HAS THE MEANING SET FORTH IN FOOTNOTE
(4) ON PAGE 5 HEREOF.
THE COMPANY
The Company is a leading outdoor advertising company operating approximately
12,700 advertising display faces in eight markets, including Chicago,
Minneapolis/St. Paul, Indianapolis, Jacksonville (Florida), Milwaukee, Des
Moines, Evansville (Indiana) and Dallas. The Company believes that it owns and
operates the largest number of outdoor advertising display faces in the Chicago,
Minneapolis/St. Paul, Indianapolis, Jacksonville, Des Moines, and Evansville
markets. The Company increased its annual net revenues from $18.8 million in
fiscal 1991 to $34.1 million in fiscal 1995, or $62.4 million on a pro forma
basis after giving effect to acquisitions by the Company in the first half of
1996. During the same period, the Company increased its annual Operating Cash
Flow from $7.7 million to $16.6 million, or $30.0 million on a pro forma basis.
The Company believes that its 1995 Operating Cash Flow Margin of 48.7%, or 48.1%
on a pro forma basis, is among the highest in the industry. For the first
quarter ended March 31, 1996, on a pro forma basis the Company had net revenues
and Operating Cash Flow of $15.1 million and $6.5 million, respectively, which
compare favorably to the pro forma results for the same period in 1995 of $13.6
million and $5.7 million, respectively.
Since beginning operations with a single outdoor advertising structure in
Chicago in 1973, the Company has achieved its leading position in the outdoor
advertising industry through its aggressive acquisition and development efforts.
Since 1989, the Company has acquired approximately 12,000 display faces in eight
markets, including more than 4,000 additional display faces in Chicago. During
the same time period, the Company has built in excess of 315 new display faces
in its markets, a number which the Company believes is among the largest built
by any outdoor advertising company during such period.
According to recent estimates by the Outdoor Advertising Association of
America (the "OAAA"), the trade association for the outdoor advertising
industry, 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. This represents growth of approximately 8.2% over estimated
total 1994 revenues and compares favorably to the growth of total U.S.
advertising expenditures of approximately 7.7% during the same period. Outdoor
advertising offers the benefits of repetitive impact and a low cost
per-thousand-impressions compared to competitive media, including television,
radio, newspapers, magazines and direct mail marketing. As a result, outdoor
advertising is attractive both to national advertisers seeking mass market
exposure and to local businesses targeting a specific geographic area or set of
demographic characteristics.
3
<PAGE>
The Company's strategy is to improve upon its position as, or to become, the
leading provider of outdoor advertising services in each of its markets by: (i)
developing programs to maximize advertising rates and occupancy levels in
existing markets; (ii) continuing to build new display faces in its existing
markets; (iii) aggressively seeking acquisitions in existing and new
strategically attractive markets; (iv) implementing technological advances that
enhance the Company's operating efficiency and the attractiveness of outdoor
advertising to advertisers; (v) improving Operating Cash Flow Margins through
continued adherence to strict cost controls and centralization of administrative
functions; and (vi) developing other forms of out-of-home media, such as bus
shelter or transit advertising in order to enhance revenues in existing markets
or provide access to new markets.
The Company focuses its marketing efforts on developing and maintaining a
diverse base of local advertisers which accounted for approximately 77% of the
Company's net revenues in 1995. This local market focus has been critical to the
Company's ability to consistently increase its net revenues while diversifying
the account base, promoting rate integrity and adding stability to revenues.
The Company believes that its senior management team is among the most
experienced in the industry. Daniel L. Simon, President and Chief Executive
Officer and the founder of the Company, has spent his entire professional career
of 23 years in the outdoor advertising business. Brian T. Clingen, Vice
President and Chief Financial Officer, and Paul G. Simon, Vice President and
General Counsel, together possess over 24 years of experience in the industry.
This management team has successfully completed and integrated 16 acquisitions
since 1989.
The Company was incorporated in Delaware in 1991 and its principal executive
office is located at 321 North Clark Street, Chicago, Illinois 60610, and its
telephone number is (312) 644-8673.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......... shares
Common Stock offered by the Selling shares
Stockholders...............................
Common Stock to be outstanding after the shares(1)
Offering...................................
Use of Proceeds to the Company.............. For retirement of a portion of senior
indebtedness. See "Use of Proceeds." The
Company will not receive any proceeds from the
sale of shares by the Selling Stockholders.
See "Principal and Selling Stockholders."
Proposed Nasdaq National Market Symbol......
</TABLE>
- ------------------------
(1) Excludes shares of Common Stock issuable pursuant to the 1996 Warrant
Plan. Of such shares, are eligible for issuance upon exercise of
outstanding warrants exercisable upon consummation of this Offering at a
warrant exercise price of $ per share. See "Management -- The 1996 Warrant
Plan." Also excludes shares of Common Stock issuable pursuant to the
outstanding Noteholder Warrants. See "Description of Capital Stock -- The
Noteholder Warrants."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
PRO
FORMA (6)
1991 1992 1993 1994 1995 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues......................... $21,435 $27,896 $28,710 $33,180 $38,101 $70,081
Net revenues (1)....................... 18,835 24,681 25,847 29,766 34,148 62,363
Direct advertising expenses............ 7,638 10,383 10,901 11,806 12,864 24,435
General and administrative expenses.... 3,515 3,530 3,357 3,873 4,645 7,925
Operating income....................... 2,152 2,951 3,589 6,777 9,237 14,360
Interest expense....................... 6,599 9,591 9,299 11,809 12,894
Income (loss) before extraordinary item
(2)................................... (4,500) (6,349) (6,061) (5,166) (3,703)
Net income (loss)...................... (4,500) (6,349) (9,321) (5,166) (3,703)
Net loss per share.....................
Weighted average common and equivalent
shares outstanding....................
OTHER DATA:
Operating Cash Flow (3)................ $ 7,682 $10,768 $11,589 $14,087 $16,639 $30,003
Operating Cash Flow Margin (4)......... 40.8% 43.6% 44.8% 47.3% 48.7% 48.1 %
Capital expenditures................... $ 2,047 $ 2,352 $ 2,004 $ 4,668 $ 5,620
Depreciation and amortization.......... 5,530 7,817 8,000 7,310 7,402 15,643
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
PRO PRO
FORMA (6) FORMA (6)
1995 1995 1996 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues......................... $ 8,025 $15,212 $ 9,332 $16,869
Net revenues (1)....................... 7,236 13,571 8,427 15,101
Direct advertising expenses............ 3,108 5,949 3,571 6,509
General and administrative expenses.... 1,072 1,923 1,227 2,110
Operating income....................... 1,319 1,978 1,597 2,422
Interest expense....................... 3,087 3,594
Income (loss) before extraordinary item
(2)................................... (1,778) (2,007)
Net income (loss)...................... (1,778) (2,007)
Net loss per share.....................
Weighted average common and equivalent
shares outstanding....................
OTHER DATA:
Operating Cash Flow (3)................ $ 3,056 $5,699 $ 3,629 $6,482
Operating Cash Flow Margin (4)......... 42.2% 42.0 % 43.1% 42.9 %
Capital expenditures................... $ 576 $ 1,966
Depreciation and amortization.......... 1,737 3,721 2,032 4,060
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------
PRO
ACTUAL FORMA (7) AS ADJUSTED (8)
--------- ----------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................ $ 2,592 $ 6,670 $ 6,670
Total assets........................................................... 84,747 177,963 176,512
Total long-term debt (5)............................................... 120,248 180,248 135,304
Common stockholders' equity (deficit).................................. (40,533) (10,532) 32,961
</TABLE>
- ------------------------------
(1) Net revenues are gross revenues less agency commissions.
(2) Extraordinary loss represents loss on early extinguishment of debt.
(3) "Operating Cash Flow" is operating income before depreciation and
amortization. Operating Cash Flow is not intended to represent net cash
provided by operating activities as defined by generally accepted accounting
principles and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to net cash
provided by operating activities as a measure of liquidity. The Company
believes Operating Cash Flow is a measure commonly reported and widely used
by analysts, investors and other interested parties in the media industry.
Accordingly, this information has been disclosed herein to permit a more
complete comparative analysis of the Company's operating performance
relative to other companies in the media industry.
(4) "Operating Cash Flow Margin" is Operating Cash Flow stated as a percentage
of net revenues.
(5) Long-term debt does not include current maturities.
(6) Represents actual amounts adjusted to give effect to the acquisitions of NOA
Holding Company, Ad-Sign, Inc. and Image Media, Inc. See Pro Forma Combined
Statement of Operations.
(7) Represents actual amounts adjusted to give effect to the acquisition of NOA
Holding Company. See Pro Forma Combined Balance Sheet.
(8) Represents actual amounts adjusted to give effect to the acquisition of NOA
Holding Company and the application of the estimated net proceeds of $46
million to the Company of this Offering based upon an assumed public
offering price of $
per share and the application of the net proceeds therefrom. See "Use of
Proceeds" and Pro Forma Combined Balance Sheet.
5
<PAGE>
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.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS. The Company has
substantial indebtedness. On a pro forma basis after giving effect to the
acquisitions by the Company and indebtedness incurred as a result of such
acquisitions and the application of the net proceeds of this Offering, as of
March 31, 1996, the Company's total long-term debt was approximately $135.3
million, and on a pro forma basis for the three months ended March 31, 1996
interest expense was approximately $3.9 million, or 25.7% of net revenues. The
Company's level of consolidated indebtedness could have important consequences
to the holders of Common Stock, including the following: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of the principal of and interest on its indebtedness and will not be
available for other purposes; (ii) the ability of the Company to obtain
financing in the future for working capital needs, capital expenditures,
acquisitions, investments, general corporate purposes or other purposes may be
materially limited or impaired; and (iii) the Company's level of indebtedness
may reduce the Company's flexibility to respond to changing business and
economic conditions. Subject to certain limitations contained in its outstanding
debt instruments, the Company or its subsidiaries may incur additional
indebtedness to finance working capital or capital expenditures, investments or
acquisitions or for other purposes. See "Description of Indebtedness and Other
Commitments." Although historically the Company's Operating Cash Flow has been
sufficient to service its fixed charges, there can be no assurance that the
Company's Operating Cash Flow will continue to exceed its fixed charges. A
decline in Operating Cash Flow could impair the Company's ability to meet its
obligations, including for debt service, and to make scheduled principal
repayments. See "Selected Consolidated Financial and Operating Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
STOCKHOLDERS' DEFICIT; PRIOR PERIOD LOSSES. On a pro forma basis after
giving effect to the acquisitions by the Company and indebtedness incurred as a
result of such acquisitions, at March 31, 1996, the Company had a stockholders'
deficit of $10.5 million. The Company's net losses resulted in significant part
from substantial depreciation and amortization expenses relating to assets
purchased in the Company's acquisitions, interest expense associated with
related indebtedness and deferred financing costs charged to extraordinary
losses. Moreover, additional acquisitions will result in increased depreciation,
amortization and interest expenses. There can be no assurance that the Company
will generate net income in the future.
RESTRICTIONS IMPOSED BY THE COMPANY'S INDEBTEDNESS. The banks under the
Revolving Credit Facility and the Acquisition Credit Facility (each as defined
in "Description of Indebtedness and Other Commitments") have a lien on
substantially all of the assets of UOI and its subsidiaries, including the
capital stock of its subsidiaries, to secure the indebtedness of UOI under such
credit facilities, and the noteholders under the Secured Notes (as defined in
"Description of Indebtedness and Other Commitments") have a pledge of the
capital stock of UOI to secure the indebtedness of the Company under the Secured
Notes. The Company's debt instruments contain restrictions on the Company's
ability to incur additional indebtedness, create liens, pay dividends, sell
assets and make acquisitions. With respect to acquisitions by the Company
following the effective date of the debt instruments described herein,
acquisitions of stock or assets which aggregate in excess of $5,000,000 require
the written consent of certain of the banks under the Revolving Credit Facility
and the Acquisition Credit Facility. Furthermore, the Revolving Credit Agreement
and Acquisition Credit Agreement (collectively, the "Credit Agreements") contain
certain maintenance tests. There can be no assurance that the Company and its
subsidiaries will be able to comply with the provisions of their respective debt
instruments, including compliance by UOI with the financial ratios and tests
contained in the Credit Agreements. Breach of any of these covenants or the
failure to fulfill the obligations thereunder and the lapse of any applicable
grace periods would result in an event of default under the applicable debt
instruments, and the holders of such indebtedness could declare all amounts
outstanding under the applicable instruments to be due and payable immediately.
There can be no assurance that the assets or cash flow of the Company or the
6
<PAGE>
Company's subsidiaries, as the case may be, would be sufficient to repay in full
borrowings under their outstanding debt instruments whether upon maturity or
earlier or if such indebtedness were to be accelerated upon an event of default
or that the Company would be able to refinance or restructure its payments on
such indebtedness or repurchase the Secured Notes or UOI Notes (as defined in
"Description of Indebtedness and Other Commitments"). If such indebtedness were
not so repaid, refinanced or restructured, the lenders or noteholders could
proceed to realize on their collateral. In addition, any event of default or
declaration of acceleration under one debt instrument could also result in an
event of default under one or more of the Company's other debt instruments. See
"-- Substantial Leverage; Ability to Service Indebtedness" and "Description of
Indebtedness and Other Commitments."
HOLDING COMPANY STRUCTURE. Universal Outdoor is a holding company with no
business operations of its own. Universal Outdoor's only material asset is all
of the outstanding capital stock of UOI, through which Universal Outdoor
conducts its business operations. Accordingly, Universal Outdoor will be
dependent on the earnings and cash flow, and dividends and distributions from
UOI to pay its expenses and to pay any cash dividends or distributions on the
Common Stock that may be authorized by the Board of Directors of Universal
Outdoor. UOI has substantial cash interest expense due on the UOI Notes. There
can be no assurance that UOI will generate sufficient cash flow to pay dividends
or distribute funds to Universal Outdoor or that applicable state law and
contractual restrictions, including negative covenants contained in the debt
instruments of UOI, will permit such dividends or distributions. The terms of
the Credit Agreements and the UOI Notes currently restrict UOI from paying
dividends or making distributions except in very limited circumstances,
including paying certain expenses of Universal Outdoor and repurchasing its
Secured Notes. See "-- Substantial Leverage; Ability to Service Indebtedness"
and "Description of Indebtedness and Other Commitments."
ACQUISITION STRATEGY. The Company's growth has been facilitated by
strategic acquisitions that have substantially increased the Company's inventory
of advertising display faces. One element of the Company's operating strategy is
to make 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. The
Company is likely to face competition from other outdoor advertising and media
companies for acquisition opportunities that are available. In addition, if the
prices sought by sellers of outdoor advertising display faces and companies
continue to rise, 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. Also, in the Minneapolis/St.
Paul market, the Company is subject to a consent judgment that restricts the
Company's ability to purchase outdoor advertising display faces until February
1, 2001. See "Business -- Government Regulation." While the Company continues to
evaluate acquisition opportunities, there are no material acquisitions pending
as of the date of this Prospectus.
REGULATION OF OUTDOOR ADVERTISING. Outdoor advertising displays are subject
to governmental regulation at the federal, state and local levels. These
regulations, in some cases, limit the height, size, location and operation of
billboards and, in limited circumstances, regulate the content of the
advertising copy displayed on the billboards. Some governmental regulations
prohibit the construction of new billboards or the replacement, relocation,
enlargement or upgrading of existing structures. Some cities have adopted
amortization ordinances under which, after the expiration of a specified period
of time, billboards must be removed at the owner's expense and without 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. Other than in the
Company's newly acquired Jacksonville market, amortization ordinances have not
materially affected operations in the Company's markets. As a result of a
settlement of litigation related to certain assets in the Jacksonville market
prior to their acquisition, the Company has removed 165 outdoor advertising
structures in 1995 and is required to remove an additional 546 (of its total of
1,493) outdoor advertising structures over the next 19 years with 317 of such
structures to be removed between 1995 and 1998.
7
<PAGE>
There can be no assurance that these removals will not adversely affect the
Company's results of operations. Recently, the Food and Drug Administration has
proposed legislation which would prohibit the use of pictures and color in
tobacco advertising and has also proposed the elimination of all tobacco
advertising on outdoor displays located within 1,000 feet of any school.
Additionally, one major tobacco manufacturer has recently proposed federal
legislation be enacted banning 8-sheet billboard advertising and transit
advertising of tobacco products in addition to banning tobacco advertising near
schools and playgrounds. While such legislation has not been enacted by
Congress, the restrictions currently proposed, if enacted, may have a material
adverse effect on the Company's results of operations. 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 -- Customers"
and "Business -- Government Regulation."
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.
Historically, manufacturers of cigarettes have been major outdoor
advertisers. Beginning in 1993, 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
13.3% of the Company's net revenues, a reduction from 27.6% in 1991. There can
be no assurance that the tobacco industry will not further reduce advertising
expenditures in the future or that such reductions will not have a material
adverse effect on the Company's revenues. See "-- Regulation of Outdoor
Advertising," "Business -- Sales and Services," and "Business -- Government
Regulation."
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,
including 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 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 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, Daniel L. Simon. Although the Company believes it has incentive and
compensation programs designed to retain key employees, including a warrant plan
to purchase shares of the Company's Common Stock upon the market value of the
Common Stock reaching certain levels, the Company has few employment contracts
with its employees, and very few of its employees are bound by non-competition
agreements. The Company maintains key man insurance on Daniel L. Simon. 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. See "Management."
CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS. Upon consummation of the
Offering, the Company's officers, directors and their respective affiliates will
beneficially own (including for this purpose options exercisable within 60 days,
the Common Stock issuable upon exercise of the Warrants exercisable upon
consummation of this Offering pursuant to the 1996 Warrant Plan (as defined in
"Description of Capital
8
<PAGE>
Stock -- The 1996 Warrant Plan") and shares over which such persons have voting
control) approximately % of the outstanding shares of the Company's Common
Stock. See "Principal and Selling Stockholders." 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, Bylaws and Delaware
Law."
ANTI-TAKEOVER PROVISIONS. The level of stock ownership of the management of
the Company and KIA V and KEP V (each as hereinafter defined), as well as the
provisions of Delaware corporation law and the Certificate of Incorporation and
Bylaws (each as defined in "Description of Capital Stock"), may have the effect
of deterring hostile takeovers, delaying or preventing changes in control or
changes in management, or limiting the ability of stockholders to approve
transactions that they may deem to be in their best interests. In addition,
under the Company's Certificate of Incorporation, the Board of Directors has the
authority to issue shares of Preferred Stock and establish the rights and
preferences thereof without obtaining stockholder approval. The Company has no
present plans to issue any shares of Preferred Stock. See "Description of
Capital Stock."
ABSENCE OF PUBLIC MARKET. Prior to this Offering, there has been no public
market for the Common Stock of the Company. There can be no assurance that,
following this Offering, an active trading market for the Common Stock will
develop or be sustained or that the market price of the Common Stock will not
decline below the initial public offering price. The initial public offering
price will be determined by negotiations among the Company and the
Representatives of the Underwriters and will not necessarily be indicative of
the market price of the Common Stock after this Offering. See "Underwriting" for
a discussion of the factors to be considered in determining the initial public
offering price.
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of Common Stock offered
hereby will suffer an immediate and substantial dilution in the net tangible
book value of the Common Stock from the initial public offering price. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE. Beginning 180 days after the date of this
Prospectus (upon expiration of lockup agreements with the Underwriters), the
shares of Common Stock outstanding as of the date of this Prospectus, and
up to additional shares that may be issued upon exercise of outstanding
stock options will become eligible for sale at prescribed times, subject to
volume and manner of sale restrictions in reliance on Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). Sales of
substantial amounts of Common Stock (including shares issued upon exercise of
stock options), or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock. See "Shares Eligible for
Future Sale." An additional shares are subject to issuance under the 1996
Warrant Plan and upon issuance will be eligible for sale. Moreover, KIA V and
KEP V and their respective partners and certain officers of the Company, who in
the aggregate will beneficially own shares of Common Stock upon the
consummation of the Offering, will have certain registration rights with respect
thereto. See "Management -- The 1996 Warrant Plan" and "Description of Capital
Stock -- The Noteholder Warrants."
NOTEHOLDER WARRANTS. Upon consummation of the Offering, the Noteholder
Warrants (as defined in "Description of Capital Stock -- The Noteholder
Warrants") will be exercisable for additional shares of Common Stock. The
Warrant Shares (as defined in "Description of Capital Stock -- The Noteholder
Warrants") entitled to be purchased upon exercise of the Noteholder Warrants
have been registered pursuant to the Securities Act. As a result, such Warrant
Shares shall become freely transferable beginning 180 days after the date of
this Prospectus (upon expiration of lockup agreements with the Underwriters).
9
<PAGE>
Sales of substantial amounts of Warrant Shares, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock. See "Description of Capital Stock -- The Noteholder Warrants."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered hereby are estimated to be approximately $46.0 million (or
approximately million if the Underwriters' over-allotment option is
exercised in full), after deducting estimated underwriting discounts and
commissions and offering expenses and assuming an initial offering price of
$ per share.
The Company intends to use approximately $9.0 million of such proceeds to
retire a portion of the Secured Notes (as defined in "Management Discussion and
Analysis of Financial Condition and Results of Operation -- Liquidity and
Capital Resources") and to repay $37.0 million outstanding under the Acquisition
Credit Facility (the "Acquisition Indebtedness"). The Acquisition Indebtedness
was incurred on April 5, 1996 in an aggregate principal amount of $84.5 million
bearing interest at 8.25% per annum to finance a certain acquisition and
refinance other indebtedness incurred by the Company to finance its prior
acquisitions. The Secured Notes were issued on June 23, 1994 in an aggregate
principal amount of $50 million and were offered at a substantial discount from
their principal amount. No interest will accrue on the Secured Notes prior to
July 1, 1999 and the Secured Notes mature on July 1, 2004. Commencing July 1,
1999, interest on the Secured Notes will accrue at the rate of 14% per annum and
will be payable semiannually. See "Description of Indebtedness and Other
Commitments."
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company intends to
retain any future earnings for reinvestment in the Company. In addition, the
Company's credit agreements, Secured Notes and the UOI Notes that will remain
outstanding following this Offering place limitations on the Company's ability
to pay dividends or make any other distributions on Common Stock. See
"Description of Capital Stock" and "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.
10
<PAGE>
DILUTION
The pro forma deficit in net tangible book value of the Company's Common
Stock as of March 31, 1996 was approximately $ million, or $ per share. The
pro forma deficit in net tangible book value per share of Common Stock
represents the amount of the Company's common stockholders' deficit on a pro
forma basis, less intangible assets, divided by shares of Common Stock
outstanding as of March 31, 1996.
Net tangible book value dilution per share of Common Stock represents the
difference between the amount per share paid by purchasers of shares of Common
Stock in this Offering and the pro forma deficit in net tangible book value per
share of Common Stock immediately after completion of the Offering. After giving
effect to the sale of shares of Common Stock in this Offering at an assumed
offering price of $ per share and the application of the estimated net
proceeds therefrom, the pro forma deficit in net tangible book value of the
Common Stock as of March 31, 1996 would have been $ million, or $ per share
of Common Stock. This represents an immediate decrease in the deficit in the net
tangible book value of $ per share of Common Stock to existing common
stockholders and an immediate dilution in net tangible book value of $ per
share of Common Stock to purchasers of Common Stock in this Offering. The
following table illustrates the dilution in the net tangible book value per
share to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock........ $
Pro forma deficit in net tangible book value per share of Common
Stock at March 31, 1996............................................. $
Decrease in deficit per share of Common Stock attributable to new
investors...........................................................
Pro forma deficit in net tangible book value per share of Common Stock
after the Offering (1)................................................
Dilution per share to new investors.................................... $
---------
---------
</TABLE>
- ------------------------
(1) If the Underwriters' over-allotment option is exercised in full, the pro
forma deficit in net tangible book value would be approximately $ per
share, resulting in dilution to new investors in this Offering of $ per
share.
The following table sets forth, as of the close of this Offering, the number
of shares of Common Stock issued by the Company, the total consideration paid
and the average price per share paid by both existing stockholders and by new
investors purchasing shares of Common Stock in this Offering:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
ACQUIRED (1) TOTAL CONSIDERATION
----------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)............................. % % $
New investors (2).....................................
Total............................................... % %
--------- --- ---
--------- --- ---
</TABLE>
- ------------------------
(1) Excludes shares of Common Stock issuable pursuant to the 1996 Warrant
Plan. Of such shares, are eligible for issuance upon exercise of the
outstanding warrants exercisable upon consummation of the Offering at a
warrant exercise price of $ per share. Also excludes shares of Common
Stock issuable pursuant to the outstanding Noteholder Warrants. See
"Management -- The 1996 Warrant Plan" and "Description of Capital Stock --
The Noteholder Warrants".
(2) Sales by the Selling Stockholders in this Offering will reduce the number of
shares of Common Stock held by existing stockholders to , or % of
the total number of shares of Common Stock to be outstanding after this
Offering, and will increase the number of shares of Common Stock to be
purchased by new investors to , or %, of the total number of shares
of Common Stock to be outstanding after this Offering. See Note 1 above and
"Principal and Selling Stockholders."
11
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
at March 31, 1996, and as adjusted to give effect to the Offering at an assumed
offering price of $ . The table should be read in conjunction with the
Consolidated Financial Statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
PRO AS
ACTUAL FORMA (1) ADJUSTED (2)
------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short term debt:
Current maturities of long term debt and other
obligations.............................................. $ 58 $ -- $ --
------- -------- --------
Long term debt:
Revolving Credit Facility................................. 3,692 -- --
Acquisition Credit Facility............................... 18,778 8,552 --
Acquisition Term Loan..................................... -- 75,000 46,152
14% Series A Senior Secured Discount Notes due 2004....... 30,175 30,175 22,631
11% Series A Senior Notes due 2003........................ 64,179 64,179 64,179
Other obligations......................................... 3,424 2,342 2,342
------- -------- --------
Total long term debt and other obligations.............. 120,248 180,248 135,304
Common stockholders' equity (deficit)....................... (40,533) (10,532 ) 32,961
------- -------- --------
Total capitalization.................................... $79,773 $169,716 $168,265
------- -------- --------
------- -------- --------
</TABLE>
- ------------------------
(1) Reflects the Naegele Acquisition consummated as of April 5, 1996 and
issuance of Class B Common Stock and Class C Common Stock. See "Business --
Acquisitions" and "Certain Transactions."
(2) Reflects the application of the net proceeds of the Offering.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected financial data presented below as of and for the year ended
December 31, 1995 and the three months ended March 31, 1996 and 1995 are derived
from the Consolidated Financial Statements of the Company. The selected
financial data as of and for the years ended December 31, 1992, 1993, 1994 and
1995 are derived from the financial statements of the Company. Certain of such
financial statements were unaudited. The financial statements of the Company for
the three years in the period ended December 31, 1995 were audited by Price
Waterhouse LLP, independent accountants, as indicated in their report included
elsewhere in this Prospectus. The selected financial data as of and for the
three months ended March 31, 1995 and 1996 are derived from the combined
financial statements included herein and include all normal and recurring
adjustments necessary for a fair presentation of such data. The data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements, including the Notes thereto, appearing elsewhere in this Prospectus.
Due to the significant development and acquisition of additional structures, the
data set forth below is not necessarily comparable on a year-to-year basis and
data set forth for certain periods is not indicative of results for the full
year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
PRO
FORMA (6)
1991 1992 1993 1994 1995 1995
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenue..................... $21,435 $27,896 $28,710 $33,180 $38,101 $70,081
Net revenues (1).................. 18,835 24,681 25,847 29,766 34,148 62,363
Direct advertising expenses....... 7,638 10,383 10,901 11,806 12,864 24,435
General and administrative
expenses......................... 3,515 3,530 3,357 3,873 4,645 7,925
Depreciation and amortization..... 5,530 7,817 8,000 7,310 7,402 15,643
Operating income.................. 2,152 2,951 3,589 6,777 9,237 14,360
Interest expense.................. 6,599 9,591 9,299 11,809 12,894
Other (expense) income, net....... (53) 291 (351) (134) (46)
Net income (loss) before extra-
ordinary item (2)................ (4,500) (6,349) (6,061) (5,166) (3,703)
Net loss.......................... (4,500) (6,349) (9,321) (5,166) (3,703)
Net loss per share................
Weighted average common and
equivalent shares outstanding....
OTHER DATA:
Operating Cash Flow (3)........... $ 7,682 $10,768 $11,589 $14,087 $16,639 $30,003
Operating Cash Flow Margin (4).... 40.8% 43.6% 44.8% 47.3% 48.7% 48.1%
Capital expenditures.............. 2,047 2,352 2,004 4,668 5,620
Depreciation and amortization..... 5,530 7,817 8,000 7,310 7,402 15,643
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------
PRO PRO
FORMA (6) FORMA (6)
1995 1995 1996 1996
------- --------- ------ ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenue..................... $ 8,025 $15,212 $9,332 $16,869
Net revenues (1).................. 7,236 13,571 8,427 15,101
Direct advertising expenses....... 3,108 5,949 3,571 6,509
General and administrative
expenses......................... 1,072 1,923 1,227 2,110
Depreciation and amortization..... 1,737 3,721 2,032 4,060
Operating income.................. 1,319 1,978 1,597 2,422
Interest expense.................. 3,087 3,594
Other (expense) income, net....... (10) (10)
Net income (loss) before extra-
ordinary item (2)................ (1,778) (2,007)
Net loss.......................... (1,778) (2,007)
Net loss per share................
Weighted average common and
equivalent shares outstanding....
OTHER DATA:
Operating Cash Flow (3)........... $ 3,056 $5,699 $3,629 $6,482
Operating Cash Flow Margin (4).... 42.2% 42.0% 43.1% 42.9%
Capital expenditures.............. 576 1,966
Depreciation and amortization..... 1,737 3,721 2,032 4,060
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
YEAR ENDED DECEMBER 31, -------------------------
----------------------------------------------------- PRO FORMA AS ADJUSTED
1991 1992 1993 1994 1995 (7) (8)
--------- --------- --------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(5)............................. $ 2,365 $ 1,326 $ 1,730 $ 2,845 $ 4,195 $ 6,670 $ 6,670
Total assets................................... 71,682 65,754 61,816 68,253 71,050 177,963 176,512
Total long-term debt and other obligations..... 65,076 59,363 69,254 99,669 106,362 180,248 135,304
Redeemable preferred stock..................... 13,442 15,055 21,505
Common stockholders' equity (deficit).......... (11,450) (17,799) (32,157) (34,823) (38,526) (10,532) 32,961
</TABLE>
13
<PAGE>
- ------------------------------
(1) Net revenues are gross revenues less agency commissions.
(2) Extraordinary loss represents loss on early extinguishment of debt.
(3) "Operating Cash Flow" is operating income before depreciation and
amortization. Operating Cash Flow is not intended to represent net cash
flow provided by operating activities as defined by generally accepted
accounting principles and should not be considered as an alternative to net
income (loss) as an indicator of the Company's operating performance or to
net cash provided by operating activities as a measure of liquidity. The
Company believes Operating Cash Flow is a measure commonly reported and
widely used by analysts, investors and other interested parties in the
media industry. Accordingly this information has been disclosed herein to
permit a more complete comparative analysis of the Company's operating
performance relative to other companies in the media industry.
(4) "Operating Cash Flow Margin" is Operating Cash Flow stated as a percentage
of net revenues.
(5) Working capital is current assets less current liabilities (excluding
current maturities of long-term debt and other obligations). Other
obligations totalled $2,850 at December 31, 1992.
(6) Represents actual amounts adjusted to give effect to the acquisitions of
NOA Holding Company, Ad-Sign, Inc. and Image Media, Inc. See Pro Forma
Combined Statement of Operations.
(7) Represents actual amounts adjusted to give effect to the acquisition of NOA
Holding Company. See Pro Forma Combined Balance Sheet.
(8) Represents actual amounts adjusted to give effect to the acquisition of NOA
Holding Company and the application of the estimated net proceeds of $46.0
million to the Company of this Offering based upon an assumed public
offering price of $ per share and the application of the net proceeds
therefrom. See "Use of Proceeds" and Pro Forma Combined Balance Sheet.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the consolidated results of operations of the
Company for the three years ended December 31, 1995 and financial condition at
December 31, 1995 should be read in conjunction with the Consolidated Financial
Statements of the Company and the related notes included elsewhere in this
Prospectus.
GENERAL
The Company has grown significantly since 1989 through the acquisition of
outdoor advertising businesses and individual display faces in specific markets,
improvements in occupancy and advertising rates, and the development of new
display faces in existing markets. Between January 1, 1989 and April 30, 1996,
the Company spent in excess of $160 million to acquire additional display faces,
increasing the number of its display faces from approximately 500 at the
beginning of 1989 to approximately 12,700 at April 30, 1996. During this period,
the Company's net revenues increased from $10.3 million in 1989 to $34.1 million
in 1995. The following table lists the Company's acquisitions since January 1,
1989:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER AND TYPE OF
DISPLAY FACES ACQUIRED
----------------------------------------------
YEAR OF 30-SHEET 8-SHEET
ACQUISITION MARKETS BULLETINS POSTERS POSTERS TOTAL
- -------------- ------------------------------------------------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
1989........ Milwaukee, Chicago 270 -- -- 270
1990........ Chicago 12 -- -- 12
1991........ Indianapolis, Des Moines, Evansville, Chicago 421 2,480 140 3,041
1994........ Chicago, Milwaukee 20 -- 4,151 4,171
1995........ Chicago, Dallas 9 -- 1,127 1,136
1996........ Chicago, Minneapolis/St. Paul, Jacksonville 1,022 2,550 -- 3,572
----------- ----------- --------- ---------
Total............................................................. 1,754 5,030 5,418 12,202
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
The Company's acquisitions have been financed through bank borrowings and
the issuance of long-term debt and redeemable preferred stock (all of which has
been redeemed), as well as with internally-generated funds. All acquisitions
have been accounted for using the purchase method of accounting, and
consequently, operating results from acquired operations are included from the
respective dates of those acquisitions. As a result of these acquisitions and
the effects of consolidation of operations following each acquisition, the
operating performance of certain markets and of the Company as a whole reflected
in the Company's Consolidated Financial Statements and other financial and
operating data included herein are not necessarily comparable on a year-to-year
basis.
15
<PAGE>
RESULTS OF OPERATIONS
The following table presents certain operating statement items in the
Consolidated Statements of Operations as a percentage of net revenues:
<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, THREE MONTHS ENDED
MARCH 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Direct advertising expenses.............................. 42.2 39.7 37.7 43.0 42.4
General and administrative expenses...................... 13.0 13.0 13.6 14.8 14.5
----- ----- ----- ----- -----
Operating Cash Flow (1).................................... 44.8 47.3 48.7 42.2 43.1
Depreciation and amortization.............................. 30.9 24.5 21.6 24.0 24.1
----- ----- ----- ----- -----
Operating income........................................... 13.9 22.8 27.1 18.2 19.0
Other expense, primarily interest.......................... 37.3 40.2 37.9 42.8 42.8
----- ----- ----- ----- -----
Net loss before extraordinary item......................... (23.4) (17.4) (10.8) (24.6) (23.8)
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
- ------------------------------
(1) "Operating Cash Flow" is operating income before depreciation and
amortization. Operating Cash Flow is not intended to represent net cash flow
provided by operating activities as defined by generally accepted accounting
principles and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to net cash
provided by operating activities as a measure of liquidity. The Company
believes Operating Cash Flow is a measure commonly reported and widely used
by analysts, investors and other interested parties in the media industry.
Accordingly this information has been disclosed herein to permit a more
complete comparative analysis of the Company's operating performance
relative to other companies in the media industry.
Revenues are a function of both the occupancy of the Company's display faces
and the rates that the Company charges for their use. The Company focuses its
sales effort on maximizing occupancy levels while maintaining rate integrity in
its markets. Additionally, the Company believes it is important to the overall
sales effort to continually attempt to develop new inventory in growth areas of
its existing markets in order to enhance overall revenues.
Historically, manufacturers of cigarettes have been major outdoor
advertisers. In the early 1990's, tobacco manufacturers began substantially
reducing their advertising expenditures. By diversifying its customer base and
increasing sales to local advertisers, the Company's tobacco revenues as a
percentage of total revenues declined from 19.9% in 1992 to 13.3% in 1995, while
the Company's total net revenues increased 38.4% during the same period.
Net revenues represent gross revenues less commissions paid to advertising
agencies that contract for the use of advertising displays on behalf of
advertisers. Approximately 35% of the Company's gross revenues are contracted
for directly from local advertisers. Agency commissions on those revenues which
are contracted through agencies are typically 15% of gross revenues on local
sales and 16 2/3% of gross revenues on national sales. The Company considers
agency commissions as a reduction in gross revenues, and measures its operating
performance based upon percentages of net revenues rather than gross revenues.
Direct advertising expenses consist of the following five catagories: lease,
production, sales, maintenance and illumination. The lease expense consists
mainly of rental payments to owners of the land underlying the signs. The
production category consists of all of the costs to produce advertising copy and
install it on the display faces. Sales expense consists mainly of the cost of
staffing a sales force to sell within a specific market. The maintenance
category includes minor repair and miscellaneous maintenance of the sign
structures and the illumination category consists mainly of electricity costs to
light the display faces. The majority of these direct expenses are variable
costs (other than lease costs) that will fluctuate with the overall level of
revenues. In 1995, these expenses amounted to the following approximate
percentages of net revenues: lease 14.2%, production 11.3%, sales 6.8%,
maintenance 3.3% and illumination 2.1%.
16
<PAGE>
General and administrative expenses occur at both the market and corporate
levels. At the market level these expenses contain various items of office
overhead pertaining to both the personnel and the facility required to
administer a given market. The corporate general and administrative costs
represent staff and facility expenses for the executive offices and the
centralized accounting function. Both types of general and administrative
expenses are primarily fixed expenses in the operation of the business.
The Company had federal income tax net operating losses ("NOLs") of
approximately $15.5 million as of December 31, 1995, which will expire over a
period of years beginning in 2005. Use of these NOLs is subject to an annual
limit of approximately $2.4 million under Section 382 of the Internal Revenue
Code of 1986, as amended, and may be subject to further restriction under the
rules applicable to corporations filing consolidated federal income tax returns.
Management believes that sufficient taxable income will be generated to use the
$15.5 million of NOLs prior to their expiration between 2005 and 2010. However,
there can be no assurance that sufficient taxable income will be generated in
the future.
COMPARISON OF THREE MONTH PERIODS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Net revenues increased 16.5% to $8.4 million during the first three months
of 1996 from $7.2 million in the corresponding 1995 period, reflecting higher
advertising rates and occupancy levels experienced primarily in the
Indianapolis, Des Moines and Evansville markets and the inclusion of the 1996
partial period of revenues from the acquisition of Ad-Sign, Inc.
Direct advertising expenses increased to $3.6 million in the first three
months of 1996 from $3.1 million in the 1995 period as a result of the higher
net revenues. As a percentage of net revenues, direct advertising expenses
decreased slightly to 42.4% in the first three months of 1996 compared to 43.0%
in the 1995 period as a result of economies of scale associated with increased
revenues.
General and administrative expenses increased to $1.2 million in the first
three months of 1996 from $1.1 million in the 1995 period primarily as a result
of increased payroll costs. As a percentage of net revenues, general and
administrative expenses decreased to 14.6% in the first three months of 1996
from 14.8% in the 1995 period as a result of economies of scale associated with
increased revenues.
As a result of the above factors, Operating Cash Flow increased by 18.8% to
$3.6 million in 1996 from $3.1 million in 1995.
Depreciation and amortization expense for the first three months of 1996
increased to $2.0 million from $1.7 million in 1995 due to large increases in
the fixed assets offset by reduced depreciation of certain older fixed assets.
Total interest expense in the first three months of 1996 increased to $3.6
million from $3.1 million in the 1995 period primarily as a result of larger
borrowings under the Acquisition Credit Facility following the acquisition of
Ad-Sign, Inc.
The foregoing factors contributed to the Company's $2.0 million net loss in
the first three months of 1996 from a $1.8 million net loss in the 1995 period.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Net revenues increased 14.7% to $34.1 million during 1995 from $29.8 million
in 1994, reflecting higher advertising rates and occupancy levels particularly
in the Chicago and Indianapolis markets and inclusion of approximately $500,000
in revenues attributable to the acquisitions in the Dallas market.
Direct advertising expenses increased to $12.9 million in 1995 from $11.8
million in 1994 as a result of higher sales during the 1995 period. As a
percentage of net revenues, however, direct advertising expenses decreased to
37.7% in 1995 as a result of economies of scale associated with increased
revenues.
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<PAGE>
General and administrative expenses in 1995 increased to $4.6 million from
$3.9 million in 1994 due to the incremental payroll costs associated with
additional employees and expenses related to acquisitions. As a percentage of
net revenues, general and administrative expenses increased to 13.6% from 13.0%
in the prior year. This increase was due primarily to the incremental payroll
costs associated with additional employees and expenses related to acquisitions.
As a result of the above factors, Operating Cash Flows increased by 18.1% to
$16.6 million in 1995 from $14.1 million in 1994 .
Depreciation and amortization expenses increased slightly to $7.4 million in
1995 from $7.3 million in 1994 due to large increases in the fixed assets offset
by reduced depreciation of the older fixed assets.
Total interest expense increased to $12.9 million in 1995 from $11.8 million
in 1994 due to interest expense associated with additional borrowings and the
accretion of interest due to a larger amount of principal outstanding, partially
offset by the elimination of the accretion of dividends on redeemable preferred
stock.
The foregoing factors contributed to the Company's $3.7 million net loss in
1995 compared to a net loss of $5.2 million in 1994. Because the Company
incurred net losses in 1995, 1994 and 1993, it had no provision for income taxes
in those years.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993
Net revenues increased 15.2% to $29.8 million during 1994 from $25.8 million
in 1993, reflecting higher advertising rates and occupancy levels and increased
sales to local advertisers. Increases in revenue from the advertising structures
acquired in certain acquisitions, offset by declines in revenues from the
January 1994 sale of the Company's 97 bulletin display faces in Jacksonville,
accounted for approximately $700,000 of the increased revenues in 1994.
Direct advertising expenses increased to $11.8 million in 1994 from $10.9
million in 1993 as a result of higher sales during the 1994 period. As a
percentage of net revenues, however, direct advertising expenses decreased to
39.7% in 1994 as a result of economies of scale associated with increased
revenues.
General and administrative expenses in 1994 increased to $3.9 million from
$3.4 million in 1993 due to the incremental payroll costs associated with
additional employees. As a percentage of net revenues, however, general and
administrative expenses remained flat at 13.0%.
As a result of the above factors, Operating Cash Flow increased by 21.6% to
$14.1 million in 1994 from $11.6 million in 1993.
Depreciation and amortization expenses decreased to $7.3 million (24.6% of
net revenues) in 1994 from $8.0 million (31.0% of the net revenues) in 1993 due
to scheduled depreciation of the fixed assets.
Total interest expense increased to $11.8 million in 1994 from $9.3 million
in 1993 as a result of the incremental interest associated with the Secured Note
Offering (as defined in "Liquidity and Capital Resources") and the additional
borrowings in 1994, which were partially offset by less accretion of dividends
on the redeemable preferred stock because such stock was redeemed in June 1994.
The foregoing factors contributed to the Company's $5.2 million net loss in
1994 compared to a net loss of $9.3 million in 1993 (which included a $3.3
million extraordinary charge recorded in the fourth quarter of 1993). Because
the Company incurred net losses in 1994 and 1993, it had no provision for income
taxes in those years.
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QUARTERLY COMPARISONS
The following table sets forth certain quarterly financial information of
the Company for each quarter of 1994 and 1995 and for the first quarter of 1996.
The information has been derived from the quarterly financial statements of the
Company which are unaudited but which, in the opinion of management, have been
prepared on the same basis as the financial statements included herein and
include all adjustments (consisting only of normal recurring items) necessary
for a fair presentation of the financial result for such periods. This
information should be read in conjunction with the financial statements and the
notes thereto and the other financial information appearing elsewhere in this
Prospectus. The operating results for any quarter are not necessarily indicative
of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1994 1994 1994 1994 1995 1995 1995 1995
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $ 6,102 $ 7,803 $ 7,973 $ 7,888 $ 7,236 $ 9,175 $ 8,940 $ 8,797
Operating income....... 924 2,333 2,002 1,518 1,319 3,055 2,458 2,405
Net income (loss)...... (2,053) (498) (1,099) (1,516) (1,778) (215) (811) (899)
PERCENTAGE OF NET
REVENUES:
Operating income....... 15.1% 29.9% 25.1% 19.2% 18.2% 33.3% 27.5% 27.3%
Net income (loss)...... (33.6) (6.4) (13.8) (19.2) (24.6) (2.3) (9.1) (10.2)
OTHER DATA:
Operating Cash Flow
(1)................... $ 2,709 $ 3,998 $ 3,885 $ 3,495 $ 3,056 $ 4,856 $ 4,308 $ 4,419
Operating Cash Flow
Margin (2)............ 44.4% 51.2 % 48.7 % 44.3 % 42.2 % 52.9 % 48.2 % 50.2%
<CAPTION>
MARCH 31,
1996
-----------
<S> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $ 8,427
Operating income....... 1,597
Net income (loss)...... (2,007)
PERCENTAGE OF NET
REVENUES:
Operating income....... 19.0%
Net income (loss)...... (23.8)
OTHER DATA:
Operating Cash Flow
(1)................... $ 3,629
Operating Cash Flow
Margin (2)............ 43.1 %
</TABLE>
- ----------------------------------
(1) "Operating Cash Flow" is operating income before depreciation and
amortization. Operating Cash Flow is not intended to represent net cash
provided by operating activities as defined by generally accepted accounting
principles and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to net cash
provided by operating activities as a measure of liquidity. The Company
believes Operating Cash Flow is a measure commonly reported and widely used
by analysts, investors and other interested parties in the media industry.
Accordingly, this information has been disclosed herein to permit a more
complete comparative analysis of the Company's operating performance
relative to other companies in the media industry.
(2) "Operating Cash Flow Margin" is Operating Cash Flow stated as a percentage
of net revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and revolving credit borrowings. Its acquisitions have been
financed primarily with borrowed funds and, to a lesser extent, with preferred
stock.
In April 1996, the Company consummated the Naegele Acquisition (as defined
hereafter) pursuant to which the Company acquired approximately 2,550 poster
faces (of which approximately 1,455 are located in the Minneapolis/St. Paul
market and approximately 1,095 are located in the Jacksonville market) and
approximately 840 painted bulletin faces (of which approximately 440 are located
in the Minneapolis/St. Paul market and approximately 400 are located in the
Jacksonville market). The purchase price of the Naegele Acquisition, including
fees and expenses associated with the transaction, was approximately $90
million. In connection therewith, UOI, its current lender, LaSalle National Bank
("LaSalle"), and an additional bank, Bankers Trust Company ("Bankers Trust";
together with LaSalle, the "Lenders"), agreed to (i) refinance the Company's
existing credit facility with a revolving credit facility (the "Revolving Credit
Facility") and (ii) provide an additional extension of credit for purposes of
acquisition financing (the "Acquisition Credit Facility") and, specifically, the
financing, in part, of the Naegele Acquisition. The Lenders extended an
acquisition term loan in the amount of $75 million and an acquisition revolving
credit line in the amount of $12.5 million for a total commitment of $87.5
million, of which $84.5 million was drawn at the closing of the Naegele
Acquisition. In addition, the Lenders extended a working capital revolving
credit line in the amount of $12.5 million, of which no amount has been drawn.
Each of the Revolving Credit Facility and the Acquisition Credit Facility are
secured by a lien on the assets of UOI and a pledge of the stock of the Company,
as well as a pledge of the stock of any
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wholly-owned subsidiary of UOI. In addition to the amounts drawn under the
Acquisition Credit Facility, the Company sold a minority portion of its capital
stock for $30 million in cash proceeds which was used to finance the remaining
amount of the Naegele Acquisition and to refinance existing indebtedness.
The Company expects to use the net proceeds of the Offering of $46.0 million
after deducting expenses to repay approximately $9.0 million of the Secured
Notes and to repay approximately $37.0 million outstanding under the Acquisition
Credit Facility. At April 30, 1996, there were no amounts outstanding under the
Revolving Credit Facility and approximately $84.5 million outstanding under the
Acquisition Credit Facility. Upon consummation of the Offering and application
of the net proceeds therefrom, approximately $12.5 million and $ million are
expected to be available for borrowing under the Revolving Credit Facility and
the Acquisition Credit Facility, respectively.
Net cash provided by operating activities increased to $2.9 million for the
three months ended March 31, 1996 from $2.0 million for the 1995 period. Net
cash provided by operating activities increased to $7.0 million in 1995 from
$4.9 million in 1994. Net cash provided by operating activities reflects the
Company's net loss adjusted for non-cash items and the use or source of cash for
the net change in working capital.
The Company's net cash used in investing activities of $15.7 million for the
three months ended March 31, 1996 includes cash used for acquisitions of $13.6
million and other capital expenditures of $2.0 million, including the
expenditure of $320,000 for the acquisition of a building in Milwaukee. The
Company's net cash used in investing activities of $9.1 million for the year
ended December 31, 1995 includes cash used for acquisitions of $1.9 million and
other capital expenditures of $5.6 million. Capital expenditures have been made
primarily to develop new structures in each of its markets. The Company intends
to continue to develop new structures in its markets and to consider other
potential acquisitions. Management established the Acquisition Credit Facility
for the purpose of financing acquisitions and capital expenditures relating to
the development and improvement of advertising structures. The Company believes
that its cash from operations, together with available borrowings under the
Revolving Credit Facility and the Acquisition Credit Facility, will be
sufficient to satisfy its cash requirements, including anticipated capital
expenditures, for the foreseeable future. However, in the event cash from
operations, together with available funds under the Revolving Credit Facility
and the Acquisition Credit Facility are insufficient to satisfy its cash
requirements, the Company may incur additional indebtedness to finance its
operations including, without limitation, additional acquisitions.
For the three months ended March 31, 1996, $12.8 million was used in
financing activities primarily due to acquisitions. For the three months ended
March 31, 1995, net cash of $0.1 million was used in financing activities,
primarily due to expenses associated with the establishment of an acquisition
credit facility. For the years ended December 31, 1995 and 1994, $2.1 million
and $3.3 million, respectively, was provided by financing activities, primarily
as a result of additional borrowings under the prior credit facility.
In June 1994, the Company completed an offering (the "Secured Note
Offering") of $50 million of Senior Secured Discount Notes due 2004 (the
"Secured Notes"), the proceeds from which were used to redeem all of the
Company's outstanding preferred stock and a portion of the Company's outstanding
common stock and for working capital purposes. The Secured Notes accrue interest
at a rate of 14% per annum with cash payments thereon beginning on January 1,
2000. The Secured Notes are secured by all of the outstanding capital stock of
UOI. Universal Outdoor is a holding company with no business operations other
than those of UOI, and its sole source of income is its ability, as the sole
stockholder of UOI, to cause UOI to make distributions on its capital stock.
However, UOI currently expects that it will retain its cash flows from operating
activities for use in its business and the servicing of its outstanding debt.
Furthermore, the terms of the indenture (the "UOI Indenture") governing the UOI
Notes and the Revolving Credit Facility effectively preclude UOI from paying
dividends or making other payments to the Company (except for limited payments
for certain expenses of the Company and the purchase of the Secured Notes).
20
<PAGE>
The Company expects to fund its capital expenditures primarily with cash
from operations and expects its capital expenditures to be primarily for
development of additional structures. The Company intends to utilize its cash
from operations to continue to develop new advertising structures in each of its
markets, and, as appropriate opportunities arise, to acquire additional outdoor
advertising operations in its existing markets, in geographically proximate
markets and in contiguous markets. The Company is also exploring the development
of other forms of out-of-home media, such as bus shelter advertising and transit
advertising that management believes would complement the Company's existing
outdoor operations. The restrictions imposed by the Revolving Credit Facility,
the Acquisition Credit Facility, the UOI Indenture and the indenture governing
the Company's Secured Notes may limit the Company's use of cash from operations
for these purposes.
IMPACT OF RETIREMENT OF DEBT ON NET INCOME
The Company intends to utilize a portion of the proceeds from this Offering
to redeem 25% of the aggregate principal amount of the Secured Notes. The
Secured Notes will be redeemed at 114% of their accreted value at the time of
the Offering. The Company will also use the remaining proceeds to repay a
portion of the acquisition term loan and the Acquisition Credit Facility. In
connection with the early retirement of the Secured Notes and a portion of the
acquisition term loan, the Company expects to incur an extraordinary loss
approximating $1.1 million representing the difference between the redemption
amount and the accreted value of the Secured Notes.
INFLATION
Inflation has not had a significant impact on the Company over the past
three years. The floating rate on the Revolving Credit Facility and Acquisition
Credit Facility could increase in an inflationary environment, but management
believes that because a significant portion of the Company's costs are fixed,
inflation will not 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 COMPENSATION, 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.
21
<PAGE>
BUSINESS
GENERAL
The Company is a leading outdoor advertising company operating approximately
12,700 advertising display faces in eight markets, including Chicago,
Minneapolis/St. Paul, Indianapolis, Jacksonville, Milwaukee, Des Moines,
Evansville and Dallas. The Company believes that it owns and operates the
largest number of outdoor advertising display faces in the Chicago,
Minneapolis/St. Paul, Indianapolis, Jacksonville, Des Moines, and Evansville
markets. The Company increased its annual net revenues from $18.8 million in
fiscal 1991 to $34.1 million in fiscal 1995, or $62.4 million on a pro forma
basis after giving effect to acquisitions by the Company in the first half of
1996. During the same period, the Company increased its Operating Cash Flow from
$7.7 million to $16.6 million, or $30.0 million on a pro forma basis. The
Company believes that its 1995 Operating Cash Flow Margin of 48.7%, or 48.1% on
a pro forma basis, is among the highest in the industry. For the first quarter
ended March 31, 1996, on a pro forma basis the Company had net revenues and
Operating Cash Flow of $15.1 million and $6.5 million, respectively, which
compare favorably to the pro forma results for the same period in 1995 of $13.6
million and $5.7 million, respectively.
Since beginning operations with a single outdoor advertising structure in
Chicago in 1973, the Company has achieved its leading position in the outdoor
advertising industry through its aggressive acquisition and development efforts.
Since 1989, the Company has acquired approximately 12,000 display faces in eight
markets including more than 4,000 additional display faces in Chicago. During
the same time period, the Company has built in excess of 315 new display faces
in its markets, a number which the Company believes is among the largest built
by any outdoor advertising company during such period.
The Company's strategy is to improve upon its position as, or to become, the
leading provider of outdoor advertising services in each of its markets by: (i)
developing programs to maximize advertising rates and occupancy levels in
existing markets; (ii) continuing to build new display faces in its existing
markets; (iii) aggressively seeking acquisitions in existing and new
strategically attractive markets; (iv) implementing technological advances that
enhance the Company's operating efficiency and the attractiveness of outdoor
advertising to advertisers; (v) improving Operating Cash Flow Margins through
continued adherence to strict cost controls and centralization of administrative
functions; and (vi) developing other forms of out-of-home media, such as bus
shelter or transit advertising in order to enhance revenues in existing markets
or provide access to new markets.
The Company focuses its marketing efforts on developing and maintaining a
diverse base of local advertisers which accounted for approximately 77% of the
Company's net revenues in 1995. This local market focus has been critical to the
Company's ability to consistently increase its net revenues while diversifying
the account base, promoting rate integrity and adding stability to revenues.
The Company believes that its senior management team is among the most
experienced in the industry. Daniel L. Simon, President and Chief Executive
Officer and the founder of the Company, has spent his entire professional career
of 23 years in the outdoor advertising business. Brian T. Clingen, Vice
President and Chief Financial Officer, and Paul G. Simon, Vice President and
General Counsel, together possess over 24 years of experience in the industry.
This management team has successfully completed and integrated 16 acquisitions
since 1989.
INDUSTRY OVERVIEW
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, newspapers, 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
22
<PAGE>
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.
Outdoor advertising dates back to the late 19th century when companies began
renting space on fences for advertising placards or "bills" which were pasted or
"posted," accounting for the current "billboards" and "posters" terminology. The
outdoor advertising industry grew dramatically from the 1920s to the 1960s, with
the significant increase in automobile travel and highway and freeway
construction and improvement. As roadside advertising became more popular with
advertisers, the displays used by the industry evolved from posters to more
permanent billboards in standard sizes located in highly visible, high-traffic
locations.
The outdoor advertising industry's operating environment changed with the
passage of the Highway Beautification Act of 1965 which encouraged states to
implement legislation to control billboards located in non-commercial and
non-industrial areas within a certain distance of federally funded highways.
Since that time, various types of state and municipal laws governing outdoor
advertising have been adopted. While these regulations have, in some
jurisdictions, restricted the construction of new billboards and placed
limitations on the expansion and improvement of existing displays, they
typically have not significantly hindered the continued use of existing
structures. In the Company's newly acquired Jacksonville market, however, as a
result of a settlement of litigation by Naegele, the Company is required to
remove a significant number of outdoor advertising structures. See "--
Government Regulation."
The outdoor advertising industry has experienced significant change in
recent periods 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, blimps 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 product-oriented companies.
Third, the industry has benefitted 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 make greater use of
advertising copy used in other media. Lastly, the outdoor advertising industry
has benefitted 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.
As a result of these factors, the outdoor advertising industry has been
experiencing increased advertiser interest and revenue growth in recent years, a
trend which the Company believes will continue in the future. 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,
according to recent estimates by the OAAA. This represents growth of
approximately 8.2% over estimated total revenues for 1994, and compares
favorably to the growth of total U.S. advertising expenditures of approximately
7.7% during the same period. According to OAAA estimates, the out-of-home
advertising market also grew by approximately 10.0% in 1995 from the prior year
to approximately $3.5 billion in revenues.
The outdoor advertising industry is comprised of several large outdoor
advertising and media companies with operations in multiple markets, as well as
many smaller and local companies operating a limited number of structures in a
single or few local markets. While the industry has experienced some
23
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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
The Company's strategy is to improve upon its position as, or to become, the
leading provider of outdoor advertising services in each of its markets and to
expand its presence in attractive new markets.
The following are the primary components of the Company's strategy:
-MAXIMIZE RATES AND OCCUPANCY. Through continued emphasis on customer sales
and service, quality displays and inventory management, the Company seeks
to maximize advertising rates and occupancy levels in each of its markets.
The Company has recruited and trained a strong local sales staff supported
by local managers operating under specific, sales-based compensation
targets designed to obtain the maximum potential from its display
inventory.
-INCREASE MARKET PENETRATION. The Company seeks to expand operations within
its existing markets through new construction, with an emphasis on painted
bulletins, which generally command higher rates and longer term contracts
from advertisers. In addition, the Company historically has acquired, and
intends to continue to acquire, additional advertising display faces in its
existing markets as opportunities become available.
-PURSUE STRATEGIC ACQUISITIONS. In addition to improved penetration of its
existing markets, the Company also seeks to grow by acquiring additional
display faces in new markets. Such new markets allow the Company to
capitalize on the efficiencies and cross-market sales opportunities
associated with operating in multiple markets. In addition, new markets
provide the added benefit of diversification.
-CAPITALIZE ON TECHNOLOGICAL ADVANCES. The Company seeks to capitalize on
technological advances that enhance its productivity and increase its
ability to effectively respond to its customer's needs. The Company's
continued investment in equipment and technology provide for greater
ongoing benefits in the areas of sales, production and operation.
-MAINTAIN LOW COST STRUCTURE. Through continued adherence to strict cost
controls, centralization of administrative functions and maintenance of low
corporate overhead, the Company seeks to maximize its Operating Cash Flow
Margin, which it believes to be among the highest in the industry. The
Company believes its centralized administration provides opportunities for
significant operating leverage from further expansion in existing markets
and from future acquisitions.
-DEVELOP OTHER OUT-OF-HOME MEDIA. The Company seeks to develop other forms
of out-of-home media such as bus shelter or transit advertising in order to
enhance revenues in existing markets or provide access to new markets.
Through implementation of this business strategy, the Company has increased
its outdoor advertising presence from 500 display faces in a single market in
1988 to approximately 12,700 in its eight markets at April 30, 1996.
ACQUISITIONS
THE NAEGELE ACQUISITION. In April 1996, the Company acquired operations in
the Minneapolis/St. Paul and Jacksonville markets. In a stock purchase
transaction with NOA Holding Company (the
"Naegele Acquisition"), the Company acquired approximately 2,550 poster faces
(of which approximately 1,455 are located in the Minneapolis/St. Paul market and
approximately 1,095 are located in the Jacksonville market) and approximately
840 painted bulletin faces (of which approximately 440 are located in the
Minneapolis/St. Paul market and approximately 400 are located in the
Jacksonville market).
The Company believes that the Naegele Acquisition will enhance its existing
operations in its primary markets and will provide opportunities for increased
revenues and operating cash flow. The
24
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Company also believes that its presence in the Jacksonville market will provide
cross-selling opportunities for regional and national advertisers. In addition,
the Company believes that these acquisitions will result in greater efficiencies
and economies of scale in its existing operations while strengthening its
competitive position in its primary markets.
OTHER ACQUISITIONS. In April 1996, the Company acquired 4 painted bulletin
faces in the Chicago market from Paramount Outdoor, Inc. in an asset purchase
transaction. In March 1996, through an asset purchase transaction with Image
Media, Inc., the Company acquired 18 painted bulletin and painted wall faces in
the Chicago market. In a transaction with Ad-Sign, Inc. in January 1996, the
Company acquired approximately 160 painted bulletin faces in the Chicago market.
In April 1995, the Company acquired approximately 6 painted bulletin faces in
the Chicago market pursuant to a stock purchase transaction with O&B Outdoor,
Inc. The Company has integrated the newly acquired faces from these acquisitions
into its existing Chicago operations.
The Company believes that the newly acquired advertising faces have enhanced
its existing operations in the Chicago market and have provided opportunities
for increased revenues and operating income. The Company also believes that its
increased presence in the Chicago area has enhanced cross-selling and other
marketing opportunities associated with its closely proximate geographic
markets. In addition, the Company believes that these acquisitions have resulted
in greater efficiencies and economies of scale in its existing operations while
strengthening its competitive position in the Chicago market.
In March 1995, the Company completed two acquisitions in the Dallas market.
In a stock purchase transaction with Harrington Associates, Inc., the Company
acquired approximately 740 junior (8-sheet) poster faces located in the Dallas
market. In a stock purchase transaction with Best Outdoor, the Company acquired
approximately 387 junior (8-sheet) poster faces in the Dallas market.
MARKETS
Each of the Company's eight markets has demographic characteristics that are
attractive to national advertisers, allowing the Company to package its 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 is a review of each of the Company's markets.
Information provided below with respect to Operating Cash Flow in each of the
Company's markets excludes $1.4 million of total corporate expenses.
-CHICAGO is the country's 3rd largest market with a population of 7.7
million residents that is projected to grow 5% by the year 2000. Chicago is
home to 32 Fortune 500 companies and has one of the most extensive and
heavily traveled freeway systems in the nation. The Company's business
started with the building of a single outdoor advertising structure in
suburban Chicago in 1973 and has grown to approximately 4,260 advertising
display faces. For the twelve months ended March 31, 1996, the Company's
Chicago operations had net revenues of $13.8 million and Operating Cash
Flow of $8.1 million.
-MINNEAPOLIS/ST. PAUL is the country's 12th largest market with a population
of 2.6 million residents that is projected to grow 10% by the year 2000.
Naegele acquired this market in 1991 and the Company currently owns
approximately 1,897 advertising display faces. The Twin Cities is home to
31 Fortune 500 and Fortune Services 500 companies. The various industries
represented in the area include medical research and development, computer
technology, manufacturing and retail. The Twin Cities area contains
one-half of Minnesota's population and three of the state's largest cities:
Minneapolis, St. Paul and Bloomington. The Twin Cities is also home to the
largest shopping mall in the country, the Mall of America, which draws
traffic from neighboring markets. For the twelve months ended March 31,
1996, the Company's Minneapolis/St. Paul operations had net revenues of
$16.7 million and Operating Cash Flow of $6.4 million.
-INDIANAPOLIS is the country's 35th largest market with a population of 1.5
million residents that is projected to grow 6% by the year 2000.
Indianapolis is the state capital of Indiana, a leading
25
<PAGE>
finance and service center, a major regional trade and distribution center,
and has developed a niche in the sports market. It is also the home of 3
Fortune 500 companies. The Company expanded inventory in this market
through construction of 22 new bulletin faces and 6 new poster faces over
the last 3 years, and currently owns approximately 1,926 advertising
display faces. For the twelve months ended March 31, 1996, the Company's
Indianapolis operations had net revenues of $10.1 million and Operating
Cash Flow of $5.8 million.
-JACKSONVILLE is the country's 46th largest market with a population of 1.0
million residents that is projected to grow 2.6% by the year 2000.
Jacksonville is considered the gateway to the state of Florida, as nearly
50% of all traffic entering Florida enters through Jacksonville on
Interstate 95. Jacksonville is also gaining recognition as a popular
tourist destination. The Company currently owns appoximately 1,493
advertising display faces. For the twelve months ended March 31, 1996, the
Company's Jacksonville operations had net revenues of $8.5 million and
Operating Cash Flow of $4.2 million.
-MILWAUKEE is the country's 34th largest market with a population of 1.7
million residents. The Company entered the Milwaukee market in 1989 by
acquiring 266 display faces and currently owns approximately 580
advertising display faces. Milwaukee is home to 9 Fortune 500 companies.
For the twelve months ended March 31, 1996, the Company's Milwaukee
operations had net revenues of $4.7 million and Operating Cash Flow of $2.2
million.
-DES MOINES is the country's 114th largest market with a population of 0.5
million residents that is projected to grow 5% by the year 2000. Des Moines
is home to 3 Fortune 500 companies, and is at the center of the Great
Plains farm economy. The Company currently owns approximately 506
advertising display faces. For the twelve months ended March 31, 1996, the
Company's Des Moines operations had net revenues of $2.9 million and
Operating Cash Flow of $1.4 million.
-EVANSVILLE is the country's 152nd largest market with a population of 0.3
million residents. Evansville's economy is dominated by manufacturing with
two new plants expected to open in the near future. Additionally, the city
expects to benefit from the recent addition of riverboat casino gambling.
The Company entered the Evansville market in 1991 through an acquisition
and currently owns approximately 845 advertising display faces. For the
twelve months ended March 31, 1996, the Company's Evansville operations had
net revenues of $3.1 million and Operating Cash Flow of $1.4 million.
-DALLAS is the country's 11th largest market with a population of 2.9
million residents that is projected to grow 10% by the year 2000. Dallas is
home to 18 Fortune 500 companies. The Company currently owns approximately
1,171 advertising display faces. For the twelve months ended March 31,
1996, the Company's Dallas operations had net revenues of $0.6 million and
Operating Cash Flow of $0.1 million.
26
<PAGE>
The following tables include data relating to structures that were acquired
or developed during certain years and were not owned during all of the years for
which data has been presented. The following tables set forth the net revenues
and Operating Cash Flow Margins for each of the Company's markets:
NET REVENUES (1)
(dollars in thousands)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, TWELVE MONTHS
----------------------------------------------------- ENDED MARCH 31,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Chicago.............................. $ 8,056 $ 8,114 $ 8,402 $ 11,235 $ 13,211 $ 13,814
Minneapolis/St. Paul................. 14,707 14,967 15,069 14,999 16,320 16,677
Indianapolis......................... 2,919 6,322 6,793 8,513 9,897 10,149
Jacksonville......................... 5,784 5,103 5,640 7,349 8,525 8,510
Milwaukee............................ 4,338 4,205 4,394 4,353 4,686 4,706
Des Moines........................... 1,229 2,629 2,553 2,792 2,747 2,883
Evansville........................... 1,134 2,369 2,354 2,873 3,028 3,147
Dallas............................... -- -- -- -- 579 640
Other................................ 1,159 1,042 1,351 -- -- --
--------- --------- --------- --------- --------- ---------------
Total.............................. $ 39,326 $ 44,751 $ 46,556 $ 52,114 $ 58,993 $ 60,526
--------- --------- --------- --------- --------- ---------------
--------- --------- --------- --------- --------- ---------------
</TABLE>
OPERATING CASH FLOW MARGIN (1)(2)
(before allocation of corporate general and administrative expenses)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, TWELVE MONTHS
----------------------------------------------------- ENDED MARCH 31,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Chicago.............................. 52.7% 51.8% 53.9% 58.2% 59.3% 58.5%
Minneapolis/St. Paul................. 32.7 35.6 33.2 34.8 37.8 38.6
Indianapolis......................... 49.5 50.0 48.7 53.9 56.7 57.2
Jacksonville......................... 24.3 21.8 24.9 42.0 48.4 49.8
Milwaukee............................ 46.3 44.1 47.3 46.7 46.3 46.9
Des Moines........................... 53.5 49.7 46.7 41.3 47.3 48.3
Evansville........................... 46.1 42.2 33.8 40.8 42.9 44.0
Dallas............................... -- -- -- -- 34.4 18.3
</TABLE>
- ------------------------
(1) The Company completed acquisitions in several of its markets during the
periods referenced above, which affects the comparability of results from
year to year to those markets.
(2) Operating Cash Flow Margin is Operating Cash Flow stated as a percentage of
net revenues.
27
<PAGE>
INVENTORY
The Company operates three standard types of outdoor advertising display
faces and also has transit advertising as follows:
-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 the 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. Thirty-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 ADVERTISING consists generally of posters and frames displayed on
the sides of public buses operating on city streets.
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 are
durable, have long useful lives and do not require substantial maintenance. When
disassembled, they typically can be moved and relocated at new sites. The
Company's outdoor advertising structures are made of steel and other durable
materials built to withstand variable climates, including the rigors of the
midwestern climate. The Company expects its structures to last 15 years or more
without significant refurbishment.
The following summarizes the Company's approximate display inventory as of
April 30, 1996:
<TABLE>
<CAPTION>
30-SHEET 8-SHEET TRANSIT
BULLETINS POSTERS POSTERS ADVERTISING TOTAL
----------- ----------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Chicago.................................................. 651 -- 3,609 -- 4,260
Minneapolis/St. Paul..................................... 440 1,457 -- -- 1,897
Indianapolis............................................. 256 1,385 142 143 1,926
Jacksonville............................................. 399 1,094 -- -- 1,493
Milwaukee................................................ 259 -- 321 -- 580
Des Moines............................................... 78 418 10 -- 506
Evansville............................................... 167 678 -- -- 845
Dallas................................................... -- -- 1,171 -- 1,171
----- ----- ----- --- ---------
Total.................................................. 2,250 5,032 5,253 143 12,678
----- ----- ----- --- ---------
----- ----- ----- --- ---------
</TABLE>
LOCAL MARKET OPERATIONS
In each of its principal markets except Dallas, the Company maintains a
complete outdoor advertising operation including a sales office, a production,
construction and maintenance facility, a creative department equipped with
advanced technology, a real estate unit and support staff. The Company
28
<PAGE>
conducts its outdoor advertising operations through these local offices,
consistent with senior management's belief that an organization with
decentralized sales and operations is more responsive to local market demand and
provides greater incentives to employees. At the same time, the Company
maintains centralized accounting and financial controls to allow it to closely
monitor the operating and financial performance of each market. Local general
managers, who report directly to the Company's President or a regional manager,
are responsible for the day-to-day operations of their respective markets and
are compensated according to the financial performance of such markets. In
general, these local managers oversee market development, production and local
sales. The Company is currently incorporating the Minneapolis/St. Paul and
Jacksonville operations into this operational structure with local offices
handling the day-to-day operations and centralized accounting and financial
controls.
Although site leases (for land underlying an advertising structure) are
administered from the Company's headquarters in Chicago, each local office is
responsible for locating and ultimately procuring leases for appropriate sites
in its market. Site lease contracts vary in term but typically run from 10 to 20
years with various termination and renewal provisions. Each office maintains a
leasing department, with an extensive database containing information on local
property ownership, lease contract terms, zoning ordinances and permit
requirements. The Company has been very successful in developing new advertising
display face inventory in each of its markets based on utilizing these databases
and developing an experienced staff of lease teams. Each such team's sole
responsibility is the procurement of sites for new locations in each of the
Company's markets.
SALES AND SERVICE
The Company's sales strategy is to maximize revenues from local advertisers.
Accordingly, it maintains a team of sales representatives headed by a sales
manager in each of its markets. The Company devotes considerable time and
resources to recruiting, training and coordinating the activities of its sales
force. A sales representative's compensation is heavily weighted to individual
performance, and the local sales manager's compensation is tied to the
performance of his or her sales team. One sales representative, based in
Chicago, manages sales to national advertisers. In total, 61 of the Company's
employees are significantly involved in sales and marketing activities.
In addition to the sales staff, the Company has established fully staffed
and equipped creative departments in each of its markets except Dallas.
Utilizing technologically advanced computer hardware and software, the staff is
able to create original design copy for both local and national accounts which
has allowed the various creative departments to exchange work via modem or over
the Internet with each other or directly with clients or their agencies. This
ability has resulted in many fully staffed advertising agencies turning to the
Company for the creation of their outdoor campaigns. The Company believes that
its creative department's implementation of continuing technological advances
provides a significant competitive advantage in its sales and service area.
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 allow it to
attract national advertisers, often by packaging displays in several of its
markets in a single contract to allow a national advertiser to simplify its
purchasing process and present its message in several markets. National
advertisers generally
29
<PAGE>
seek wide exposure in major markets and therefore tend to make larger purchases.
The Company competes for national advertisers primarily on the basis of price,
location of displays, availability and service.
The Company also focuses efforts on local sales, and approximately 77% of
the Company's net 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. Beginning in 1993, the leading tobacco companies
substantially reduced their expenditures for outdoor advertising due to a
declining population of smokers, societal pressures, consolidation in the
tobacco industry and price competition from generic brands. Since tobacco
advertisers often utilized some of the industry's prime inventory, the decline
in tobacco-related advertising expenditures 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. The following table
illustrates the diversity of the Company's advertising base:
NET REVENUES BY CATEGORY
<TABLE>
<CAPTION>
PERCENTAGE OF
NET REVENUES
---------------
<S> <C>
Retail/Consumer Products............................................ 14.4%
Tobacco............................................................. 13.3
Automotive & Related................................................ 9.5
Travel/Entertainment................................................ 9.5
Restaurant.......................................................... 7.4
Alcohol............................................................. 6.4
Advertising/Media................................................... 5.3
Food................................................................ 4.3
Home Developer/Real Estate.......................................... 4.3
Other............................................................... 25.6
-----
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
in all of its markets. Production work includes creating the advertising copy
design and layout, painting the design or coordinating its printing and
installing the designs on its displays. In addition, the Company's substantial
new development activity has allowed it to vertically integrate its own sign
fabrication ability so that new signs are fabricated and erected in-house. 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 due to
the development of new designs or adaptation of 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
30
<PAGE>
for labor-intensive production work since vinyl and pre-printed copy can be
installed quickly. The vinyl sheets are reusable, thereby reducing the Company's
production costs, and are easily transportable. Due to the geographic proximity
of the Company's principal markets and the transportability of vinyl sheets, the
Company can shift materials among markets to promote efficiency. 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 repetitively reach a broad
segment of the population in a specific 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, including Gannett
Outdoor (a division of Gannett Co. Inc.), Eller Media, Inc. (formerly Patrick
Media Group) and 3M National Advertising Co. (a division of Minnesota Mining and
Manufacturing Company), each of which has a larger national network and greater
total resources than the Company. The Company believes that its emphasis on
local advertisers and its position as a major provider of advertising services
in each of its markets and in the midwest enable it to compete effectively with
the other outdoor media operators, as well as other media, both within those
markets and in the midwest region. The Company also competes with other outdoor
advertising companies for sites on which to build new structures. See "Risk
Factors -- Competition."
GOVERNMENT REGULATION
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
federal appropriations for the construction and improvement of highways within
such states, to implement legislation to restrict billboards located within 660
feet of, or visible from, interstate and primary highways except in commercial
or industrial areas. 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
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, and, in some instances, content of advertising copy being
displayed on 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 non-illuminated to
illuminated structures. From time to time governmental authorities order the
removal of billboards by the exercise of eminent domain. Thus far, the Company
has
31
<PAGE>
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.
In recent years, there have been movements to restrict billboard advertising
of certain products, including tobacco and alcohol. No bills have become law at
the federal level except those requiring health hazard warnings similar to those
on cigarette packages and print advertisements. Its is uncertain whether
additional legislation of this type will be enacted on the national level or in
any of the Company's markets.
Recently, the Food and Drug Administration has proposed legislation which
would prohibit the use of pictures and color in tobacco advertising and has also
proposed the elimination of all tobacco advertising on outdoor displays located
within 1,000 feet of any school. Additionally, one major tobacco manufacturer
has recently proposed federal legislation be enacted banning 8-sheet billboard
advertising and transit advertising of tobacco products. In addition to a ban on
tobacco advertising near schools and playgrounds, the tobacco manufacturer has
proposed a ban on tobacco advertising on all 8-sheet posters and in or on
trains, buses, subways, taxis and bus shelters. Tobacco advertising represents
13.3% of the Company's net revenues and 1.8% of the Company's revenues
attributed to tobacco advertising is derived from 8-sheet posters. While such
legislation has not been enacted by Congress, the restrictions currently
proposed, if enacted, may have a material adverse effect on the Company's
results of operations.
Amortization of billboards has also been adopted in varying forms in certain
jurisdictions. 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 state and federal courts and cases
have reached differing conclusions as to the constitutionality of these
regulations. To date, regulations in the Company's markets have not materially
adversely affected its operations, except in the Jacksonville market, where the
Company has been subject to regulatory efforts and recently agreed to city
ordinances to remove a number of faces. On March 22, 1995, following litigation
over an ordinance and a municipal charter amendment, Naegele entered into an
agreement with the City of Jacksonville to remove 711 billboard faces over a
twenty year period starting January 1, 1995 and ending December 31, 2014. The
resolution specifies the following removal schedule:
<TABLE>
<CAPTION>
30-SHEET 8-SHEET
CALENDAR YEARS BULLETINS POSTERS POSTERS TOTAL
- ------------------------------------------------------ ------------- ------------- ----------- -----
<S> <C> <C> <C> <C>
1995-1998............................................. 73 242 167 482
1999-2004............................................. 23 87 -- 110
2005-2014............................................. 23 96 -- 119
--- --- --- ---
119 425 167 711
--- --- --- ---
--- --- --- ---
</TABLE>
Under the agreement, Naegele and the City of Jacksonville have agreed on the
removal of 445 pre-selected faces, including 167 (100%) of its 8-sheet faces.
Management of the Company has control over the selection and removal of an
additional 155 faces. The remaining 111 faces to be removed will be selected by
the Company from a pool of faces identified by the City. While the number of
signs being taken down represents a large percentage of Naegele's plant in the
Jacksonville market, the Company believes that Jacksonville has been overbuilt
for a number of years, leading to low occupancy levels and low advertising
rates. The removal of a number of marginally profitable boards is expected to
put upward pressure on rates. Additionally, the removals are staggered over 20
years, with management having substantial input on which signs are removed and
some rights of substitution and rebuilding of outdoor advertising structures in
the Jacksonville market.
32
<PAGE>
On February 1, 1991, Naegele entered into a consent judgment to settle a
complaint brought by the Minnesota Attorney General under Minnesota anti-trust
laws pursuant to which Naegele and its successors are prohibited from purchasing
outdoor advertising displays in the Minneapolis/St. Paul market from other
operators of outdoor advertising displays until February 1, 2001. The consent
judgment also prohibits the Company from enforcing certain covenants not to
compete and from entering into property leases in excess of 15 years. The
consent judgment does not affect the Company's ability to continue to develop
and build new advertising displays in the Minneapolis/St. Paul market.
Additionally, the Company can purchase displays from brokers or other
non-operators.
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 has not adversely impacted the Company's business, other than in the
newly acquired Jacksonville market, no assurance can be given that existing or
future laws or regulations will not materially adversely affect the Company at
some time in the future.
OUTDOOR ADVERTISING PROPERTIES; OFFICE AND PRODUCTION FACILITIES
OUTDOOR ADVERTISING SITES. The Company owns or has permanent easements on
approximately 252 parcels of real property that serve as the sites for its
outdoor displays. The Company's remaining approximately 6,739 advertising
display sites are leased or licensed.
The Company's leases are for varying terms ranging from month-to-month or
year-to-year to terms of ten years or longer, and many provide for renewal
options. There is no significant concentration of displays under any one lease
or subject to negotiation with any one landlord. The Company believes that an
important part of its management activity is to manage its lease portfolio and
negotiate suitable lease renewals and extensions.
OFFICE AND PRODUCTION FACILITIES. The Company's principal executive and
administration offices are located in Chicago, Illinois in a 6,956-square foot
space leased by the Company. In addition, the Company has an office and complete
production and maintenance facility in each of Addison, Illinois (40,000 square
feet); Milwaukee (18,367 square feet); Indianapolis (23,648 square feet); Des
Moines (15,320 square feet); Minneapolis/St. Paul (82,547 square feet);
Jacksonville (16,000 square feet); and Evansville (16,000 square feet) and a
sales, real estate and administration office in Dallas (2,000 square feet). The
Indianapolis, Addison, Milwaukee, Jacksonville and Evansville facilities are
owned and all other facilities are leased. The Company considers its facilities
to be well maintained and adequate for its current and reasonably anticipated
future needs.
EMPLOYEES
At January 1, 1996, the Company employed approximately 337 people, of whom
approximately 61 were primarily engaged in sales and marketing, 190 were engaged
in painting, bill posting and construction and maintenance of displays and the
balance were employed in financial, administrative and similar capacities. The
Milwaukee market has 14 employees who belong to a union and the Minneapolis/St.
Paul market has 28 employees who belong to unions. The Company considers its
relations with the unions and with its employees to be good.
33
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The table below sets forth certain information with respect to the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
YEARS WITH
NAME AGE POSITION COMPANY
- ------------------------- --- ----------------------------------------------------------- ---------------
<S> <C> <C> <C>
Daniel L. Simon* 45 Chief Executive Officer, President and Director 23
Brian T. Clingen 36 Vice President, Chief Financial Officer and Director 8
Paul G. Simon* 43 Vice President, Secretary and General Counsel 6
Michael J. Roche 45 Director 2
Michael B. Goldberg 49 Director --
Frank K. Bynum, Jr.** 33 Director --
</TABLE>
- ------------------------
* Daniel L. and Paul G. Simon are brothers.
** To be elected director upon consummation of the Offering.
DANIEL L. SIMON, a founder and a principal beneficial stockholder of the
Company, has been the President of the Company since 1989 and a director since
its formation. Mr. Simon has 23 years of experience in the outdoor advertising
industry and serves on the executive and legislative committees of the Outdoor
Advertising Association of America.
BRIAN T. CLINGEN has served as Vice President and Chief Financial Officer of
the Company since December 1987 and as a director since 1990. From 1983 to 1987,
Mr. Clingen worked for Elmore Group ("Elmore"), a diversified property and
service Company, and served as Chief Financial Officer of an Elmore subsidiary.
Mr. Clingen is a certified public accountant.
PAUL G. SIMON has been Vice President and General Counsel of the Company
since 1989 and has served as Secretary of the Company since July 1991. Mr. Simon
was in the private practice of law in Illinois from 1978 to 1989, specializing
in commercial litigation, general corporate matters, real estate and mergers and
acquisitions. Mr. Simon represented the Company as outside counsel from 1981 to
1989.
MICHAEL J. ROCHE has been National Marketing Manager (Licensed Businesses)
for Sears, Roebuck and Co. since 1985. Prior thereto, he was an Assistant
Marketing Manager (1984-1985) and a National Sales Promotion Manager (1980-1984)
for Sears, Roebuck and Co. Mr. Roche has been a director of the Company since
November 1993.
MICHAEL B. GOLDBERG has been a director of the Company since April 5, 1996.
Mr. Goldberg has been a Managing Director of Kelso & Company, L.P. since October
1991. Mr. Goldberg served as a Managing Director and jointly managed the merger
and acquisitions department at The First Boston Corporation from 1989 to May
1991. Mr. Goldberg was a partner at the law firm of Skadden, Arps, Slate,
Meagher & Flom from 1980 to 1989. Mr. Goldberg is a director of General Medical
Corporation, Hosiery Corporation of America, Inc. and United Refrigerated
Services, Inc.
FRANK K. BYNUM, JR. will be elected a director of the Company immediately
upon consummation of the Offering. Mr. Bynum has been a Vice President of Kelso
& Company, L.P. since July 1991, and was an Associate of Kelso & Company, L.P.
from October 1987 to July 1991. He is a director of Douglas Broadcasting, Inc.,
Ellis Communications, Inc., Hosiery Corporation of America, Inc., IXL Holdings,
Inc. and United Refrigerated Services, Inc.
For their services as directors, the members of the Board of Directors who
are not employees of the Company, UOI, or affiliates of Kelso & Company, L.P.
are paid an aggregate of $10,000 annually. All directors are reimbursed for
reasonable expenses associated with their attendance at meetings of the
respective Boards of Directors.
34
<PAGE>
The Company will institute a classified Board of Directors immediately upon
consummation of this Offering. Upon the completion of their initial terms, which
vary from one to three years, all directors of the Company will hold office for
three-year terms until the next annual meeting of stockholders of the Company or
until their successors are duly elected and qualified. See "Description of
Capital Stock -- Special Provisions of Certificate of Incorporation, Bylaws 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.
On December 23, 1992, Kelso & Companies, Inc., the general partner of Kelso
& Company, L.P., and its chief executive officer, without admitting or denying
the findings contained therein, consented to an administrative order in respect
of an inquiry by the Securities and Exchange Commission (the "Commission")
relating to the 1990 acquisition of a portfolio company by an affiliate of Kelso
& Companies, Inc. The order found that the tender offer filing by Kelso &
Companies, Inc. in connection with the acquisition did not comply fully with the
Commission's tender offer reporting requirements, and required Kelso &
Companies, Inc. and its chief executive officer to comply with these
requirements in the future.
The Company has an agreement with Kelso & Company, L.P. that permits Kelso &
Company, L.P. to nominate two persons for the Board of Directors to be voted
upon by the shareholders. Messrs. Goldberg and Bynum have been elected to the
Board of Directors as a result of such agreement. The agreement also provides
that at least one of such nominees, if elected to the Board of Directors, will
also serve on the Board's compensation committee. See "Certain Transactions."
OTHER SIGNIFICANT MANAGEMENT PERSONNEL
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE IN
OUTDOOR ADVERTISING
NAME AGE POSITION INDUSTRY
- ----------------------- --- ------------------------------------------------------------ -------------------------
<S> <C> <C> <C>
Bruce Davies 37 General Manager -- Jacksonville 9
Leon Howell 56 General Manager -- Evansville 35
Dennis O'Brien 62 President -- 8-Sheet Division 35
Cynthia V. Ogle 41 Regional Manager 15
David L. Quas 38 General Manager and Sales Manager -- Chicago 11
Gary Riley 34 Market Manager -- Indianapolis 11
Jay Sauber 36 General Manager and Sales Manager -- Milwaukee 11
Mike Scheid 39 National Sales Manager 18
Roy Schroeder 35 Market Manager -- Minneapolis 10
Teri Wood 39 General Manager -- Des Moines 9
David Zimmermann 40 General Manager -- 8-Sheet Division 18
</TABLE>
BRUCE DAVIES has continued to serve as General Manager of the Company's
Jacksonville operation since its acquisition in early 1996. From 1992 to 1995,
he was employed by Naegele Outdoor (Youngstown, OH) as General Manager and Sales
Manager. For 5 years prior, Mr. Davies was employed by various outdoor companies
including Pony Panels (8-Sheets) and Ackerley Outdoor (Airport Division), both
in Albuquerque, NM.
LEON HOWELL has served as General Manager of the Company's Evansville
operation since its acquisition in 1991. Mr. Howell has 32 years of experience
in the outdoor advertising industry, including 15 years in the Evansville
market. From 1961 to 1991, Mr. Howell was employed by Naegele Outdoor
Advertising, Inc. (and predecessor companies) in Louisville, Palm Springs and
Evansville in various sales, operations and management positions, including
General Manager of the Evansville operation from 1986 to 1991.
DENNIS O'BRIEN has served as the President of the 8-Sheet Division since
1994. In 1987 he founded Target Media, Inc. which he operated until its
acquisition by the Company in 1994. From 1961 to 1987 Mr. O'Brien was employed
by various outdoor companies including Gannett, Media Comm, 3M and Foster &
Kleiser.
35
<PAGE>
CYNTHIA OGLE has served as Regional Manager of the Company since 1995. Ms.
Ogle has 15 years of experience in the outdoor advertising industry, all of it
in Indianapolis. From 1991 to 1996 she served as General Manager. From 1987 to
1991, she served as the Indianapolis Sales Manager for Naegele, continuing in
that capacity with the Company for 10 months after it acquired Naegele's
Indianapolis operations. From 1982 to 1986, Ms. Ogle was an account executive
for Naegele.
DAVID QUAS has served as General Manager for the Company's Chicago market
since 1993. From 1989 to his appointment to General Manager, he served as Sales
Manager for the Chicago market. Mr. Quas has 11 years of experience in the
outdoor advertising business, all of it in the Chicago market. From 1985 to
1989, he served as an account executive for 3M National Advertising.
GARY RILEY has served as Market Manager for the Company's Indianapolis
market since 1995. Prior to his appointment to Market Manager, he served as
Sales Manager in Indianapolis since 1991. From 1985 to 1991, he was an account
executive in Indianapolis for Naegele and continued in that capacity with the
Company after it acquired Naegele's Indianapolis operations.
JAY SAUBER has served as General Manager of the Company's Milwaukee
operations since 1991. From 1989 to 1991, he served as Sales Manager for the
Milwaukee market. Mr. Sauber founded Action Outdoor, Inc., a Chicago outdoor
advertising company acquired by the Company in 1988. From 1985 to 1987, he
served as an account executive for 3M National Advertising in the Chicago
market.
MIKE SCHEID has served as National Sales Manager since the Company's
acquisition of Image Media, Inc. in 1996. In 1988, he founded Image Media, Inc.
which he operated until the acquisition. For 10 years prior, Mr. Scheid was
employed by Patrick Media/Foster & Kleiser in various sales, real estate and
management positions, including National Sales.
ROY SCHROEDER has served as Market Manager for the Company's Minneapolis
market since its acquisition in early 1996. Mr. Schroeder has over 10 years of
experience in the outdoor advertising industry, all of it in Minneapolis. From
1989 to 1996 he served as General Sales Manager for Naegele's Minneapolis
operations. From 1986 to 1989, Mr. Schroeder was an account executive for
Naegele.
TERI WOOD has served as General Manager for the Company's Des Moines market
since 1996. Prior to her appointment to General Manager, she served as Market
Manager since 1993. From 1991 to 1993, she served as the Des Moines Sales
Manager for Naegele, continuing in that capacity with the Company after it
acquired Naegele's Des Moines operation. From 1987 to 1991, Ms. Wood was account
executive with Naegele. Prior to her employment with Naegele, Ms. Wood was an
outdoor media buyer and a client of Naegele.
DAVID ZIMMERMANN has served as General Manager of the 8-Sheet Division since
1995. From 1990 to 1996 he served as the Company's National Sales Manager. From
1985 to 1990, Mr. Zimmermann was employed by Gateway Outdoor Advertising in
Chicago as Sales Manager from 1985 to 1987, Vice President of National Sales
from 1987 to 1990, and Vice President and General Manager of the Chicago market
from 1989 to 1990. From 1977 to 1985, Mr. Zimmermann was employed by Asch
Advertising, as an outdoor media buyer, and by Brown-Forman, as a planner and
buyer of outdoor advertising.
36
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid during 1993, 1994 and 1995 to the Company's Chief Executive
Officer and each other executive officer whose total annual salary and bonus
that year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (2)
- ----------------------------------------- --------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Daniel L. Simon (1)...................... 1995 $ 244,379 $ 0 $ 1,000
President and 1994 249,250 0 500
Chief Executive Officer 1993 187,439 0 0
Brian T. Clingen (1)..................... 1995 $ 145,128 $ 0 $ 1,000
Chief Financial 1994 145,852 0 500
Officer and Vice 1993 122,742 0 0
President
Paul G. Simon............................ 1995 $ 158,176 $ 0 $ 1,000
Vice President, Secretary and 1994 158,968 0 500
General Counsel 1993 167,125 0 0
</TABLE>
- ------------------------
(1) Does not include warrants granted in April 1996 pursuant to the 1996 Warrant
Plan to Daniel L. Simon and Brian T. Clingen, valued at $ and $ ,
respectively.
(2) Represents contributions made by the Company on behalf of the named
executive officers to a 401(k) plan.
The Company currently maintains two life insurance policies covering Daniel
L. Simon, each in the amount of $2.5 million. The Company is the sole
beneficiary under each policy. Pursuant to a buy-sell agreement between the
Company and Mr. Simon, the Company has agreed to use up to $3.5 million of the
proceeds from these policies to purchase a portion of Mr. Simon's shares of
Common Stock of the Company from his estate.
THE 1996 WARRANT PLAN
The 1996 Warrant Plan (the "1996 Warrant Plan") was adopted by the Board of
Directors of the Company in April 1996 in order to advance the interests of the
Company by affording certain key executives and employees an opportunity to
acquire a proprietary interest in the Company and thus to stimulate increased
personal interest in such persons in the success and future growth of the
Company. The 1996 Warrant Plan is administered by the Board of Directors. Daniel
L. Simon, President and Chief Executive Officer, and Brian T. Clingen, Vice
President and Chief Financial Officer, are eligible to receive warrants pursuant
to the 1996 Warrant Plan (the "Warrants"). Such Warrants may not be sold,
assigned, transferred, exchanged or otherwise disposed of except to spouses and
beneficiaries of the holders of Warrants. A total of shares of Common
Stock have been reserved for issuance pursuant to the Warrants issued under the
1996 Warrant Plan. The Warrants have been divided into three series each of
which becomes exerciseable at $ per share upon the achievement of a specified
market price by the Common Stock for a period of 30 consecutive trading days.
The applicable market prices are Series I -- $ ; Series II -- $ ; and
Series III -- $ . Daniel L. Simon has been awarded of each series of
Warrants. Brian T. Clingen has been awarded of each series of Warrants.
AUDIT COMMITTEE; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Upon consummation of the Offering contemplated hereby, the Board of
Directors shall form an Audit Committee 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. and .
37
<PAGE>
The Company did not have a compensation committee in 1995. Instead,
compensation decisions were made by the Board of Directors of the Company.
Daniel L. Simon, Lawrence J. Simon, (brother of Daniel L. Simon and Paul G.
Simon) and Brian T. Clingen served as a members of the Board of Directors of the
Company and as an executive officers of the Company during 1995. Lawrence J.
Simon resigned as an officer and director of the Company in October, 1995. No
other individual who was a director of the Company during 1995 was also an
officer or employee of the Company during 1995. Upon consummation of the
Offering contemplated hereby, the Board of Directors shall form a Compensation
Committee which will be responsible for reviewing and approving the amount and
type of consideration to be paid to senior management and for administering the
1996 Warrant Plan. See "Management -- The 1996 Warrant Plan." The members of the
Company's Compensation Committee are Messrs. and
. The Company has agreed that a Kelso & Company, L.P. designee
will be on the Compensation Committee so long as there is such a designee on the
Board of Directors.
CERTAIN TRANSACTIONS
On April 5, 1996, the Company issued to Kelso Investment Associates V, L.P.
("KIA V") and Kelso Equity Partners V, L.P. ("KEP V") and certain individuals
designated by Kelso & Company, L.P. (the "Kelso Designees") 186,500 shares of
Class B Common Stock and 188,500 shares of Class C Common Stock in exchange for
$30,000,000. As an inducement to KIA V's and KEP V's purchase of the Class B
Common Stock and Class C Common Stock, Daniel L. Simon and Brian T. Clingen
agreed to assume, pro rata, the dilution to the holders of Common Stock
following the exercise of the option held by William H. Smith described below in
"Description of Capital Stock." At such time, the Company also agreed to pay a
one-time fee of $1,250,000 in cash and an annual fee of $150,000 to Kelso &
Company, L.P., an affiliate of KIA V and KEP V, for consulting and advisory
services to the Company. Messrs. Goldberg and Bynum, directors of the Company,
are Managing Director and Vice President, respectively, of Kelso & Company,
L.P., limited partners of the general partner of KIA V and limited partners of
KEP V.
In June 1996, the Company entered into an agreement with KIA V and KEP V
relating to certain rights of KIA V and KEP V as holders of Class B Common Stock
and Class C Common Stock of the Company. Pursuant to such agreement, KIA V and
KEP V agreed to exchange each share of Class B Common Stock and Class C Common
Stock held by it into shares of Common Stock, a portion of which shares
are included in the Offering. See "Principal and Selling Shareholders." Pursuant
to such agreement, the annual consulting and advisory fee of $150,000 was
terminated but Kelso & Company, L.P.'s reimbursement of expenses and
indemnification rights remained in effect. In connection with the Offering,
Kelso & Company, L.P. received a one-time fee of $650,000. In addition, KIA V
and KEP V relinquished certain rights granted to the holders of Class B Common
Stock and Class C Common Stock under the Second Amended and Restated Certificate
of Incorporation and Amended and Restated By-laws of the Company including the
right to (i) elect a majority of the Board of Directors of the Company
subsequent to a sale of the Class C Common Stock to certain purchasers, (ii)
appoint, remove and replace the chief executive officer of the Company
subsequent to certain financial events and (iii) approve or disapprove of the
enactment of certain material events by the Company. As consideration for the
relinquishment of such rights, KIA V and KEP V were granted four demand
registration rights, were granted "piggy-back" registration rights, and were
granted the right to nominate two persons for seats on the Board of Directors to
be voted upon by the stockholders, with one of such directors, if elected, to be
a member of the Compensation Committee. Daniel L. Simon and Brian T. Clingen
also entered into a separate registration rights agreement with the Company that
provides them with four demand registration rights and "piggy-back" registration
rights.
As a component of its growth strategy, in July 1995, the company entered
into a consulting agreement with Urban Development, L.L.C. ("Urban") whereby
Urban shall consult with, and develop new sign locations in the Milwaukee and
Chicago markets for, the Company. Urban agreed to provide consulting services to
the Company over a period of 10 years in consideration of $1,400,000 which was
38
<PAGE>
paid on such date. The managing member of Urban is Lawrence J. Simon, a former
officer and director of the Company and the brother of Daniel L. Simon and Paul
G. Simon. Lawrence J. Simon resigned as a director and an executive vice
president of the Company on October 4, 1995.
In April 1996, the Company acquired four painted bulletin faces from
Paramount Outdoor, Inc. ("Paramount") in an asset purchase transaction. Messrs.
Quas and Sauber are the owners of Paramount. In exchange for the four painted
bulletin faces, the Company agreed to pay $500,000 in cash at the time of
purchase, $1,400 monthly for the next 24 months and an additional $168,000
payable two years after such purchase date, provided, the gross revenues
received by the Company from the purchased assets equal or exceed $333,600. In
1993, Paramount purchased 100% of the Company's interest and 100% of interest in
the Chicago sites (including the lease rights, permits and structures produced
in a joint venture between the Company and HMS, Inc., an unaffiliated entity,
for $100,000, which the Company believes represented market price.
All of the transactions described above were approved by the Company's
independent outside director. The Company will not engage in transactions with
its affiliates in the future unless the terms of such transactions are approved
by a majority of its independent outside directors. In addition, the Indenture
imposes limitations on the Company's ability to engage in such transactions. See
"Description of Indebtedness and Other Commitments."
STOCKHOLDERS AGREEMENT
Daniel L. Simon and Brian T. Clingen are parties to a Stockholders Agreement
pursuant to which they have granted each other reciprocal rights of first
refusal with respect to the purchase of their shares.
39
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth, assuming the exercise of all outstanding
options, the number and percentage of outstanding shares of Common Stock that
will be beneficially owned by (i) each director of the Company, (ii) each
executive officer identified under "Management -- Executive Compensation," (iii)
all directors and officers of the Company as a group, (iv) each person known by
the Company to own beneficially more than 5% of the Common Stock and (v) 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 them, except as otherwise noted. Pursuant to the Voting
Trust Agreement ("Voting Trust Agreement") dated December 20, 1995 by and
between the Company, Daniel L. Simon and Brian T. Clingen, Brian T. Clingen
deposited his shares of common stock of the Company with Daniel L. Simon as
Trustee. Under the terms of said Voting Trust Agreement, Daniel L. Simon was
granted voting rights with respect to the deposited shares. The Voting Trust
Agreement expires December 19, 2015.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
BENEFICIAL OWNERSHIP OF
COMMON STOCK PRIOR TO THE COMMON STOCK AFTER THE
OFFERING OFFERING
------------------------- SHARES -------------------------
NUMBER OF PERCENT OF BEING NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES CLASS OFFERED SHARES CLASS
- ---------------------------------------------------------------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Daniel L. Simon ................................................ (1)
321 North Clark Street
Chicago, Illinois 60610
Brian T. Clingen ............................................... (1)
321 North Clark Street
Chicago, Illinois 60610
Paul G. Simon ..................................................
321 North Clark Street
Chicago, Illinois 60610
Michael J. Roche ...............................................
333 Beverly Road, E5-312A
Hoffman Estates, Illinois 60179
Michael B. Goldberg (2) ........................................
Director
Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Frank K. Bynum, Jr. (2) ........................................
Director
Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Kelso Investment Associates V, L.P. (3)(4)......................
Kelso Equity Partners V, L.P. (3)(4)............................
Joseph S. Schuchert (3)(5)......................................
Frank T. Nickell (3)(5).........................................
George E. Matelich (3)(5).......................................
Thomas R. Wall, IV (3)(5).......................................
All directors and executive officers as a group (6 persons) ....
</TABLE>
- ------------------------------
(1) Includes shares issuable upon exercise of certain Warrants which
become exercisable upon consummation of the Offering.
(2) Mr. Goldberg is a director of the Registrant and Mr. Bynum will be a
director of the Registrant upon consummation of the Offering.
(3) The business address for such person(s) is c/o Kelso & Company, 320 Park
Avenue, 24th Floor, New York, New York 10022.
(4) Total reflects shares proposed to be sold in the Offering and not more than
additional shares expected to be distributed to certain partners of
KIA V and KEP V in lieu of cash in conjunction with the Offering.
(5) Messrs. Schuchert, Nickell, Matelich and Wall may be deemed to share
beneficial ownership of shares of Common Stock owned of record by KIA V and
KEP V, by virtue of their status as general partners of the general partner
of KIA V and as general partners of KEP V. Messrs. Schuchert, Nickell,
Matelich and Wall share investment and voting power with respect to
securities owned by KIA V and KEP V, but disclaim beneficial ownership of
such securities.
40
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of the date of this Prospectus, the Company's authorized capital stock
consists of shares of Common Stock, $.01 par value per share, and
shares of Preferred Stock, $1.00 par value per share. 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 Second Amended and Restated Bylaws (the
"Bylaws"), each of which is filed as an exhibit to the registration statement of
which this Prospectus is a part.
COMMON STOCK
The Company is authorized to issue shares of Common Stock, $.01 par
value per share. Following this Offering, shares of Common Stock will
be issued and outstanding (assuming no exercise of the over-allotment option and
excluding shares of Common Stock issuable upon the exercise of
outstanding options and excluding Common Stock issuable pursuant to the exercise
of warrants.) 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 this Offering will be, when issued and paid for, fully paid and
nonassessable. In the event of the liquidation or dissolution of the Company,
the holders of Common Stock are entitled to share pro rata in any 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 restrictions set forth in the Secured Note
Indenture, the Revolving Credit Facility, the Acquisition Credit Facility and
the UOI Indenture. See "Dividend Policy."
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Certificate of Incorporation and limitations prescribed by law, the Board
of Directors is expressly authorized to adopt resolutions to issue the shares,
to fix the number of shares and to change the number of shares constituting any
series, and to provide for or change the voting powers, designations,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the Preferred Stock, in each case without any further action or vote
by the stockholders. The Company has no current plans to issue any additional
shares of Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.
THE NOTEHOLDER WARRANTS
GENERAL. In connection with the Company's sale of the Secured Notes,
certain warrants (the "Noteholder Warrants") were issued pursuant to a Warrant
Agreement, dated as of June 30, 1994,
41
<PAGE>
between the Company and United States Trust Company of New York, as warrant
agent. The Noteholder Warrants expire on July 1, 2004. The Noteholder Warrants
entitle the holders thereof to purchase, at a price of $.01 per share, an
aggregate of shares of Common Stock (the "Warrant Shares").
EXERCISE OF NOTEHOLDER WARRANTS. Upon consummation of the Offering, the
Noteholder Warrants will be exercisable.
CASH DIVIDENDS. If the Company pays any cash dividend on, or any other cash
distribution in respect of, its Common Stock, it shall pay each Warrantholder an
amount in cash equal to the amount such Warrantholder would have received if
such Warrantholder had been the record holder of the Warrant Shares issuable
upon exercise of his warrants immediately prior to the record date for such
dividend or distribution.
ANTI-DILUTION ADJUSTMENTS. The number of Warrant Shares issuable upon
exercise of a Noteholder Warrant will be adjusted upon the occurrence of certain
events, including, without limitation (i) the payment of a dividend on, or the
making of any distribution in respect of, Common Stock of the Company in (a)
shares of the Company's capital stock (including Common Stock), (b) options,
warrants or rights to purchase, or securities convertible into or exchangeable
or exercisable for, shares of Common Stock or other securities of the Company or
any other person, or (c) certain evidences of indebtedness of the Company or any
assets of the Company or (ii) the issuance of Common Stock or securities
convertible into or exercisable or exchangeable for shares of Common Stock at a
price below fair market value. An adjustment will also be made in the event of a
combination, subdivision or reclassification of the Common Stock. Adjustments
will be made whenever and as often as any specified event requires an adjustment
to occur. Accordingly, an adjustment will be made in connection with the for
one stock split, increasing the number of shares of Common Stock issuable from
to .
THE 1996 WARRANT PLAN
The 1996 Warrant Plan was adopted by the Board of Directors of the Company
in April 1996 in order to advance the interests of the Company by affording
certain key executives and employees an opportunity to acquire a proprietary
interest in the Company and thus to stimulate increased personal interest in
such persons in the success and future growth of the Company. The 1996 Warrant
Plan is administered by the Board of Directors. Daniel L. Simon, President and
Chief Executive Officer, and Brian T. Clingen, Vice President and Chief
Financial Officer, are eligible to receive Warrants pursuant to the 1996 Warrant
Plan. Such Warrants may not be sold, assigned, transferred, exchanged or
otherwise disposed of except to spouses and beneficiaries of the holders of
Warrants. A total of shares of Common Stock have been reserved for
issuance pursuant to the Warrants issued under the 1996 Warrant Plan. The
Warrants have been divided into three series each of which becomes exerciseable
at $ per share upon the achievement of a specified market price by the Common
Stock for a period of 30 consecutive trading days. The applicable market prices
are Series I -- $ ; Series II -- $ ; and Series III -- $ . Daniel L.
Simon has been awarded of each series of Warrants. Brian T. Clingen has
been awarded of each series of Warrants. See "Management -- Executive
Compensation."
CERTAIN OUTSTANDING RIGHTS
On November 18, 1993, the Company entered into the Capital Appreciation
Right Agreement with Connecticut General Life Insurance Company, Cigna Property
and Casualty Insurance Company, Life Insurance Company of North America and
Aetna Life Insurance Company, pursuant to which the Company granted such parties
limited capital appreciation rights in the capital stock of the Company in
exchange for a waiver of the prepayment penalty in connection with the 1993
refinancing. Such capital appreciation rights are triggered by the occurrence of
any of the following: (i) liquidation or dissolution of the Company or UOI, (ii)
sale of all or substantially all of the issued and outstanding shares of common
stock or assets of the Company or (iii) the merger or consolidation of the
Company or UOI, subject to certain exceptions. The maximum amount payable
pursuant to the agreement is $3.8 million and is required to be paid no later
than one year following the triggering event. The agreement expires June 30,
1998.
42
<PAGE>
On November 18, 1993, the Company entered into the Option Exchange Agreement
with UOI and William H. Smith ("WHS"), pursuant to which the Company granted to
WHS an option to purchase 0.52% of the issued and outstanding capital stock of
the Company at a purchase price of $130,000. The option is exercisable by WHS
upon the Company entering into a definitive agreement to issue shares of capital
stock through an underwritten public offering. Subsequent to the execution of
the Underwriting Agreement, the Company expects WHS shall exercise his option in
full and purchase shares of Common Stock of the Company.
In July 1995, Daniel L. Simon and Brian T. Clingen entered into a Capital
Appreciation Plan with Lawrence J. Simon pursuant to which Lawrence J. Simon was
granted an option to purchase one percent (1%) of the common stock of the
Company owned by Daniel L. Simon and Brian T. Clingen for a purchase price equal
to $165,000. The option is exercisable upon receipt of notice that the Company
has finalized arrangements for a public offering of its capital stock.
Subsequent to the execution of the Underwriting Agreement, the Company expects
Lawrence J. Simon shall exercise his option in full and purchase shares of
Common Stock.
SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Certain provisions of the Certificate of Incorporation and Bylaws as well as
certain provisions of Delaware law may be deemed to have an anti-takeover effect
or any 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 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 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
misconduct or a knowing violation of law, (iii) pursuant to 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 Bylaws provide that the Company will indemnify its directors and
officers to the fullest extent permissible under Delaware General Corporation
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
43
<PAGE>
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 12 months after such adoption.
Neither the Certificate of Incorporation nor the Bylaws exclude the Company from
the restrictions imposed by Section 203.
CLASSIFIED BOARD OF DIRECTORS. The 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 whose term expires in 1998. The third class ("Class
III") consists of two directors whose term 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. As a result of this
classification of directors, no shareholder or group of shareholders 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,
including director nominations, properly brought before an annual meeting of
shareholders may be conducted at such meeting. In order to bring 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, including with respect to the nominee of directors or
considering any transaction that could result in a change of control of the
Company.
TRANSFER AGENT
The Company's transfer agent and registrar for the Common Stock is LaSalle
National Trust, N.A.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common Stock
of the Company. No prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares of Common Stock
for sale will have on the market price prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock of the Company in the
public market after the restrictions described below lapse could adversely
affect the prevailing market price of the Common Stock and the ability of the
Company to raise equity capital in the future.
Upon completion of this Offering, the Company will have outstanding
shares of Common Stock (excluding shares of Common Stock issuable upon the
exercise of the Underwriters' over-allotment option and shares of Common
Stock issuable pursuant to the 1996 Warrant Plan and Noteholder Warrants. See
"Capitalization" and "Description of Capital Stock." Of these shares, the
shares ( shares if the Underwriters' over-allotment option is exercised
in full) of Common Stock sold in this Offering will be freely tradable without
restriction under the Securities Act except for any shares purchased by
"affiliates," as that term is defined in the Securities Act, of the Company. The
remaining shares are "restricted securities" within the meaning of Rule 144
adopted under the Securities Act (the "Restricted Shares"). The Restricted
Shares generally may not be sold unless they are registered under the Securities
Act or are sold pursuant to an exemption from registration, such as the
exemption provided by Rule 144 under the Securities Act.
Certain of the Company's security holders and all of its executive officers
and directors, with the power to dispose of a total of shares, have agreed
not to offer, sell or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus (the "Lock-up Period")
without the prior written consent of Alex. Brown & Sons Incorporated on behalf
of the Underwriters. See
44
<PAGE>
"Underwriting." Following the Lock-up Period, these shares will not be eligible
for sale in the public market without registration unless such sales meet the
conditions and restrictions of Rule 144 as described below. KIA V and KEP V
expect to distribute shares of Common Stock to their respective partners, and
may in the future sell or otherwise dispose of Common Stock, including
additional distribution to their respective partners.
KIA V and KEP V expect to distribute not more than shares of Common
Stock to certain of its partners in lieu of cash in conjunction with the
Offering. The recipients of such distributions have agreed with KIA V, KEP V and
the Underwriters not to offer, sell, or otherwise dispose of such shares of
Common Stock prior to without the prior written consent of KIA
V, KEP V and Alex. Brown & Sons Incorporated. KIA V, KEP V and their partners
are entitled to four demand and certain "piggyback" registration rights. Daniel
L. Simon and Brian T. Clingen are entitled to four demand and certain
"piggyback" registration rights.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least two years (as computed under Rule 144) is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of (i) 1% of the then-outstanding shares of Common Stock
(approximately shares after giving effect to this Offering) and (ii) the
average weekly trading volume in the Company's Common Stock during the four
calendar weeks immediately preceding the date on which the notice of such sale
on Form 144 is filed with the Commission. Sales under Rule 144 are also subject
to certain provisions relating to notice and manner of sale and the availability
of current public information about the Company. In addition, a person (or
persons whose shares are aggregated) who has not been an affiliate of the
Company at any time during the 90 days immediately preceding a sale, and who has
beneficially owned the shares of at least three years (as computed under Rule
144), would be entitled to sell such shares under Rule 144(k) without regard to
the volume limitation and other conditions described above. The foregoing
summary of Rule 144 is not intended to be a complete description thereof.
Upon consummation of the Offering, the Noteholder Warrants will be
exercisable for additional shares of Common Stock. The Warrant Shares entitled
to be purchased upon exercise of the Noteholder Warrants have been registered
pursuant to the Securities Act. As a result, such Warrant Shares shall become
freely transferable beginning 180 days after the date of this Prospectus (upon
expiration of lockup agreements with the Underwriters).
DESCRIPTION OF INDEBTEDNESS AND OTHER COMMITMENTS
The following is a description of the principal agreements governing the
indebtedness of the Company and UOI as of April 30, 1996. The following
summaries of certain provisions of the Secured Note Indenture governing the
Secured Notes of the Company, the Revolving Credit Facility, the Acquisition
Credit Facility and the UOI Notes (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 an exhibit to the registration statement of which
this Prospectus is a part. See "Available Information." Defined terms used below
and not defined have the meanings set forth in the respective agreements.
THE SECURED NOTES
On June 23, 1994, the Company issued $50 million aggregate principal amount
of 14% Series A Senior Secured Discount Notes due 2004 (the "Secured Notes") and
50,000 Warrants to purchase Common Stock pursuant to an indenture (the "Secured
Note Indenture") between the Company and the United States Trust Company of New
York, as trustee. The Secured Notes mature on July 1, 2004 and are senior
secured obligations of the Company secured by a pledge of all of the common
stock of UOI issued to the Company. The Secured Notes rank on a parity in right
of payment with all existing and future indebtedness of the Company that is not
expressly subordinated to the Secured Notes.
45
<PAGE>
INTEREST. The Secured Notes were offered at a substantial discount from
their principal amount. No interest will accrue on the Secured Notes prior to
July 1, 1999. Commencing July 1, 1999, interest on the Secured Notes will accrue
at the rate of 14% per annum and will be payable semiannually on each January 1
and July 1, to holders of record on the immediately preceding December 15 and
June 15, respectively. Interest on the Secured Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from July 1, 1999, and the first interest payment date will be January 1, 2000.
Interest will be computed on the basis of a 360-day per year consisting of
twelve 30-day months.
SECURITY. The obligations under the Secured Notes are secured by a pledge
of all of the common stock of UOI issued to the Company.
REDEMPTION. The Secured Notes may be redeemed at the option of the Company,
in whole or in part, at any time and from time to time, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as a
percentage of principal amount) set forth below plus accrued and unpaid interest
to the redemption date, if redeemed during the twelve-month period beginning on
July 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------------------- ------------
<S> <C>
1999................................................................... 107.00%
2000................................................................... 104.67%
2001................................................................... 102.33%
2002 and thereafter.................................................... 100.00%
</TABLE>
Notwithstanding the foregoing, if the Company consummates an initial public
offering of its Common Stock on or prior to July 1, 1997, the Company, at its
option, within 60 days of the consummation of such offering, may use all or any
portion of the net proceeds of that offering to redeem up to 25% of the
aggregate principal amount at maturity of the Secured Notes at a redemption
price equal to 114% of their accreted value, provided that immediately following
the redemption at least 75% of the aggregate principal amount at maturity of the
Secured Notes remains outstanding. The Company intends to use a portion of the
net proceeds of the Offering to redeem 25% of the aggregate principal amount of
the Secured Notes. See "Use of Proceeds."
COVENANTS. The Indenture restricts the Company and its subsidiaries from,
among other things: (i) incurring indebtedness and allowing subsidiaries to
issue preferred stock; (ii) incurring liens or guaranteeing obligations except
for certain permitted liens with certain exceptions; (iii) entering into mergers
or consolidations or liquidating or dissolving; (iv) selling or otherwise
disposing of property, business or assets; (v) with certain exceptions, making
loans or investments; (vi) making optional payments or prepayments of
indebtedness; (vii) entering into transactions with affiliates; and (viii) with
certain exceptions, entering into agreements prohibiting or limiting the ability
of UOI to create liens upon its property, assets or revenues or pay dividends or
indebtedness and engaging in any businesses other than ownership of the capital
stock of UOI and, with respect to UOI and subsidiaries, the business of outdoor
advertising.
CHANGE IN CONTROL. Upon a change of control, each holder of Secured Notes
may require the Company to repurchase all or a portion of such holder's Secured
Notes at a purchase price equal to 101% of their accreted value on the date of
purchase. A "change in control" occurs upon (i) a failure of Daniel L. Simon (or
his trusts or family members) to own at least 40% of the capital stock of the
Company entitled to vote in an election of directors, (ii) acquisition by any
Person or group other than Daniel L. Simon of in excess of 30% of the capital
stock or the Company's assets, (iv) approval of a plan of liquidation or
dissolution, or (v) the members of the Board of Directors as of the date of the
Indenture or their duly elected replacements, failing to constitute a majority
of the Board of Directors.
REVOLVING CREDIT FACILITY
COMMITMENT; INTEREST. The Revolving Credit Facility is a revolving line of
credit facility providing for borrowings of up to $12.5 million that may be used
for general corporate purposes including working
46
<PAGE>
capital requirements. Borrowings under the Revolving Credit Facility may be in
the form of eurodollar loans or announced base rate loans as determined by the
Company. UOI may prepay borrowings under the Revolving Credit Facility, and may
reborrow (up to the amount of the commitment then in effect) any amounts that
are repaid or prepaid.
TERMINATION OF COMMITMENT. The initial commitment of $12.5 million
terminates on the earlier of the Acquisition Credit Facility termination date
(April 5, 1999, unless extended) or March 31, 2003 or upon the occurrence of a
Change of Control (as defined below). On each of these dates, UOI is required to
repay borrowings (together with fees and interest accrued thereon and any
additional amounts owing under the Revolving Credit Facility) in excess of the
commitment as reduced.
SECURITY. UOI's obligations under the Revolving Credit Facility are secured
by first priority liens (subject to certain permitted encumbrances) on
substantially all of the assets of UOI.
COVENANTS. The Revolving Credit Facility restricts UOI and its subsidiaries
from, among other things: (i) changes in business; (ii) with certain exceptions,
consolidation; mergers, sales or purchases of assets; (iii) with certain
exceptions, incurring, creating, assuming or suffering to exist any liens or
encumbrances upon property of UOI or assigning any right to receive income; (iv)
with certain exceptions, creating, incurring, assuming or suffering to exist any
indebtedness; (v) making investments or loans in any other person or entity or
acquiring or establishing any subsidiaries except for investments and
subsidiaries permitted under the Revolving Credit Facility; (vi) selling,
assigning or otherwise encumbering or disposing of the capital stock or other
securities of any subsidiary; (vii) making any optional or voluntary prepayments
on indebtedness; (viii) with certain exceptions, redeeming, retiring or
purchasing capital stock of UOI or declaring or paying dividends on the capital
stock of UOI; and (ix) except as to certain transactions that comply with the
terms of the Revolving Credit Agreement, entering into transactions with
affiliates. In addition, the Revolving Credit Facility also requires UOI to
maintain certain levels of Operating Cash Flow and interest expense coverage,
and limits UOI's capital expenditures to $6 million in fiscal year 1996, which
amount is increased to 105% of the maximum amount for the immediately preceding
twelve-month period.
CHANGE OF CONTROL. A change of control of UOI constitutes an event of
default permitting the lenders to accelerate indebtedness under and terminate
the Revolving Credit Facility. "Change of Control" means (i) the Company shall
cease to own legally and beneficially 100% of the outstanding capital stock of
UOI, (ii) prior to the Company's initial public offering of common stock, the
Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of 66 2/3% in the
aggregate of the total voting and economic ownership interests of the Company,
whether as a result of the issuance of securities of the Company, any merger,
consolidation, liquidation or dissolution of the Company, any direct or indirect
transfer of securities or otherwise, (iii) KIA V and KEP V shall cease to be the
beneficial owner (as defined in clause (ii) above) of at least 50% of the
economic ownership interest of the Company they hold on the Initial Borrowing
Date (after the consummation of the Transaction), (iv) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, is or becomes the beneficial owner (as defined in clause
(ii) above, except that a person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total voting and economic ownership
interests of the Company; PROVIDED, HOWEVER, that the Permitted Holders
"beneficially own" (as defined in clause (ii) above), directly or indirectly, in
the aggregate a lesser percentage of the total voting and economic ownership
interests of the Company than such other person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company, or (v) during any
period of two consecutive years individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
47
<PAGE>
ACQUISITION CREDIT FACILITY
COMMITMENT; INTEREST. The Acquisition Credit Facility consists of an
acquisition term loan in the amount of $75,000,000, as well as an acquisition
revolving credit line in the amount of $12,500,000, for a total commitment of
$87,500,000 under the Acquisition Credit Facility. The acquisition term loan was
drawn in full to finance the Company's recent acquisition of the operations of
Naegele and may not be reborrowed once such borrowing is paid by UOI.
TERMINATION OF COMMITMENT. The initial commitment of $12.5 million under
the acquisition revolving credit line terminates on April 5, 1999 or upon the
occurrence of a Change of Control (as defined below). On each of these dates,
UOI is required to repay borrowings (together with fees and interest accrued
thereon and any additional amounts owing under the Acquisition Credit Facility)
in excess of the commitment as reduced.
SECURITY. UOI's obligations under the Acquisition Credit Facility are
secured by first priority liens (subject to certain permitted encumbrances) on
substantially all of the assets of UOI.
COVENANTS. Except to the extent any of such covenants conflict with the
terms of the Secured Notes or UOI's Notes, the Acquisition Credit Facility
restricts UOI and its subsidiaries from, among other things: (i) changes in
business; (ii) with certain exceptions, consolidation; mergers, sales or
purchases of assets; (iii) with certain exceptions, incurring, creating,
assuming or suffering to exist any liens or encumbrances upon property of UOI or
assigning any right to receive income; (iv) with certain exceptions, creating,
incurring, assuming or suffering to exist any indebtedness; (v) making
investments or loans in any other person or entity or acquiring or establishing
any subsidiaries except for investments and subsidiaries permitted under the
Acquisition Credit Facility; (vi) selling, assigning or otherwise encumbering or
disposing of the capital stock or other securities of any subsidiary; (vii)
making any optional or voluntary prepayments on indebtedness; (viii) with
certain exceptions, redeeming, retiring or purchasing capital stock of UOI or
declaring or paying dividends on the capital stock of UOI; and (ix) except as to
certain transactions that comply with the terms of the Acquisition Credit
Agreement, entering into transactions with affiliates. In addition, the
Acquisition Credit Facility also requires UOI to maintain certain levels of
Operating Cash Flow and interest expense coverage, and limits UOI's capital
expenditures to $6 million in fiscal year 1996, which amount is increased to
105% of the maximum amount for the immediately preceding twelve-month period.
CHANGE OF CONTROL. A change of control of UOI constitutes an event of
default permitting the lenders to accelerate indebtedness under and terminate
the Acquisition Credit Facility. "Change of Control" means (i) the Company shall
cease to own legally and beneficially 100% of the outstanding capital stock of
UOI, (ii) prior to the Company's initial public offering of common stock, the
Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of 66 2/3% in the
aggregate of the total voting and economic ownership interests of the Company,
whether as a result of the issuance of securities of the Company, any merger,
consolidation, liquidation or dissolution of the Company, any direct or indirect
transfer of securities or otherwise, (iii) KIA V and KEP V shall cease to be the
beneficial owner (as defined in clause (ii) above) of at least 50% of the
economic ownership interest of the Company they hold on the Initial Borrowing
Date (after the consummation of the Transaction), (iv) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, is or becomes the beneficial owner (as defined in clause
(ii) above, except that a person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total voting and economic ownership
interests of the Company; PROVIDED, HOWEVER, that the Permitted Holders
"beneficially own" (as defined in clause (ii) above), directly or indirectly, in
the aggregate a lesser percentage of the total voting and economic ownership
interests of the Company than such other person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company, or (v) during any
period of two consecutive years individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
48
<PAGE>
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
THE UOI NOTES
On March 2, 1994, UOI issued $65 million aggregate principal amount of 11%
Series A Senior Notes due 2003 (the "UOI Notes") pursuant to an indenture (the
"UOI Indenture") between UOI and the United States Trust Company of New York, as
trustee. The UOI Notes mature on November 15, 2003 and are senior unsecured
obligations of UOI with all existing and future indebtedness of the Company that
is not expressly subordinated to the UOI Notes.
INTEREST. The UOI Notes bear interest at the rate of 11% per annum and will
be payable semiannually on each November 15 and May 15, to holders of record on
the immediately preceding November 1 and May 1, respectively. Interest on the
UOI Notes will accrue from the most recent date to which interest has been paid
and will be computed on the basis of a 360-day per year consisting of twelve
30-day per year consisting of twelve 30-day months.
SECURITY. The obligations under the UOI Notes are not secured.
REDEMPTION. The UOI Notes may be redeemed at the option of UOI commencing
November 15, 1998 in whole or in part, at any time and from time to time, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as a percentage of principal amount) set forth below plus accrued and
unpaid interest to the redemption date, if redeemed during the twelve-month
period beginning on November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------------------- ------------
<S> <C>
1998................................................................... 105.50%
1999................................................................... 103.67%
2000................................................................... 101.83%
2001 and thereafter.................................................... 100.00%
</TABLE>
Notwithstanding the foregoing, if UOI or the Company consummates an initial
public offering of its Common Stock on or prior to November 15, 1996, UOI, at
its option, within 60 days of the consummation of such offering, may use all or
any portion of the net proceeds of that offering to redeem up to $20 million of
the aggregate principal amount of UOI Notes at a redemption price equal to 110%
of their principal amount plus accrued and unpaid interest to the date of
redemption, provided that immediately following the redemption at least $30
million of the aggregate principal amount at maturity of UOI Notes remains
outstanding.
COVENANTS. The UOI Indenture restricts UOI and its subsidiaries from, among
other things: (i) incurring indebtedness and allowing subsidiaries to issue
preferred stock; (ii) incurring liens or guaranteeing obligations except for
certain permitted liens with certain exceptions; (iii) entering into mergers or
consolidations or liquidating or dissolving; (iv) selling or otherwise disposing
of property, business or assets; (v) with certain exceptions, making loans or
investments; (vi) making optional payments or prepayments of indebtedness; (vii)
entering into transactions with affiliates; (viii) with certain exceptions,
entering into agreements prohibiting or limiting the ability of UOI to create
liens upon its property, assets or revenues or pay dividends or indebtedness;
engaging in any businesses other than the business of outdoor advertising.
CHANGE IN CONTROL AND ASSET SALES. Upon a change of control, each holder of
UOI Notes may require UOI to repurchase all or a portion of such holder's UOI
Notes at a purchase price equal to 101% of their accreted value on the date of
purchase. A "change in control" occurs upon (i) a failure of Daniel L. Simon (or
his trusts or family members) to own at least 40% of the capital stock of the
Company entitled to vote in an election of directors, (ii) acquisition by any
Person or group other than Daniel L. Simon of in excess of 30% of the capital
stock or the Company's assets, (iv) approval of a plan of
49
<PAGE>
liquidation or dissolution, or (v) the members of the Board of Directors as of
the date of the UOI Indenture or their duly elected replacements, failing to
constitute a majority of the Board of Directors. In addition, in the event of
certain sales or transfers of assets of the Company, the Company is obligated to
invest the proceeds in assets related to the outdoor advertising business or
apply excess proceeds from such sale to repay UOI Notes.
50
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company, the Selling Shareholders and the Underwriters named below (the
"Underwriting Agreement"), the Underwriters named below (the "Underwriters"),
through their representatives, Alex. Brown & Sons Incorporated, Bear, Stearns &
Co. Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, have severally
agreed to purchase from the Company and the Selling Stockholders, the following
respective number of shares of Common Stock at the initial 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......................................................................
Bear, Stearns & Co. Inc..............................................................................
Donaldson, Lufkin & Jenrette Securities Corporation..................................................
-----------
Total..............................................................................................
-----------
-----------
</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 has been advised by the representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the initial public offering price set forth on the coverage page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
initial public offering, the offering price and other selling terms may be
changed by the representatives of 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
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 , 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 shares are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
Stockholders of the Company, holding in the aggregate shares of
Common Stock (including shares issuable pursuant to the 1996 Warrant Plan)
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 representatives of the Underwriters. Although KIA V and KEP V are
stockholders of the Company, KIA V and KEP V expect to distribute not more than
shares of Common Stock to certain of their respective partners in lieu
of cash. The recipients of such distributions have agreed with KIA V and the
representatives of the Underwriters not to offer, sell or otherwise dispose of
such shares of Common Stock prior to without the prior written
consent of KIA V and Alex. Brown & Sons Incorporated. Consent to sales within
the 180-day period referred to in this paragraph may be provided without prior
notice to holders of the Common Stock or to the markets where such securities
are traded. See "Shares Eligible for Future Sale."
The representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
51
<PAGE>
The representatives of the Underwriters have in the past provided and may
continue to provide investment banking services to the Company and Kelso &
Company, L.P. and its affiliates.
Prior to this Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiation among the Company and the
representatives of the Underwriters. Among the factors considered in such
negotiations were prevailing market conditions, the results of operations of the
Company in recent periods, the market capitalizations and stages of development
of other companies which the Company and the representatives of the Underwriters
believed to be comparable to the Company, estimates of the business potential of
the Company, the present state of the Company's development and other factors
deemed relevant.
At the Company's request, the Underwriters have agreed to make available
shares of Common Stock for sale at the initial public offering price to
officers, directors, employees and certain other persons associated with the
Company or Kelso & Company, L.P. The number of shares of Common Stock available
for sale to the general public will be reduced to the extent that these persons
purchase such shares. Any such shares not purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.
CERTAIN LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Winston & Strawn, Chicago, Illinois.
Skadden, Arps, Slate, Meagher & Flom, New York, New York will pass on certain
legal matters for the Underwriters in connection with this Offering. Skadden,
Arps, Slate, Meagher & Flom, New York, New York has from time to time
represented Kelso & Company, L.P. and two of the Selling Stockholders, KIA V and
KEP V, including with respect to the purchase by KIA V and KEP V from the
Company of Class B Common Stock and Class C Common Stock of the Company in April
1996, and may continue to represent Kelso & Company, L.P., KIA V and KEP V.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31, 1994
and 1995 and for each of the three years in the period ended December 31, 1995
in this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The Consolidated Financial Statements of NOA Holding Company at May 31, 1995
and 1994, and for each of the three years in the period ended May 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company 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-1 under 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.
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
52
<PAGE>
deemed to be qualified in all respects by such reference. The Registration
Statement and reports and other information filed by the Company 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.
The Company intends to distribute to the holders of its shares of Common
Stock annual reports containing consolidated financial statements audited by an
independent accountant and quarterly reports containing unaudited condensed
consolidated financial information for the first three quarters of each year.
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
UNIVERSAL OUTDOOR HOLDINGS, INC.
AND SUBSIDIARY
<TABLE>
<S> <C>
Report of Independent Accountants of Price Waterhouse LLP............................. F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Cash Flow.................................................. F-5
Consolidated Statements of Changes in Common Stockholders' Deficit.................... F-6
Notes to Consolidated Financial Statements............................................ F-7
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Statements of Operations................................. F-16
Notes to Unaudited Pro Forma Combined Statements of Operations........................ F-18
Unaudited Pro Forma Combined Balance Sheet............................................ F-19
Note to Unaudited Pro Forma Combined Balance Sheet.................................... F-20
NOA HOLDING COMPANY
Report of Independent Accountants of Ernst & Young LLP................................ F-21
Consolidated Balance Sheets........................................................... F-22
Consolidated Statements of Operations................................................. F-23
Consolidated Statements of Stockholders' Equity....................................... F-24
Consolidated Statements of Cash Flows................................................. F-25
Notes to Consolidated Financial Statements............................................ F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Universal Outdoor Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in common stockholders'
deficit and of cash flows present fairly, in all material respects, the
financial position of Universal Outdoor Holdings, Inc. and its subsidiary at
December 31, 1994 and 1995, 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. These financial
statements are the responsibility of Universal's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 23, 1996
F-2
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- -------------- MARCH 31,
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash............................................................. $ 15 $ 19 $ 11
Accounts receivable, less allowance for doubtful accounts of $106
in 1994 and 1995................................................ 4,313 5,059 4,608
Other receivables................................................ 185 201 539
Prepaid land rents............................................... 822 1,043 1,144
Prepaid insurance and other...................................... 859 1,029 1,264
-------------- -------------- ------------
Total current assets......................................... 6,194 7,351 7,566
-------------- -------------- ------------
Property and equipment, net........................................ 53,651 55,346 69,266
-------------- -------------- ------------
Other assets:
Noncompete agreements, net of accumulated amortization of $4,711
and $4,505...................................................... 1,615 1,995 1,670
Finance costs, net of accumulated amortization of $511 and
$1,171.......................................................... 5,437 5,113 4,948
Excess of cost over fair value assets acquired, net of
accumulated amortization of $184 and $230....................... 746 700 689
Other costs associated with acquisitions, net of accumulated
amortization of $569 and $686................................... 584 525 587
Deposits......................................................... 26 20 21
-------------- -------------- ------------
Total other assets........................................... 8,408 8,353 7,915
-------------- -------------- ------------
$ 68,253 $ 71,050 $ 84,747
-------------- -------------- ------------
-------------- -------------- ------------
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt............................. $ 58 $ 58 $ 58
Accounts payable................................................. 1,469 1,225 1,180
Accrued interest................................................. 998 1,054 2,946
Deferred revenue................................................. 400 468 268
Accrued expenses................................................. 482 409 580
-------------- -------------- ------------
Total current liabilities.................................... 3,407 3,214 5,032
-------------- -------------- ------------
Long-term debt, less current maturities............................ 99,669 106,362 120,248
-------------- -------------- ------------
Common stockholders' deficit:
Common stock, $.01 par value, 1,500,000 shares authorized;
437,500 shares issued and outstanding........................... -- -- --
Additional paid in capital....................................... 1,451 1,451 1,451
Common stock warrants............................................ 2,500 2,500 2,500
Accumulated deficit.............................................. (38,774) (42,477) (44,484)
-------------- -------------- ------------
Total common stockholders' deficit........................... (34,823) (38,526) (40,533)
-------------- -------------- ------------
Commitment and contingencies (Notes 5 and 9)....................... -- -- --
-------------- -------------- ------------
$ 68,253 $ 71,050 $ 84,747
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER
31, ENDED MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues......................................... $ 28,710 $ 33,180 $ 38,101 $ 8,025 $ 9,332
Less agency commissions................................ 2,863 3,414 3,953 789 905
--------- --------- --------- --------- ---------
Net revenues....................................... 25,847 29,766 34,148 7,236 8,427
--------- --------- --------- --------- ---------
Operating expenses:
Direct advertising expenses.......................... 10,901 11,806 12,864 3,108 3,571
General and administrative expenses.................. 3,357 3,873 4,645 1,072 1,227
Depreciation and amortization........................ 8,000 7,310 7,402 1,737 2,032
--------- --------- --------- --------- ---------
22,258 22,989 24,911 5,917 6,830
--------- --------- --------- --------- ---------
Operating income....................................... 3,589 6,777 9,237 1,319 1,597
--------- --------- --------- --------- ---------
Other (income) expense:
Interest expense, including amortization of bond
discount of $162, $1,818 and $3,982................. 6,625 9,836 12,234 2,938 3,430
Interest expense -- amortization of deferred
financing costs..................................... 511 464 660 149 164
Interest expense -- accretion of dividends on
redeemable preferred stock.......................... 2,163 1,509 -- -- --
(Gain) loss on disposal of assets and other
expenses............................................ 351 134 46 10 10
--------- --------- --------- --------- ---------
Total other expense................................ 9,650 11,943 12,940 3,097 3,604
--------- --------- --------- --------- ---------
Net loss before extraordinary item..................... (6,061) (5,166) (3,703) (1,778) (2,007)
Extraordinary loss on early extinguishment of debt..... (3,260) -- -- -- --
--------- --------- --------- --------- ---------
Net loss............................................... $ (9,321) $ (5,166) $ (3,703) $ (1,778) $ (2,007)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Loss per common and equivalent share................... $ (21.31) $ (11.81) $ (8.46) $ (4.06) $ (4.59)
Weighted average number of shares...................... 437,500 437,500 437,500 437,500 437,500
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31,
ENDED MARCH 31,
--------------------------------- ---------------------
1993 1994 1995 1995 1996
---------- ---------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $ (9,321) $ (5,166) $ (3,703) $ (1,778) $ (2,007)
Depreciation and amortization...................... 8,673 9,592 12,044 2,815 3,305
Extraordinary loss................................. 3,260 -- -- -- --
(Gain) loss on sale of property and equipment...... 69 90 -- -- --
Accretion of preferred stock dividends............. 2,163 1,509 -- -- --
Changes in assets and liabilities:
Accounts receivable and other receivables........ (728) (1,278) (762) (244) 113
Prepaid land rents, insurance and other.......... (262) (223) (391) (154) (336)
Accounts payable and accrued expenses............ 741 (156) (317) (339) 126
Accrued interest................................. (253) 140 56 1,736 1,892
Deferred revenue................................. -- 400 68 -- (200)
Other............................................ (220) -- 5 9 (4)
---------- ---------- --------- --------- ----------
Net cash from operating activities............. 4,122 4,908 7,000 2,045 2,889
---------- ---------- --------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gross capital expenditures......................... (2,862) (5,671) (5,620) (576) (1,966)
Payments for acquisitions.......................... -- (3,355) (1,925) (1,341) (13,621)
Proceeds from sale of property and equipment....... 858 1,003 -- -- --
Payment for consulting agreement................... -- -- (1,400) -- --
Other payments..................................... (32) (160) (124) -- (86)
---------- ---------- --------- --------- ----------
Net cash used in investing activities.......... (2,036) (8,183) (9,069) (1,917) (15,673)
---------- ---------- --------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........... 64,037 25,408 -- -- --
Principal payments of long-term debt............... (64,505) (272) (262) (33) (33)
Deferred financing costs........................... (3,560) (1,888) (336) (138)
Net borrowings under credit agreements............. 3,950 3,040 2,671 42 12,809
Payment of prepayment fees......................... (1,272) -- -- -- --
Payment for redemption of preferred stock.......... -- (23,015) -- -- --
Payment for cancellation of outstanding warrants... (750) -- -- -- --
---------- ---------- --------- --------- ----------
Net cash from (used in) financing activities....... (2,100) 3,273 2,073 (129) 12,776
---------- ---------- --------- --------- ----------
NET INCREASE (DECREASE) IN CASH...................... (14) (2) 4 (1) (8)
CASH, at beginning of period......................... 31 17 15 15 19
---------- ---------- --------- --------- ----------
CASH, at end of period............................... $ 17 $ 15 $ 19 $ 14 $ 11
---------- ---------- --------- --------- ----------
---------- ---------- --------- --------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period.................... $ 7,701 $ 7,885 $ 8,196 $ 276 $ 401
---------- ---------- --------- --------- ----------
---------- ---------- --------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON
STOCK AND
ADDITIONAL COMMON COMMON
SHARES OF PAID IN STOCK ACCUMULATED STOCKHOLDERS'
COMMON STOCK CAPITAL WARRANTS DEFICIT DEFICIT
--------------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993............ 7,649 $ 1,051 -- ($ 33,608) ($ 32,557)
Effect of stock split................... 429,851 -- -- -- --
Debt proceeds attributable to warrants
issued................................. -- -- $ 2,500 -- 2,500
Reclassification of redeemable common
stock reflecting termination of
stockholder agreement which may have
required Universal Outdoor II Holding
Company to purchase up to 20% of its
outstanding Class A common stock....... -- 400 -- -- 400
Net loss................................ -- -- -- (5,166) (5,166)
--------------- ----------- ----------- ------------- --------------
Balance at December 31, 1994............ 437,500 1,451 2,500 (38,774) (34,823)
Net loss................................ -- -- -- (3,703) (3,703)
--------------- ----------- ----------- ------------- --------------
Balance at December 31, 1995............ 437,500 1,451 2,500 (42,477) (38,526)
Net loss (unaudited).................... -- -- -- (2,007) (2,007)
--------------- ----------- ----------- ------------- --------------
Balance at March 31, 1996 (unaudited)... 437,500 $ 1,451 $ 2,500 ($ 44,484) ($ 40,533)
--------------- ----------- ----------- ------------- --------------
--------------- ----------- ----------- ------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASIS OF PRESENTATION AND DESCRIPTION OF THE BUSINESS:
Universal Outdoor, Inc., Universal Outdoor II Holding Company (the Holding
Company), Outdoor Properties, Inc., Midwest Outdoor Management, Inc. and CBT
Development, Inc. were entities under common ownership and control. In
connection with the Refinancing Plan (see below), (i) a wholly-owned subsidiary
of the Holding Company was merged with and into Universal Outdoor, Inc., which
thereupon became a wholly-owned subsidiary of the Holding Company and (ii)
Universal Outdoor, Inc. (Universal) acquired all of the assets, in consideration
for the assumption of all of the liabilities, of each of Outdoor Properties,
Inc., Midwest Outdoor Management, Inc. and CBT Development, Inc. In conjunction
with the Refinancing Plan, 2,649 shares of class A common stock of Universal
were exchanged for an equal number of common shares of the Holding Company, and
1,556 shares of class B common stock of Universal were exchanged for 48,000
shares of Series B voting preferred stock of the Holding Company.
Effective November 18, 1993, Universal executed a Refinancing Plan to extend
the average life of its obligations, thereby enhancing its operating and
financial flexibility. As part of the Refinancing Plan, Universal combined, in a
single operating entity (Universal Outdoor, Inc.) under the Holding Company,
business activities previously conducted by separate affiliated corporations,
repaid certain outstanding indebtedness, issued $65.0 million Senior Notes due
2003 of Universal and replaced its existing bank credit facility. In addition,
the Refinancing Plan provided for the amendment of the terms of the redeemable
preferred stock of the Holding Company to allow the provisions of the indenture
governing the Senior Notes due 2003 to restrict payments by the operating
company to the Holding Company until the $65.0 million Senior Notes due 2003
have been retired.
Pursuant to the Refinancing Plan, Universal entered a new credit facility
which permits borrowings of up to $12,500 on a revolving basis. Additionally,
Universal issued $65.0 million Senior Notes. With the funds obtained, Universal
(i) repaid all outstanding bank borrowings, (ii) retired approximately $25,000
of senior secured notes (including a prepayment penalty of $1,000), (iii)
retired approximately $6,500 of senior subordinated notes, (iv) repaid
approximately $3,400 of other indebtedness and (v) paid related transaction fees
and expenses, including prepayment penalties.
Upon consummation of the Refinancing Plan, Universal recognized an
extraordinary loss totaling $3,300 relating to the write-off of unamortized
deferred financing costs and prepayment fees associated with long term debt
instruments. Furthermore, the redeemable preferred stock ($16,900 at November
18, 1993, the refinancing date) and a $1,200 unsecured term loan became
obligations of and were recorded in the Holding Company with the operations of
Universal and all other assets and liabilities recorded in the operating
subsidiary, Universal. The Holding Company's sole source of funds will be the
operations of its wholly-owned subsidiary, Universal. However the terms of the
$65.0 million Senior Notes due 2003 effectively preclude the operating
subsidiary from distributing cash to satisfy obligations of the Holding Company.
Universal is a leading Midwestern outdoor advertising company. Universal
owns and operates outdoor advertising display faces principally in five
geographic markets: Chicago, Illinois; Milwaukee, Wisconsin; Indianapolis,
Indiana; Des Moines, Iowa; and Evansville, Indiana. Universal sells outdoor
advertising space to national, regional and local advertisers.
Historically, manufacturers of tobacco products, principally cigarettes,
have been major users of outdoor advertising displays, including displays
operated by Universal. In 1993, 1994 and 1995, tobacco industry advertising
accounted for approximately 14.8%, 13.1% and 13.3% of Universal's net revenues,
respectively.
F-7
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES:
The summary of significant accounting policies is presented to assist the
reader in understanding and evaluating Universal's consolidated financial
statements. These policies are in conformity with generally accepted accounting
principles consistently applied in all material respects.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The Holding Company's subsidiary is wholly-owned and is consolidated in the
accompanying financial statements. All material intercompany balances,
transactions and profits have been eliminated.
REVENUE RECOGNITION
Universal's revenues are generated from contracts with advertisers generally
covering periods of one to twelve months. Universal recognizes revenues ratably
over the contract term and defers customer prepayment of rental fees. Costs
incurred for the production of outdoor advertising displays are recognized in
the initial month of the contract or as incurred during the contract period.
PREPAID LAND RENTS
Most of Universal's outdoor advertising structures are located on leased
land. Land rents are typically paid in advance for periods ranging from one to
twelve months. Prepaid land rents are expensed ratably over the related rental
term.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
assets. Expenditures for maintenance and repairs are charged to operations as
incurred; major improvements are capitalized.
INTANGIBLE ASSETS
Non-compete agreements, deferred financing and acquisition costs are
amortized over their estimated economic lives, ranging from three to ten years.
The excess of cost over fair value of assets acquired is amortized over twenty
years on a straight-line basis. Universal reviews the carrying value of
intangibles and other long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. This review is performed by comparing estimated undiscounted future
cash flows from use of the asset to the recorded value of the asset.
INCOME TAXES
Income tax expense is based on pre-tax income for financial reporting
purposes, adjusted for the effects of permanent differences between such income
and that reported for tax return purposes. Deferred tax assets and liabilities
are recognized for expected future tax consequences of temporary differences
between the carrying amounts and tax bases of the underlying assets and
liabilities (Note 8).
PER SHARE INFORMATION
Loss per common and equivalent share are based on the weighted average
number of common stock and common stock equivalents outstanding during periods,
computed using the treasury stock method. Common stock equivalents represent the
potential dilutive impact of common stock warrants. For the three years ended
December 31, 1995, stock warrants issued did not have a dilutive impact on
earnings per share.
F-8
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
RECLASSIFICATIONS
Certain financial information in the prior years have been reclassified to
conform to the current year presentation.
INTERIM FINANCIAL INFORMATION
The interim financial information as of March 31, 1996 and 1995 and for the
three months then ended has been prepared from the unaudited financial records
of the Company and, in the opinion of management, reflects all adjustments
necessary for a fair presentation of the financial position and results of
operations and of cash flows for the respective interim periods. All adjustments
were of a normal and recurring nature.
NOTE 3 -- PROPERTY AND EQUIPMENT:
Major classes of property and equipment consist of the following at December
31, 1994 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Outdoor advertising structures............................................................. $ 70,869 $ 76,340
Land and capitalized land lease costs...................................................... 2,167 2,232
Vehicles and equipment..................................................................... 3,751 4,712
Building and leasehold improvements........................................................ 3,019 3,150
Display faces under construction........................................................... 125 1,344
--------- ---------
79,931 87,778
Less accumulated depreciation.............................................................. 26,280 32,432
--------- ---------
Net property and equipment................................................................. $ 53,651 $ 55,346
--------- ---------
--------- ---------
</TABLE>
NOTE 4 -- LONG-TERM DEBT AND OTHER OBLIGATIONS:
Long-term debt consists of the following at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
--------- -----------
<S> <C> <C>
11% Senior Notes due 2003, net of discount of $902 and $839 (a)................ $ 64,098 $ 64,161
14% Senior Secured Discount Notes due 2004, net of discount of $24,835 and
$20,917 (b)................................................................... 25,165 29,083
Credit facility (c)............................................................ 6,990 3,286
Acquisition line (c)........................................................... -- 6,375
Unsecured promissory note (d).................................................. 1,200 1,200
Other obligations (e).......................................................... 2,274 2,315
--------- -----------
99,727 106,420
Less current maturities of long-term debt and other obligations................ 58 58
--------- -----------
$ 99,669 $ 106,362
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(a) The $65.0 million Senior Notes due 2003 have interest payable semi-annually
and are subject to redemption at the option of Universal beginning in 1998.
The $65.0 million Senior Notes due 2003 also contain certain restrictive
covenants including, among others, limitations on additional debt incurrence
and restrictions on distributions to stockholders, except for limited
payments permitted under the Indenture.
F-9
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4 -- LONG-TERM DEBT AND OTHER OBLIGATIONS: (CONTINUED)
(b) The $50.0 million Senior Secured Discount Notes due 2004 do not pay any
interest prior to July 1, 1999. Commencing July 1, 1999, interest on the
Notes will accrue at the per annum rate of 14% of the principal amount at
maturity and will be payable in cash semi-annually on each January 1 and
July 1, commencing on January 1, 2000. These notes are secured by a pledge
of all the outstanding common shares of Universal and rank pari passu in
right of payment with existing senior indebtedness of the Holding Company.
The indenture governing these notes contains certain restrictive covenants
including, among others, limitations on Universal and the Holding Company on
additional debt incurrence, restrictions on distributions to shareholders,
the creation of liens, the making of certain investments and engaging in
transactions with affiliates.
The Holding Company will be dependent on the cash flow of Universal and its
subsidiary in order to meet its debt service obligations. The Holding
Company believes that it will receive distributions from Universal to enable
it to service the cash interest payments; however, there can be no
assurances that such distributions, if any, will be adequate to satisfy
either the cash interest on, or the payment of such debt. Significant
contractual and other restrictions exist on the payment of dividends and the
making of loans by Universal to the Holding Company. Consequently, all or a
portion of the $50.0 million Senior Secured Discount Notes due 2004 may
require refinancing prior to the maturity thereof. During the period prior
to July 1, 2004, the Holding Company does not expect to have significant
short-term cash requirements except for certain legal, accounting, printing
and other similar costs.
(c) In July 1995, Universal's credit agreement was amended to increase the
available borrowings, to extend the term of the agreement, and to add an
acquisition line of credit.
Pursuant to the amended revolving credit agreement that extends through May
2001, Universal has borrowing available under a credit facility and an
acquisition line of credit. The credit facility permits borrowings up to
$12,500 until May 1, 2000 when available borrowings under the credit
facility are scheduled to reduce to $10,000. The acquisition line of credit
permits borrowings up to $22,500. Available borrowings under the acquisition
line are scheduled to reduce to $19,500 in 1996, $15,500 in 1997, $10,500 in
1998 and $4,500 in 1999 and $0 in 2000.
The loans under the credit facility and acquisition line bear interest at
the rate per annum equal to the following: (i) Prime rate plus 0.25% when
the aggregate principle amount outstanding under the credit facility and the
acquisition line is $20 million or less, and (ii) Prime rate plus 0.50% when
the aggregate principle amount outstanding is greater than $20 million.
Prior to the amendment, Universal paid interest on this facility at (i) the
Prime rate or (ii) LIBOR plus 225 basis points. The interest rate in effect
during 1995 ranged from 8.5% to 9.25% and was 6% to 8.5% during 1994.
Interest on the credit facility is payable monthly. The credit facility is
collateralized by a first security interest in all assets of Universal.
Borrowings under the credit agreement are subject to certain restrictive
covenants including, among others, a maximum ratio of total indebtedness to
earnings, a minimum ratio of earnings to total interest expense and
restrictions on additional debt incurrence as well as distributions to
stockholders. Commitment fees are 0.25% of the unused portion of the
committed facility and are paid quarterly.
(d) The unsecured term loan of the Holding Company, which is due no later than
60 days following November 15, 2003, bears interest at 10% and is payable
monthly. This loan is guaranteed by a stockholder of the Holding Company.
F-10
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4 -- LONG-TERM DEBT AND OTHER OBLIGATIONS: (CONTINUED)
(e) Other obligations include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
- - Secured term note due November 30, 1999 bearing interest at the prime
rate. Interest on this note is payable monthly. This note is secured by
a building in Addision, Illinois....................................... $ 1,200 $ 1,148
- - Promissory note due December 31, 2001. Interest on this note is
calculated annually and is equal to 14% of the cash flow (as defined)
of Universal's subsidiary.............................................. 500 500
- - Promissory note with interest, compounded annually, at 10%, due May 4,
1999. For the first two years subsequent to May 4, 1994, interest is
added to the principal balance. Thereafter, interest is to be paid
monthly in arrears..................................................... 500 500
- - Other obligations...................................................... 74 167
--------- ---------
$ 2,274 $ 2,315
--------- ---------
--------- ---------
</TABLE>
Aggregate maturities of long-term debt obligations for each of the five
years subsequent to 1995 are $58, $54, $95, $2,712 and $4,500.
NOTE 5 -- PURCHASE OF PREFERRED AND COMMON STOCK:
The Holding Company sold 50,000 Units consisting of $50.0 million of 14%
Senior Secured Discount Notes due 2004 and 50,000 warrants to purchase shares of
common stock. The gross proceeds from the sale of the Units were $25,400 which
were used by the Holding Company (i) to purchase, for approximately $18,400, all
of the outstanding shares of its Series A preferred stock (including accrued
dividends) together with approximately 23.1% of its outstanding common stock
held by the holder of the Series A preferred stock, (ii) to purchase, for
approximately $4.7 million, all of the outstanding shares of its Series B
preferred stock (including accrued dividends), (iii) to pay related transaction
fees and expenses and, (iv) for working capital purposes. In addition, 12,500
warrants to purchase shares of common stock were issued as compensation for
services rendered in connection with the sale of the Units. The warrants, which
are exercisable at a price of $.01 per share, were assigned, based on market
conditions at the time of the sale of the Units, a value of $40 per warrant, or
$2,500 in total.
NOTE 6 -- REDEEMABLE PREFERRED STOCK:
In connection with the 1993 Refinancing, the Holding Company amended its
Certificate of Incorporation and authorized and issued 48,000 shares of no-par
Series B preferred stock in exchange for the 1,556 outstanding shares of Class B
common stock of Universal. This preferred stock was initially valued at fair
market value, or $4,287. As described in Note 5, the Series B preferred stock
and the Series A preferred stock (as described below), including accrued
dividends, were purchased by the Holding Company in June 1994.
F-11
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7 -- LEASE COMMITMENTS:
Rent expense totaled $4,100, $4,600 and $4,600 in 1993, 1994 and 1995,
respectively. Minimum annual rentals under the terms of noncancellable operating
leases in effect at December 31, 1995 are payable as follows:
<TABLE>
<CAPTION>
YEAR LEASES LAND TOTAL
- ------------------------------------------------------------------------ ----------- --------- ---------
<S> <C> <C> <C>
1996.................................................................... $ 191 $ 3,315 $ 3,506
1997.................................................................... 145 2,995 3,140
1998.................................................................... 63 2,615 2,678
1999.................................................................... 63 2,242 2,305
2000.................................................................... 53 1,925 1,978
Thereafter.............................................................. -- 13,083 13,083
----- --------- ---------
$ 515 $ 26,175 $ 26,690
----- --------- ---------
----- --------- ---------
</TABLE>
NOTE 8 -- INCOME TAXES:
Universal and the Holding Company entered into a tax sharing agreement that
became effective upon completion of the Refinancing Plan. Under the tax sharing
agreement, the Holding Company filed a consolidated federal income tax return
with Universal for the taxable year of Universal ended on December 31, 1993 and
will continue to file consolidated returns for each taxable year thereafter for
which the Holding Company and Universal are eligible to file consolidated
federal income tax returns. Under the tax sharing agreement, for each taxable
year of Universal with respect to which Universal is included in a consolidated
federal income tax return with the Holding Company, Universal will pay to the
Holding Company an amount equal to the lesser of (i) the consolidated federal
income tax liability of the consolidated group of which the Holding Company is
the common parent or (ii) the federal income tax liability of Universal,
computed as if Universal had filed a separate federal income tax return.
Accordingly, Universal has included the tax benefits of the Holding Company's
net operating loss carryforwards generated prior to consummation of the
Refinancing Plan in its deferred tax computation. Tax benefits from losses
generated by the Holding Company subsequent to the consummation of the
Refinancing Plan are not available to Universal; however, such benefits may be
transferred through either an intercompany transfer or a capital transaction.
Since the Holding Company incurred a net operating loss in 1994 and 1995, no
provision for income taxes was required. Deferred tax assets, determined in
accordance with FAS 109, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Bad debts.......................................................................... $ 42 $ 42
Non-deductible accrued expenses.................................................... 81 53
Depreciation....................................................................... 136 523
Non-deductible interest............................................................ 558 1,803
Loss carryforwards................................................................. 6,575 6,202
--------- ---------
7,392 8,623
--------- ---------
Valuation reserve.................................................................. (7,392) (8,623)
--------- ---------
Net deferred tax asset............................................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>
F-12
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 8 -- INCOME TAXES: (CONTINUED)
For tax return purposes, the following companies have net operating loss
carryforwards at December 31, 1994 which expire between 2005-2009:
<TABLE>
<S> <C> <C>
PRIOR TO REFINANCING PLAN:
Universal....................................................... $ 5,808
Holding Company................................................. 7,172
---------
$ 12,980
---------
---------
SUBSEQUENT TO REFINANCING PLAN:
Holding Company................................................. $ 2,524
---------
---------
</TABLE>
Certain restrictions on the Holding Company's utilization of the net
operating losses will apply if there has been an "ownership change" of either
the Holding Company, Universal, or both within the meaning of section 382 of the
Internal Revenue Code. Upon completion of the debt offering and stock purchases
as described in Note 5, a limitation was imposed on the net operating loss
carryforwards which arose prior to the Refinancing Plan of Universal. The
limitation, as specified in Section 382 of the Internal Revenue Code, is based
on a percentage of the value of the Company at the time of the ownership change.
Furthermore, the Holding Company's use of Universal's net operating losses are
subject to limitations applicable to corporations filing consolidated federal
income tax returns.
In accordance with the Internal Revenue Code regulations, the deductibility
of interest for the $50.0 million Senior Secured Discount Notes due 2004 is
limited. Net operating losses exclude any interest which is not currently
deductible.
NOTE 9 -- SUPPLEMENTAL CASH FLOW INFORMATION:
In May 1994, Universal entered into two asset purchase agreements to
purchase, for a net combined purchase price of $4,300, advertising structures
located in the Chicago and Milwaukee markets. Approximately, $3,300 of the total
purchase price was paid in cash and $1,000 was paid in the form of promissory
notes issued by Universal. Additionally, in October 1994, Universal acquired a
building in Addison, Illinois, for $1,500, $1,200 of which was funded with a
secured term note. Accordingly, the Statement of Cash Flows does not reflect
these notes issued to acquire the advertising structures or building.
In addition, in 1994, 12,500 warrants to purchase shares of common stock
were issued as compensation for services rendered in connection with the sale of
the Units (Note 5). Accordingly, the Statement of Cash Flows does not reflect
the $500 value assigned to the warrants as a cash outflow for deferred financing
costs.
In March 1995, Universal entered into two stock purchase agreements to
purchase, for a net combined purchase price of $1,400, advertising structures
located in the Dallas market. Approximately $1,200 of the total purchase price
was paid in cash and $200 was paid in the form of promissory notes issued by
Universal or assumption of debt of the acquired Company. Additionally, during
1995 Universal acquired signboard crane equipment for $103 under a capital
lease. Accordingly, the Statement of Cash Flows does not reflect the debt
incurred in the acquisition of the stock or the equipment.
NOTE 10 -- FINANCIAL INSTRUMENTS:
The Holding Company values its financial instruments as required by FAS No.
107, "Disclosures about Fair Values of Financial Instruments." The carrying
amounts of cash and cash equivalents, short
F-13
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 10 -- FINANCIAL INSTRUMENTS: (CONTINUED)
term debt and long-term variable rate debt approximate fair value. The fair
value of long-term debt is based on market prices. The estimated fair values of
the Holding Company's financial instruments, for which the carrying amount does
not approximate fair value, as of December 31, 1995 is as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT
FAIR VALUE
----------- -----------
<S> <C> <C>
Long-term debt................................................................ $ 106,420 $ 109,145
</TABLE>
NOTE 11 -- COMMITMENT AND CONTINGENCIES:
The Holding Company is subject to various legal claims, suits and complaints
in the normal course of business. Such litigation includes claims by
municipalities that certain outdoor advertising structures must be removed.
While the ultimate outcome of current and future litigation cannot be predicted
with certainty, management believes, based on the advice of the Company's
counsel, the final outcome of such litigation will not have a material adverse
effect on the Holding Company's consolidated financial position.
Pursuant to the Refinancing Plan, the Holding Company entered into a Limited
Capital Appreciation Rights Agreement with certain institutions that were
previously debt holders of Universal (the "Holders"). Pursuant to the agreement,
upon the occurrence of a "Triggering Event," the Holding Company will be
obligated to pay to the Holders consideration based on the valuation of the
common equity of the Holding Company, but in no event in excess of $3,800. As
defined by the agreement, a Triggering Event includes an initial public offering
of common stock and a plan of complete liquidation or dissolution. The
expiration date of the agreement is June 30, 1998, except that, with respect to
an initial public offering of common stock, the expiration date is June 30,
1996. As the likelihood of a triggering event occurring prior to the agreement's
expiration date is not probable, no accrual, or charge to operations, were
recorded at December 31, 1995.
NOTE 12 -- SUBSEQUENT EVENTS:
In February 1996, the Company entered into an agreement to purchase all
outstanding stock of NOA Holding Company for approximately $85 million ("Naegele
Acquisition"). The Company expects fees and expenses associated with the deal to
be $5 million. As a result of the proposed stock purchase, Universal will
acquire signboards in the Minneapolis/St. Paul, Minnesota and Jacksonville,
Florida markets. The Company expects to finance this acquisition with $60
million in bank borrowings and $30 million in cash proceeds from the purchase of
equity of the Holding Company by an investor group. The transaction is expected
to close in April 1996.
In the first quarter of 1996, the Company also entered into an asset
purchase agreement with Adsign, Inc. Under this agreement, Universal purchased
approximately 160 display faces in the Chicago market in exchange for $12.5
million. The purchase price was paid in cash and was financed with borrowings
against the Acquisition Line of Credit.
NOTE 13 -- NAEGELE AND PARAMOUNT ACQUISITIONS:
On April 5, 1996, the Company refinanced its existing credit facility with
(i) a revolving credit line in the amount of $12.5 million ("Revolving Credit
Facility") and (ii) an acquisition term loan and an acquisition revolving credit
line in the amount of $75.0 million and $12.5 million, respectively
("Acquisition Credit Facility"). No amounts were drawn under the Revolving
Credit Facility to finance the Naegele Acquisition; the Revolving Credit
Facility is available to Universal Outdoor, Inc. for working capital needs.
Approximately $84.5 million was drawn and used to finance the Naegele
Acquisition and refinance other
F-14
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 13 -- NAEGELE AND PARAMOUNT ACQUISITIONS: (CONTINUED)
indebtedness under the Acquisition Credit Faciliy. Both the Revolving Credit
Facility and the Acquisition Credit Facility are secured by a lien on the assets
of Universal Outdoor, Inc., a pledge of the stock of the Company, and a pledge
of the stock of any wholly-owned subsidiary of Universal Outdoor, Inc.
In addition, the Company sold 186,500 shares of Class B common stock and
188,500 shares of Class C common stock for approximately $30 million. The
proceeds were used to assist in the financing of the Naegele Acquisition.
In April 1996, the Company acquired four painted bulletin faces in the
Chicago market from Paramount Outdoor, Inc. in an asset purchase transaction for
approximately $600,000.
F-15
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNIVERSAL PRO FORMA AS ADJUSTED
OUTDOOR AD-SIGN, NOA ---------------------- ----------------------
HOLDINGS, INC. AND HOLDING ACQUISITION OFFERING
INC. IMAGE MEDIA COMPANY ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
--------- ------------ ------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................................... $38,101 $3,616 $28,364 $ -- $70,081 $-- $70,081
Less -- commissions and discounts............. 3,953 249 3,516 -- 7,718 -- 7,718
--------- ------------ ------- ----------- -------- ----------- --------
34,148 3,367 24,848 -- 62,363 -- 62,363
--------- ------------ ------- ----------- -------- ----------- --------
Operating expenses:
Direct cost of revenue...................... 12,864 1,286 10,285 -- 24,435 -- 24,435
General and administrative.................. 4,645 402 5,378 (2,500)(c) 7,925 -- 7,925
Depreciation and amortization............... 7,402 640 4,341 3,260(a) 15,643 -- 15,643
--------- ------------ ------- ----------- -------- ----------- --------
24,911 2,328 20,004 760 48,003 -- 48,003
--------- ------------ ------- ----------- -------- ----------- --------
Operating income (loss)....................... 9,237 1,039 4,844 (760) 14,360 -- 14,360
--------- ------------ ------- ----------- -------- ----------- --------
Other expense:................................
Interest.................................... 12,894 -- 2,503 3,569(b) 18,966 (4,183) 14,783
Other....................................... 46 -- -- -- 46 -- 46
--------- ------------ ------- ----------- -------- ----------- --------
12,940 -- 2,503 3,569 19,012 (4,183) 14,829
--------- ------------ ------- ----------- -------- ----------- --------
Net income (loss)............................. $(3,703) $1,039 $2,341 $(4,329) $(4,652) $4,183 $ (469)
--------- ------------ ------- ----------- -------- ----------- --------
--------- ------------ ------- ----------- -------- ----------- --------
</TABLE>
See accompanying notes to pro forma combined statements of operations.
F-16
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNIVERSAL PRO FORMA AS ADJUSTED
OUTDOOR AD-SIGN, NOA ---------------------- ----------------------
HOLDINGS, INC. AND HOLDING ACQUISITION OFFERING
INC. IMAGE MEDIA COMPANY ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
--------- ------------ ------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................................... $ 9,332 $ 904 $6,633 $ -- $16,869 $-- $16,869
Less -- commissions and discounts............. 905 62 801 -- 1,768 -- 1,768
--------- ----- ------- ----------- -------- ----------- --------
8,427 842 5,832 -- 15,101 -- 15,101
--------- ----- ------- ----------- -------- ----------- --------
Operating expenses:
Direct cost of revenue...................... 3,571 322 2,616 -- 6,509 -- 6,509
General and administrative.................. 1,227 100 1,459 (676)(c) 2,110 -- 2,110
Depreciation and amortization............... 2,032 160 1,053 815(a) 4,060 -- 4,060
--------- ----- ------- ----------- -------- ----------- --------
6,830 582 5,128 139 12,679 -- 12,679
--------- ----- ------- ----------- -------- ----------- --------
Operating income (loss)....................... 1,597 260 704 (139) 2,422 -- 2,422
--------- ----- ------- ----------- -------- ----------- --------
Other expense:................................
Interest.................................... 3,594 -- 468 863(b) 4,925 (1,051) 3,874
Other....................................... 10 -- -- -- 10 -- 10
--------- ----- ------- ----------- -------- ----------- --------
3,604 -- 468 863 4,935 (1,051) 3,884
--------- ----- ------- ----------- -------- ----------- --------
Net income (loss)............................. $(2,007) $ 260 $ 236 $(1,002) $(2,513) $1,051 $(1,462)
--------- ----- ------- ----------- -------- ----------- --------
--------- ----- ------- ----------- -------- ----------- --------
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNIVERSAL PRO FORMA AS ADJUSTED
OUTDOOR AD-SIGN, NOA ---------------------- ----------------------
HOLDINGS, INC. AND HOLDING ACQUISITION OFFERING
INC. IMAGE MEDIA COMPANY ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
--------- ------------ ------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................................... $ 8,025 $ 904 $6,283 $ -- $15,212 $-- $15,212
Less -- commissions and discounts............. 789 62 790 -- 1,641 -- 1,641
--------- ----- ------- ----------- -------- ----------- --------
7,236 842 5,493 -- 13,571 -- 13,571
--------- ----- ------- ----------- -------- ----------- --------
Operating expenses:
Direct cost of revenue...................... 3,108 321 2,520 -- 5,949 -- 5,949
General and administrative.................. 1,072 101 1,375 (625)(c) 1,923 -- 1,923
Depreciation and amortization............... 1,737 160 1,009 815(a) 3,721 -- 3,721
--------- ----- ------- ----------- -------- ----------- --------
5,917 582 4,904 190 11,593 -- 11,593
--------- ----- ------- ----------- -------- ----------- --------
Operating income (loss)....................... 1,319 260 589 (190) 1,978 -- 1,978
--------- ----- ------- ----------- -------- ----------- --------
Other expense:................................
Interest.................................... 3,087 -- 707 811(b) 4,605 (1,036) 3,569
Other....................................... 10 -- -- -- 10 -- 10
--------- ----- ------- ----------- -------- ----------- --------
3,097 -- 707 811 4,615 (1,036) 3,579
--------- ----- ------- ----------- -------- ----------- --------
Net income (loss)............................. $(1,778) $ 260 $ (118 ) $(1,001) $(2,637) $1,036 $(1,601)
--------- ----- ------- ----------- -------- ----------- --------
--------- ----- ------- ----------- -------- ----------- --------
</TABLE>
See accompanying notes to pro forma combined statements of operations.
F-17
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NOTE 1 -- BASIS OF PRESENTATION
The unaudited pro forma combined statements of operations give effect to the
acquisition by Universal Outdoor Holdings, Inc. of the capital stock of NOA
Holding Company in a transaction to be accounted for as a purchase. These
statements are based on the individual statements of operations of Universal
Outdoor Holdings, Inc., NOA Holding Company, Ad-Sign, Inc. and Image Media and
combine their results of operations for the year ended December 31, 1995 and the
three months ended March 31, 1996 and 1995 as if the acquisitions occurred as of
the beginning of the periods presented. The historical statement of operations
of NOA Holding Company excludes the results of operations of the Memphis and
Youngstown markets which were sold in November of 1995, as well as the gain on
the sale of those operations.
No income taxes have been reflected in the statements of operations because
(a) available net operating loss carryforwards of Universal Outdoor Holdings,
Inc. previously have been fully offset with a valuation allowance, and (b) the
income taxes recorded by NOA Holding Company have been eliminated as they relate
principally to the gain from the sale of the Memphis and Youngstown operations.
NOTE 2 -- PRO FORMA ADJUSTMENTS
The pro forma combined statements of operations have been prepared to
reflect (a) the acquisition of NOA Holding Company by Universal Outdoor
Holdings, Inc. for an aggregate purchase price of $85 million plus related
acquisition fees of $5 million, (b) the financing of such acquisition by bank
borrowings of $60 million and the issuance of $30 million of common shares to an
investor group, and (c) the utilization of the proceeds to the Company of the
public equity offering to redeem $10 million of 14% Senior Secured Discount
Notes due 2004 and repay $35 million of 8.25% bank borrowings. Pro Forma
adjustments have been made to reflect:
(a) Additional annual depreciation of $3.9 million resulting from the
increased basis of $45 million and $13.6 million in property and
equipment acquired, based on estimated useful lives of 15 years from NOA
Holding Company and Ad-Sign, Inc. and Image Media, respectively.
(b) Annual interest charges of $4,950,000 on $60 million of 8.25% bank
borrowings issued in connection with the acquisition, less interest
eliminated on NOA Holding Company debt not assumed in the acquisition and
annual interest charges of $1,122,000 on $13.6 million of 8.25% bank
borrowings issued in connection with the acquisition of Ad-Sign, Inc. and
Image Media.
(c) Elimination of certain duplicate corporate expenses of NOA Holding
Company, principally relating to employee costs and costs relating to
other corporate activities. Such expenses were eliminated by the company
upon completion of the acquisition.
F-18
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNIVERSAL PRO FORMA AS ADJUSTED
OUTDOOR ---------------------------- ----------------------------
HOLDINGS, NOA HOLDING ACQUISITION OFFERING
INC. COMPANY ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
----------- ----------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current assets................. $ 7,566 $ 6,830 $ -- $ 14,396 $ -- $ 14,396
Property and equipment......... 69,266 14,421 45,000 (c) 128,687 -- 128,687
Other assets................... 7,915 5,715 21,250 (c) 34,880 (1,451)(d) 33,429
----------- ----------- --------------- ----------- --------------- -----------
Total assets............... $ 84,747 $ 26,966 $ 66,250 $ 177,963 $ (1,451 ) $ 176,512
----------- ----------- --------------- ----------- --------------- -----------
----------- ----------- --------------- ----------- --------------- -----------
Current liabilities............ $ 5,032 $ 2,694 $ $ 7,726 $ $ 7,726
Long-term debt................. 120,248 5,163 60,000(a) 180,248 (44,944 (d) 135,304
(5,163 (b)
Other noncurrent liabilities... -- 521 -- 521 -- 521
----------- ----------- --------------- ----------- --------------- -----------
Total liabilities.......... 125,280 8,378 54,837 188,495 (44,944 ) 143,551
Stockholders' equity
(deficit)..................... (40,533 ) 18,588 30,000(a) (10,532) 43,493(d) 32,961
(18,587 (b)
----------- ----------- --------------- ----------- --------------- -----------
Total liabilities and
stockholders' equity.......... $ 84,747 $ 26,966 $ 66,250 $ 177,963 $ (1,451 ) $ 176,512
----------- ----------- --------------- ----------- --------------- -----------
----------- ----------- --------------- ----------- --------------- -----------
</TABLE>
See accompanying note to pro forma combined balance sheet.
F-19
<PAGE>
NOTE TO PRO FORMA COMBINED BALANCE SHEET
The pro forma combined balance sheet has been prepared to reflect (a) the
acquisition of NOA Holding Company by Universal Outdoor Holdings, Inc. for an
aggregate purchase price of $85 million plus related acquisition fees and
expenses of $5 million and (b) the repayment of debt related to the financing of
the acquisition from the proceeds of sale of common shares. Pro forma
adjustments have been made to reflect:
(a) Bank borrowings of $60 million at 8.25% and issuance of $30 million of
common stock,
(b) The elimination of the stockholders' equity accounts and debt of NOA
Holding Company,
(c) The recording of the net assets of NOA Holding Company at estimated fair
value at the acquisition date, and
(d) The $46 million estimated proceeds to Universal Outdoor Holdings, Inc.
for common shares being sold in this Offering which is to be used to
repay indebtedness.
F-20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
NOA Holding Company
We have audited the accompanying consolidated balance sheets of NOA Holding
Company as of May 31, 1994 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended May 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NOA Holding
Company as of May 31, 1994 and 1995 and the consolidated results of its
operations and cash flows for each of the three years in the period ended May
31, 1995 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
July 21, 1995
F-21
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31,
--------------------
1994 1995
--------- --------- MARCH 31,
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................................... $ 1,619 $ 1,630 $ 906
Accounts receivable, net of allowance for doubtful accounts of $346,000 in
1994 and $338,000 in 1995................................................ 4,384 4,517 3,639
Other receivables......................................................... 256 262 126
Inventories............................................................... 267 282 153
Current portion of prepaid leases......................................... 1,183 1,098 1,059
Prepaid expenses.......................................................... 390 274 191
Other assets.............................................................. 150 35 210
--------- --------- ------------
Total current assets.................................................. 8,249 8,098 6,284
--------- --------- ------------
Long-term portion of prepaid leases......................................... 312 509 545
Property and equipment, net (Note 3)........................................ 23,562 22,357 14,422
Intangibles, net (Note 4)................................................... 17,505 12,374 5,714
--------- --------- ------------
Total assets.......................................................... $ 49,628 $ 43,338 $ 26,965
--------- --------- ------------
--------- --------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................................... $ 605 $ 650 $ 460
Revolving credit.......................................................... 200 -- --
Accrued interest.......................................................... 598 191 393
Other accrued expenses.................................................... 1,626 1,800 1,705
Deferred revenue.......................................................... 100 66 137
Current portion of long-term debt......................................... 6,000 608 90
--------- --------- ------------
Total current liabilities............................................. 9,129 3,315 2,785
--------- --------- ------------
Long-term debt (Note 5)..................................................... 29,657 30,324 4,552
Other long-term liabilities................................................. 577 480 932
STOCKHOLDERS' EQUITY (NOTES 8 AND 9)
Preferred stock, par value $.10 per share:
Authorized shares -- 1,000
Issued shares -- 1,000.................................................... -- -- --
Class A common stock, par value $.01 per share:
Authorized shares -- 200,000
Issued shares -- 81,693.70 in 1994 and 72,919.94 in 1995.................. 1 1 1
Class B common stock, par value $.01 per share:
Authorized shares -- 25,000
Issued shares -- 13,199.82 in 1994 and 6,172.16 in 1995................... -- -- --
Additional paid-in capital.................................................. 19,524 18,857 18,857
Retained deficit............................................................ (9,260) (9,639) (162)
--------- --------- ------------
Total stockholders' equity............................................ 10,265 9,219 18,696
--------- --------- ------------
Total liabilities and stockholders' equity............................ $ 49,628 $ 43,338 $ 26,965
--------- --------- ------------
--------- --------- ------------
</TABLE>
See notes to consolidated financial statements.
F-22
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEAR ENDED MAY 31 MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................................... $ 33,503 $ 33,784 $ 37,054 $ 30,369 $ 28,964
Less agency commissions and discounts.................. 4,394 4,082 4,553 3,730 3,570
--------- --------- --------- --------- ---------
Net revenue............................................ 29,109 29,702 32,501 26,639 25,394
Operating expenses:
Production........................................... 6,876 6,466 6,472 5,416 4,697
Real estate rental................................... 6,763 7,143 7,556 6,212 6,021
Selling.............................................. 2,364 2,773 2,545 2,108 1,803
General and administrative........................... 4,951 5,294 5,388 4,391 3,509
Depreciation and amortization........................ 6,726 6,816 7,201 6,589 5,073
--------- --------- --------- --------- ---------
27,680 28,492 29,162 24,716 21,103
--------- --------- --------- --------- ---------
Operating profit....................................... 1,429 1,120 3,339 1,923 4,291
Interest............................................... 3,613 3,479 3,062 2,601 1,769
Gain on sale of assets................................. -- -- -- -- (9,983)
--------- --------- --------- --------- ---------
Net income (loss) before income taxes.................. (2,184) (2,269) 277 (678) 12,505
Income taxes........................................... -- -- -- -- 2,441
--------- --------- --------- --------- ---------
Net income (loss)...................................... (2,184) (2,269) 277 (678) 10,064
Dividends on preferred stock........................... (594) -- -- -- (587)
--------- --------- --------- --------- ---------
Net income (loss) applicable to common shares.......... $ (2,778) $ (2,269) $ 277 $ (678) $ 9,477
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK CLASS A COMMON CLASS B COMMON
STOCK STOCK ADDITIONAL
--------------- ---------------- ------------------ PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------ ------ --------- ----- ---------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1992................. 1,000 $-- 81,693.70 $ 1 13,199.82 $-- $19,228 $ (3,612)
Dividends declared.................... -- -- -- -- -- -- -- (594)
Net loss.............................. -- -- -- -- -- -- -- (2,184)
------ ------ --------- ----- ---------- ------ --------- --------
Balance at May 31, 1993................. 1,000 -- 81,693.70 1 13,199.82 -- 19,228 (6,390)
Dividends declared.................... -- -- -- -- -- -- -- (305)
Dividends in-kind..................... -- -- -- -- -- -- 296 (296)
Net loss.............................. -- -- -- -- -- -- -- (2,269)
------ ------ --------- ----- ---------- ------ --------- --------
Balance at May 31, 1994................. 1,000 -- 81,693.70 1 13,199.82 -- 19,524 (9,260)
Dividends in-kind..................... -- -- -- -- -- -- 961 (656)
Proceeds from issuance of stock....... -- -- -- -- 3,852.63 -- -- --
Stock redemptions relative to the sale
of Pony Panels....................... -- -- (7,599.32) -- (9,754.26) -- (1,372) --
Repurchases of stock.................. -- -- (1,174.44) -- (1,126.03) -- (270) --
Compensation expense on stock
issuances............................ -- -- -- -- -- -- 14 --
Net income............................ -- -- -- -- -- -- -- 277
------ ------ --------- ----- ---------- ------ --------- --------
Balance at May 31, 1995................. 1,000 $-- 72,919.94 $ 1 6,172.16 $ -- $18,857 $ (9,639)
Net income (unaudited)................ -- -- -- -- -- -- -- 9,477
------ ------ --------- ----- ---------- ------ --------- --------
Balance at March 31, 1996 (unaudited)... 1,000 $ 72,919.94 $ 1 6,172.16 $-- $18,857 $ (162)
------ ------ --------- ----- ---------- ------ --------- --------
------ ------ --------- ----- ---------- ------ --------- --------
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEAR ENDED MAY 31 MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................ $ (2,184) $ (2,269) $ 277 $ (678) $ 9,477
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization.......................... 6,726 6,816 7,201 6,589 5,073
Gain on sale of assets................................. -- -- -- -- (9,983)
Deferred tax provision................................. 550
Barter revenue resulting from purchases of equipment... (108) -- -- -- --
Stock compensation expense............................. -- -- 14 -- --
Changes in operating assets and liabilities:
Accounts receivable.................................. (444) (57) (320) 118 (7)
Other current and noncurrent assets.................. (36) 628 98 66 (123)
Accounts payable..................................... 191 144 45 (108) --
Accrued expenses, deferred revenue and other......... 5 (477) (59) (231) (452)
--------- --------- --------- --------- ---------
Net cash provided by operating activities................ 4,150 4,785 7,256 5,756 4,535
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures for signs........................... (928) (1,459) (1,636) (1,146) (1,164)
Proceeds from disposal of signs.......................... 150 301 51 26 106
Other capital expenditures............................... -- (242) (338) (293) (235)
Proceeds from the sale of assets......................... -- -- 542 542 21,784
--------- --------- --------- --------- ---------
Net cash used in investing activities.................... (778) (1,400) (1,381) (871) 20,491
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Net borrowings from bank................................. -- 200 -- -- 1,500
Dividends paid........................................... (594) (296) -- -- --
Increase in preferred stock.............................. -- -- -- -- 540
Principal payments of bank debt.......................... (3,100) (3,043) (5,157) (4,357) (27,700)
Payments to revise credit agreement...................... -- -- (669) (668) --
Principal payments on notes payable...................... -- -- (38) -- (90)
--------- --------- --------- --------- ---------
Net cash used in financing activities.................... (3,694) (3,139) (5,864) (5,025) (25,750)
--------- --------- --------- --------- ---------
Net cash provided........................................ (322) 246 11 (140) (724)
Cash at beginning at of period........................... 1,695 1,373 1,619 1,619 1,630
--------- --------- --------- --------- ---------
Cash at end of period.................................... $ 1,373 $ 1,619 $ 1,630 $ 1,479 $ 906
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Supplemental schedule of noncash operating and investing activities:
The Company sold the net assets of Pony Panels on August 31, 1994 as part
of a stock redemption. The book value of the net assets sold totaled
approximately $1,900,000.
The Company incurred long-term obligations of $270,000 for stock
redemptions made during the year ended May 31, 1995.
Purchases of equipment resulting from barter agreements totaled $108,000
for the year ended May 31, 1993. There were no such purchases in 1994 and
1995.
See notes to consolidated financial statements.
F-25
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements consolidate the accounts of NOA
Holding Company (formerly McCarty Holding Company, Inc.) and its wholly-owned
subsidiary, Naegele Outdoor Advertising Company. All intercompany transactions
have been eliminated in consolidation.
REVENUE RECOGNITION
Advertising revenue is recognized monthly over the period in which
advertisement displays are posted on the advertising structures. A full month's
revenue is recognized in the first month of posting. The direct costs incurred
to produce the related advertisements are expensed as incurred. Payments
received in advance of billings are recorded as deferred revenue.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance, repairs and
renewals, which neither materially add to the value of the property, nor
appreciably prolong its life, are charged to expense as incurred.
Depreciation of property and equipment is provided on declining balance and
straight-line methods over useful lives of 3 to 25 years.
INTANGIBLE ASSETS
Intangibles assets are carried and are amortized on the straight-line method
over useful lives of 5 to 40 years. Goodwill represents the cost of acquired
businesses in excess of amounts assigned to tangible and intangible assets at
the date of acquisition.
INVENTORIES
Inventories consist principally of supplies and are stated at lower of cost
or market as determined on a first-in, first-out basis.
INCOME TAXES
Income taxes are computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
BARTER TRANSACTIONS
The Company occasionally enters into agreements to trade advertising space
for goods or services. Prior to December 8, 1992, the Company did not record
such arrangements as revenue unless the items bartered for were capital items.
The impact on revenues and expense of barter transactions not recorded in fiscal
1993 was $164,000.
RECLASSIFICATION
Certain amounts previously reported in 1993 and 1994 have been reclassified
to conform to the 1995 presentation.
INTERIM FINANCIAL INFORMATION
The interim financial information as of March 31, 1996 and 1995 and for the
ten months then ended has been prepared from the unaudited financial records of
the Company and, in the opinion of management, reflects all adjustments
necessary for a fair presentation of the financial position and results of
operations and of cash flows for the respective interim periods. All adjustments
were of a normal and recurring nature.
F-26
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
2. ACQUISITIONS
Effective January 19, 1994, the Company purchased Atlantic Outdoor
Advertising, Inc. for $1 million. The acquisition was recorded using the
purchase method of accounting for business combinations.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
1994 1995 USEFUL LIFE
--------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Land............................................................. $ 1,235 $ 1,294 --
Advertising structures........................................... 24,825 25,256 20 years
Buildings........................................................ 491 491 10-25 years
Machinery and equipment.......................................... 1,180 1,201 6 years
Office furniture and equipment................................... 1,896 1,865 5-10 years
Automobiles and trucks........................................... 1,045 1,124 5 years
Other............................................................ 384 370 3-10 years
--------- ---------
31,056 31,601
Less accumulated depreciation.................................... 7,494 9,244
--------- ---------
$ 23,562 $ 22,357
--------- ---------
--------- ---------
</TABLE>
4. INTANGIBLES
The intangibles consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
1994 1995 USEFUL LIFE
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Advertising site leases............................................. $ 22,760 $ 21,762 7 years
Covenant not to compete............................................. 3,118 3,129 5 years
Goodwill............................................................ 2,159 2,030 40 years
Loan costs.......................................................... 2,028 2,697 6 years
Organization costs.................................................. 506 503 5 years
--------- ---------
30,571 30,121
Less accumulated amortization....................................... 13,066 17,747
--------- ---------
$ 17,505 $ 12,374
--------- ---------
--------- ---------
</TABLE>
The advertising site leases and covenant not to compete were recorded as a
result of an acquisition in May 1991. Their cost represents management's best
estimate of the fair value at the date of acquisition. The loan costs represent
fees paid to obtain a bank term loan and line of credit in 1991 and to refinance
the term loan and line of credit in August 1994. In connection with the loan
refinancing, the Company wrote-off approximately $1 million of unamortized loan
costs. The organization costs are management's estimate of the portion of
various fees paid which are allocable to this asset.
F-27
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
5. DEBT
Long-term debt consists of the following at May 31:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revolving Credit Commitment under the Amended and Restated Credit
Agreement dated August 31, 1994....................................... $ -- $ 30,700
Term loans under the Credit Agreement dated as of May 22, 1991......... 35,657 --
Revolving Credit Loan under the Credit Agreement dated as of May 22,
1991.................................................................. 200 --
Subordinated note payable, annual installments of $52 through July
1997, plus quarterly interest payments at prime....................... -- 157
Subordinated notes payable, annual installments of $38 through March
1997, plus quarterly interest payments at prime....................... -- 75
--------- ---------
35,857 30,932
Less current portion................................................... 6,200 608
--------- ---------
$ 29,657 $ 30,324
--------- ---------
--------- ---------
</TABLE>
The Company amended and restated its bank Credit Agreement on August 31,
1994 and established a Revolving Credit Commitment of up to $38,000,000 and an
Acquisition Loan Commitment of up to $5,000,000. Both commitments decrease
quarterly each fiscal year and terminate on February 28, 2001. The available
Revolving Credit Commitment at May 31, 1995 was $32,800,000. At year end there
were no borrowings against the $5,000,000 Acquisition Loan Commitment. As part
of the Agreement, interest on the first $20,000,000 of debt is payable under an
Interest Rate Protect Plan ("IPP"). The IPP provides for a fixed rate of 6.28%
plus applicable margin (2.5% at May 31, 1995) for a period of three years and
began August 5, 1994. The Amended and Restated Credit Agreement also enables the
Company to borrow the remainder of the debt at a rate equal to either the Loan
Interbank Offered Rate (LIBOR) plus 3.0% or at the Lending Agent's base rate
plus 1.75%. In addition, the Company can realize lower borrowing rates if
certain financial results are achieved. At May 31, 1995, the interest rate in
effect was LIBOR plus 2.5%.
The Company is obligated to pay loan commitment fees to the banks equal to
one-half of 1% of the average daily unused portion of the commitments.
The bank has issued a letter of credit to the Company's insurance carrier
totaling $323,000 at the end of fiscal 1994 and 1995.
All common shares of the Company are pledged as collateral for the Credit
Agreement; accordingly, substantially all of the Company's assets are
effectively pledged as collateral.
The Credit Agreement contains certain restrictive covenants which the
Company must comply with on a continuing basis. The Company is restricted as to
borrowings, dividend payments, acquisitions, stock repurchases, sales of assets
and capital expenditures.
During fiscal 1995, the Company entered into certain stock redemption
agreements to repurchase 1,174.44 shares of Class A Common Stock and 1,126.03
shares of Class B Common Stock. As part of the agreements, the Company issued
subordinated promissory notes totaling approximately $270,000.
Total interest paid on all debt was $3,849,000, $3,528,000 and $3,468,000
for fiscal 1993, 1994 and 1995, respectively.
F-28
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
5. DEBT (CONTINUED)
Aggregate annual maturities of long-term debt during the five-year period
ending May 31, 2000 are (in thousands):
<TABLE>
<S> <C>
Year ending May 31:
1996............................................................. $ 608
1997............................................................. 4,365
1998............................................................. 6,227
1999............................................................. 7,600
2000............................................................. 7,600
</TABLE>
6. INCOME TAXES
At May 31, 1995, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $8.0 million. These carryforwards
expire between May 31, 2006 and 2010. During the current fiscal year, the
Company utilized approximately $625,000 of net operating loss carryforwards to
offset current year taxable income.
Components of deferred tax assets and liabilities are (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Loss carryforward...................................................... $ 3,403 $ 3,145
Accrued expenses....................................................... 249 207
Loan cost amortization................................................. -- 343
--------- ---------
3,652 3,695
Deferred tax liabilities:
Depreciation........................................................... 857 1,090
Bad debt allowance..................................................... 33 36
--------- ---------
890 1,126
--------- ---------
Net deferred tax assets before valuation allowance....................... 2,762 2,569
Less valuation allowance................................................. 2,762 2,569
--------- ---------
Net deferred tax assets.................................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>
7. EMPLOYEE BENEFIT PLAN
The Company has a voluntary defined contribution 401(k) savings and
retirement plan for the benefit of its nonunion employees who may contribute
from 3% to 10% of their compensation. The Company has no obligation to
contribute to the plan and made no contribution for fiscal 1993, 1994 and 1995.
8. REDEEMABLE PREFERRED STOCK
The preferred stock is redeemable, subject to certain restrictions, by the
Company at a price equal to its value as carried on the financial statements.
The Company also has the right to convert the preferred stock to debt at a rate
of $1,000 principal of debt to $1,000 liquidation value of the preferred stock.
The liquidation value of each of share of preferred stock is $7,699 and $8,660
at May 31, 1994 and 1995, respectively. After May 22, 2001, the preferred
shareholders have the right to control the Board of Directors for the purpose of
selling the Company.
F-29
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
8. REDEEMABLE PREFERRED STOCK (CONTINUED)
Subject to certain bank restrictions, dividends on the preferred shares are
payable semi-annually at the rate of 8% either in cash or in-kind payments which
increase the liquidation value of the preferred stock. Should operating profits
exceed certain targets, the dividend rate increases to 12%. The minimum targets
for fiscal 1996 are $9,259 for each six month period.
9. COMMON STOCK AND WARRANT
The Class B common stock is entirely owned by key employees and officers.
The ownership vests over a period of five years. In the event of a sale or
liquidation of the Company, the Class A common stock has a 10% return preference
over the Class B common stock.
During fiscal 1995, the Company implemented a stock purchase plan for its
key employees. Under the plan, 4,253 shares of Class B common stock will be
granted to the employees at a purchase price of $.10 per share. The shares will
vest over a five year period. Approximately 3,853 shares had been granted by May
31, 1995.
Additionally, a warrant to purchase 5,000 shares of Class A common stock at
$144.75 per share was outstanding at May 31, 1994 and 1995. The warrant expires
on May 22, 2006 and has no voting rights.
10. SALES OF PONY PANELS
Only July 22, 1994, the Company entered into an agreement with The McCarty
Company ("McCarty") under which McCarty acquired all of the assets of the Pony
Panels division (excluding cash) in exchange for McCarty's assumption of Pony
Panel's liabilities, delivery of 7,599.32 shares of Class A Common Stock and
9,754.26 shares of Class B Common Stock of NOA Holding Company, and cash in the
amount of $542.
11. COMMITMENTS AND CONTINGENCIES
The City of Jacksonville, Florida has enacted a number of ordinances which
would require the removal of outdoor advertising structures which are not
located on federal aid primary and/or interstate highways. Management has
vigorously contested the validity of these ordinances for the last four years.
In March 1995, the Company reached a settlement with the City of Jacksonville
and Capsigns, Inc. and has agreed to remove 711 billboards faces over a period
of 20 years.
The Company is also involved in litigation with various other municipalities
and regulatory agencies as the result of condemnation proceedings and licensing
and permit renewal disputes, which could result in the removal of advertising
structures.
Management believes, based upon the information currently available, that
the settlement with the City of Jacksonville and Capsigns, Inc., along with the
outcomes of the various actions described above, will not have a material
adverse effect on the consolidated financial condition or results of operations
of the Company.
During fiscal 1995, the Company became a party to certain material
litigation. The action alleges that a former billposting employee, while in the
process of posting a billboard, fell to the ground (because the platform on
which he was working gave way) and suffered significant injuries. It is alleged
that these injuries have precluded him from seeking any gainful employment. This
matter involves a significant level issue concerning the exclusive remedy
provision of workers' compensation law in Minnesota. Minnesota law provides that
an employer providing workers' compensation benefits is immune from tort
liability. It is the Company's contention that, because the Company provided
workers' compensation benefits to the former employee, the Company is entitled
to tort immunity.
F-30
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Plaintiff disputes the Company's interpretation of the law and argues
that the tort suit can go forward. This matter was argued before a trial judge
on February 28, 1995, who ruled in favor of the Plaintiff. An appeal to the
Minnesota Court of Appeals is currently pending.
The Plaintiff has also made a demand of approximately $4.9 million for lost
wages and pain and suffering. An attempt to amend this complaint and state a
claim for punitive damages has also been made. The Court has not yet acted on
the amendment.
At this time it is not possible to estimate the probable outcome of these
actions and, accordingly, the Company has not established a reserve for the
outcome of this litigation.
The Company leases the facility in Minneapolis from the Company's preferred
stockholder with annual rents of $480,000, exclusive of operating costs, which
commenced May of 1993 and continues through May of 2001.
The Company is required to make the following minimum operating lease
payments for equipment and facilities under noncancelable lease agreements (in
thousands):
<TABLE>
<S> <C>
Year ending May 31:
1996............................................................. $ 552
1997............................................................. 552
1998............................................................. 552
1999............................................................. 557
2000............................................................. 557
Thereafter....................................................... 704
---------
$ 3,474
---------
---------
</TABLE>
Rent expense for operating leases for the years ended May 31, 1993, 1994 and
1995 totaled $6,950,000, $6,837,000 and $7,268,000, respectively.
F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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
Risk Factors................................... 6
Use of Proceeds................................ 10
Dividend Policy................................ 10
Dilution....................................... 11
Capitalization................................. 12
Selected Consolidated Financial and Operating
Data.......................................... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 15
Business....................................... 22
Management..................................... 34
Certain Transactions........................... 38
Principal and Selling Stockholders............. 40
Description of Capital Stock................... 41
Shares Eligible for Future Sale................ 44
Description of Indebtedness and Other
Commitments................................... 45
Underwriting................................... 51
Certain Legal Matters.......................... 52
Experts........................................ 52
Available Information.......................... 52
Index to Consolidated Financial Statements..... F-1
</TABLE>
--------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
SHARES
UNIVERSAL OUTDOOR
HOLDINGS, INC.
COMMON STOCK
------------
PROSPECTUS
------------
ALEX. BROWN & SONS
INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of estimated expenses incurred in connection
with the shares of Common Stock being registered hereby, other than underwriting
discounts and commissions:
<TABLE>
<S> <C>
SEC Registration Fee........................................... $36,771.17
NASD Filing Fee................................................ 11,164.00
Nasdaq Stock Market Listing Fee................................ *
Printing and Engraving Expenses................................ *
Legal Fees and Expenses........................................ *
Accounting Fees and Expenses................................... *
Transfer Agent and Registrar Fees and Expenses................. *
Blue Sky Fees and Expenses (including legal fees).............. *
Miscellaneous.................................................. *
----------
Total........................................................ $
----------
----------
<FN>
- ------------------------
* To be filed by amendment.
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law and Article XI of the
Registrant's Bylaws provide for indemnification of the Registrant's directors
and officers to the maximum extent provided by Delaware law, which may include
liabilities under the Securities Act.
Section of the Underwriting Agreement provides for indemnification by the
Underwriters of directors, officers and controlling persons of the Company
against certain liabilities, including liabilities under the Securities Act,
under certain circumstances.
As permitted by Section 102(b) of the Delaware Law, the Certificate of
Incorporation provides that directors of the Company shall have no personal
liability to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of a director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violations of law,
(iii) under Section 174 of the Delaware Law, or (iv) for any transaction from
which a director derived an improper personal benefit.
The Company does not maintain directors' and officers' liability insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1993, the Company has issued the following securities which
were not registered under the Securities Act:
On April 5, 1996, the Company issued to KIA V and KEP V and certain
individuals designated by KIA V and KEP V 186,500 shares of Class B Common Stock
and 188,500 shares of Class C Common Stock in exchange for $30 million. Such
Class B Common Stock and Class C Common Stock was converted into shares of
Common Stock pursuant to and is now being sold in the Offering.
On November 18, 1993, the Company entered into the Option Exchange Agreement
with UOI and WHS, pursuant to which the Company granted to WHS an option to
purchase 0.52% of the issued and outstanding capital stock of the Company at a
purchase price of $130,000. The option is exercisable by WHS upon the Company
entering into a definitive agreement to issue shares of capital stock through an
underwritten public offering. Subsequent to the execution of the underwriting
agreement, the Company expects WHS shall exercise his option in full and
purchase shares of Common Stock of the Company.
II-1
<PAGE>
On November 18, 1993, the Company entered into the Capital Appreciation
Right Agreement with Connecticut General Life Insurance Company, Cigna Property
and Casualty Insurance Company, Life Insurance Company of North America and
Aetna Life Insurance Company, pursuant to which the Company granted such parties
limited capital appreciation rights in the capital stock of the Company in
exchange for a waiver of the prepayment penalty in connection with the 1993
refinancing. Such capital appreciation rights are triggered by the occurrence of
any of the following: (i) liquidation or dissolution of the Company or UOI, (ii)
sale of all or substantially all of the issued and outstanding shares of common
stock or assets of the Company or (iii) the merger or consolidation of the
Company or UOI, subject to certain exceptions. The maximum amount payable
pursuant to the agreement is $3.8 million and is required to be paid no later
than one year following the triggering event. The agreement expires June 30,
1998.
In each case, exemption from registration was claimed on the grounds that
the issuance of such securities did not involve any public offering within the
meaning of Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement
2.1 Stock Purchase Agreement ("Stock Purchase Agreement") between Wind Point
Partners II, L.P., Marquette Venture Partners, L.P., Chemical Equity
Associates, a California Limited Partnership, Banc One Venture Corporation and
Management Shareholders and UOI relating to the capital stock of NOA Holding
Company dated February 27, 1996 (filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K dated April 5, 1996 (File No. 33-82582) (the "Company 8-K")
and incorporated herein by reference)
2.2 Amendment No. 1 to Stock Purchase Agreement (filed as Exhibit 2.2 to the Company
8-K and incorporated herein by reference)
3.1* Form of Third Amended and Restated Certificate of Incorporation
3.2* Form of Second Amended and Restated Bylaws
4.1* Specimen Common Stock Certificate of the Company
4.2 Indenture (filed as Exhibit 4.2 to the Company's Form S-1 Registration Statement
(File No. 33-82582) and incorporated herein by reference.)
4.3 Indenture of Trust between United States Trust Company of New York, as trustee,
and UOI dated as of November 15, 1993 relating to the UOI Notes (filed as
Exhibit 4(b) to UOI's Registration Statement on Form S-1 (File No. 33-72710)
and incorporated herein by reference)
5.1* Opinion of Winston & Strawn
9.1* Voting Trust Agreement dated December 20, 1995 among the Company, Daniel L.
Simon and Brian T. Clingen
10.1 Revolving Credit Agreement entered into among the Registrant, the various
lending institutions from time to time parties thereto, LaSalle National Bank,
as Co-Agent and Bankers Trust Company, as Agent (filed as Exhibit 10.1 to the
Company 8-K and incorporated herein by reference.)
10.2 Acquisition Credit Agreement entered into among the Registrant, the various
lending institutions from time to time parties thereto, LaSalle National Bank,
as Co-Agent and Bankers Trust Company, as Agent (filed as Exhibit 10.2 to the
Company 8-K and incorporated herein by reference).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.3* 1996 Warrant Plan of the Company
10.4 Warrant Agreement between the Registrant and United States Trust Company of New
York, as warrant agent, dated June 30, 1994 relating to the Noteholder Warrants
(filed as Exhibit 4(i) to Amendment No. 1 to the Company's Form S-1
Registration Statement (File No. 33-93852) and incorporated herein by
reference)
10.5 Agreement Regarding Tax Liabilities and Payments dated as of November 18, 1993
by and between UOI and the Company (filed as Exhibit 10(f) to UOI's Form S-1
Registration Statement (File No. 33-72710) and incorporated herein by
reference)
10.6* Capital Appreciation Right Agreement among the Company, Connecticut General Life
Insurance Company, Cigna Property and Casualty Insurance Company, Life
Insurance Company of North America and Aetna Life Insurance Company dated
November 18, 1993
10.7* Option Exchange Agreement among the Company, UOI and WHS dated November 18, 1993
11.1* Computation of earnings per share
21.1* Subsidiaries of the Registrant
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ernst & Young LLP
23.3* Consent of Winston & Strawn (contained in Exhibit 5.1)
24 Powers of Attorney (included on Signature Page)
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that:
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to Item 14 above, or otherwise, the Company has been advised that, in
the opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the Offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 6th day of June, 1996.
UNIVERSAL OUTDOOR HOLDINGS, INC.
By: /s/ DANIEL L. SIMON
-----------------------------------
Daniel L. Simon
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
The undersigned directors and officers of Universal Outdoor Holdings, Inc.
do hereby constitute and appoint Brian T. Clingen and Paul G. Simon, and each of
them, with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all instruments for
us and in our names in the capacities indicated below which such person may deem
necessary or advisable to enable Universal Outdoor Holdings, Inc. to comply with
the Securities Act of 1933 (the "Act"), as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement, including specifically, but not limited to, power
and authority to sign for us, or any of us, in the capacities indicated below
and any and all amendments (including pre-effective and post-effective
amendments or any other registration statement filed pursuant to the provisions
of Rule 462(b) under the Act) hereto; and we do hereby ratify and confirm all
that such person or persons shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------- -----------------------
<C> <S> <C>
/s/ DANIEL L. SIMON President and Chief Executive
------------------------------------------- Officer (Principal Executive June 6, 1996
Daniel L. Simon Officer) and Director
Vice President and Chief
/s/ BRIAN T. CLINGEN Financial Officer (Principal
------------------------------------------- Financial and Accounting June 6, 1996
Brian T. Clingen Officer) and Director
/s/ MICHAEL J. ROCHE
------------------------------------------- Director June 6, 1996
Michael J. Roche
/s/ MICHAEL B. GOLDBERG
------------------------------------------- Director June 6, 1996
Michael B. Goldberg
</TABLE>
II-4
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------------ ------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1* Form of Underwriting Agreement
2.1 Stock Purchase Agreement ("Stock Purchase Agreement") between Wind Point Partners II, L.P.,
Marquette Venture Partners, L.P., Chemical Equity Associates, a California Limited
Partnership, Banc One Venture Corporation and Management Shareholders and UOI relating to
the capital stock of NOA Holding Company dated February 27, 1996 (filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K dated April 5, 1996 (File No. 33-82582) (the
"Company 8-K") and incorporated herein by reference)
2.2 Amendment No. 1 to Stock Purchase Agreement (filed as Exhibit 2.2 to the Company 8-K and
incorporated herein by reference)
3.1* Form of Third Amended and Restated Certificate of Incorporation
3.2* Form of Second Amended and Restated Bylaws
4.1* Specimen Common Stock Certificate of the Company
4.2 Indenture (filed as Exhibit 4.2 to the Company's Form S-1 Registration Statement (File No.
33-82582) and incorporated herein by reference)
4.3 Indenture of Trust between United States Trust Company of New York, as trustee, and UOI
dated as of November 15, 1993 relating to the UOI Notes (filed as Exhibit 4(b) to UOI's
Registration Statement on Form S-1 (File No. 33-72710) and incorporated herein by
reference)
5.1* Opinion of Winston & Strawn
9.1* Voting Trust Agreement dated December 20, 1995 among the Company, Daniel L. Simon and Brian
T. Clingen
10.1 Revolving Credit Agreement entered into among the Registrant, the various lending
institutions from time to time parties thereto, LaSalle National Bank, as Co-Agent and
Bankers Trust Company, as Agent (filed as Exhibit 10.1 to the Company 8-K and incorporated
herein by reference.)
10.2 Acquisition Credit Agreement entered into among the Registrant, the various lending
institutions from time to time parties thereto, LaSalle National Bank, as Co-Agent and
Bankers Trust Company, as Agent (filed as Exhibit 10.2 to the Company 8-K and incorporated
herein by reference).
10.3* 1996 Warrant Plan of the Company
10.4 Warrant Agreement between the Registrant and United States Trust Company of New York, as
warrant agent, dated June 30, 1994 relating to the Noteholder Warrants (filed as Exhibit
4(i) to Amendment No. 1 to the Company's Form S-1 Registration Statement (File No.
33-93852) and incorporated herein by reference)
10.5 Agreement Regarding Tax Liabilities and Payments dated as of November 18, 1993 by and
between UOI and the Company (filed as Exhibit 10(f) to UOI's Form S-1 Registration
Statement (File No. 33-72710) and incorporated herein by reference)
10.6* Capital Appreciation Right Agreement among the Company, Connecticut General Life Insurance
Company, Cigna Property and Casualty Insurance Company, Life Insurance Company of North
America and Aetna Life Insurance Company dated November 18, 1993
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
10.7* Option Exchange Agreement among the Company, UOI and WHS dated November 18, 1993
11.1* Computation of earnings per share
21.1* Subsidiaries of the Registrant
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ernst & Young LLP
23.3* Consent of Winston & Strawn (contained in Exhibit 5.1)
24 Powers of Attorney (included on Signature Page)
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 23, 1996
relating to the financial statements of Universal Outdoor Holdings, Inc., which
appears in such Prospectus. We also consent to the references to us under the
headings "Experts" and "Selected Consolidated Financial and Operating Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Consolidated Financial and Operating Data."
Price Waterhouse LLP
Chicago, Illinois
June 5, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 21, 1995, with respect to the financial statements
of NOA Holding Company included in the Registration Statement (Form S-1) and
related Prospectus of Universal Outdoor Holdings, Inc.
ERNST & YOUNG LLP
Minneapolis, Minnesota
June 5, 1996
