-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S/JkO8qpSA8OaDOvoNdNA20ASZ1vqZGhBoHIgrNePLUJz8mKov8NWj0QOXJYX8ra Y7lUasFoCQpCOWZ2GjIdmA== 0000950130-97-004816.txt : 19971107 0000950130-97-004816.hdr.sgml : 19971107 ACCESSION NUMBER: 0000950130-97-004816 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19971106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARGYLE TELEVISION INC CENTRAL INDEX KEY: 0000949536 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 742717523 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: SEC FILE NUMBER: 333-36659 FILM NUMBER: 97708967 BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10106 BUSINESS PHONE: 2108281700 MAIL ADDRESS: STREET 1: 200 CONCORD PLAZA STREET 2: STE 700 CITY: SAN ANTONIO STATE: TX ZIP: 78216 424B5 1 FINAL PROSPECTUS SUPPLEMENTS FILED UNDER RULE NO. 424(b)(5) TO THE REGISTRATION STATEMENT ON FORM S-3 (FILE NO. 333-36659) PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED OCTOBER 17, 1997) 4,000,000 SHARES HEARST-ARGYLE TELEVISION, INC. SERIES A COMMON STOCK --------------- All of the 4,000,000 shares of Series A Common Stock, par value $.01 per share (the "Series A Common Stock"), of Hearst-Argyle Television, Inc., a Delaware corporation (the "Company"), offered hereby are being offered by the Company. Of the 4,000,000 shares of Series A Common Stock offered hereby, 3,200,000 shares are being offered initially in the United States and Canada by the U.S. Underwriters (the "U.S. Offering") and the remaining 800,000 shares of Series A Common Stock are being offered initially in a concurrent offering outside the United States and Canada by the International Underwriters (the "International Offering" and, together with the U.S. Offering, the "Common Stock Offering"). Shares of Series A Common Stock not exceeding in the aggregate 5% of the Series A Common Stock being offered hereby are being reserved for sale to certain directors, officers, employees and other persons associated with the Company or its majority stockholder, The Hearst Corporation ("Hearst"), at the public offering price. The Company is currently offering to sell up to $400,000,000 aggregate principal amount of Senior Notes Due 2007 and Debentures Due 2027 by a separate prospectus supplement (the "Debt Offering"). The Common Stock Offering is not conditioned upon the completion of the Debt Offering, and there can be no assurance that the Debt Offering will be consummated on favorable terms or at all, or that the Debt Offering will not be reduced in size. See "Recent Developments" and "Use of Proceeds." The Series A Common Stock is traded on the Nasdaq National Market under the symbol "HATV." On November 5, 1997, the last reported sale price of the Series A Common Stock as reported by Nasdaq was $27 7/8 per share. The Company's authorized and outstanding capital stock consists of Series A Common Stock, Series B Common Stock, Series A Preferred Stock and Series B Preferred Stock. Hearst owns all of the outstanding shares of Series B Common Stock, currently representing approximately 82% of the common stock of the Company. Upon consummation of the Common Stock Offering, Hearst will own approximately 76% of the Company's Common Stock (assuming the Underwriters' over-allotment option is not exercised.) See "The Company--The Hearst Transaction." The rights of the Series A Common Stock and the Series B Common Stock are substantially similar except that the holders of the Series A Common Stock as a class have the right to elect two members of the Company's Board of Directors and Hearst, as the holder of the Series B Common Stock, has the right to elect the remaining nine of the 11 members of the Company's Board of Directors. Each share of Series B Common Stock is convertible at any time, at the option of the holder, into a share of Series A Common Stock. Each share of Series A Preferred Stock is convertible at any time, at the option of the holder, into Series A Common Stock and each share of Series B Preferred Stock is convertible, at anytime after June 11, 2001, at the option of the holder, into Series A Common Stock. See "Description of Capital Stock" in the accompanying Prospectus. SEE "RISK FACTORS" BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SERIES A COMMON STOCK OFFERED HEREBY. --------------- 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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - -------------------------------------------------------------------------------- Per Share............................... $27.00 $1.21 $25.79 - -------------------------------------------------------------------------------- Total(3)................................ $108,000,000 $4,840,000 $103,160,000
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) The Company has agreed to indemnify the U.S. Underwriters and the International Underwriters (collectively, the "Underwriters") against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deduction of expenses payable by the Company estimated at $600,000. (3) The Company has granted the U.S. Underwriters and the International Underwriters options exercisable within 30 days after the date hereof to purchase up to an aggregate of 480,000 shares and 120,000 shares, respectively, of Series A Common Stock solely to cover over-allotments, if any. If all such 600,000 shares are purchased, the total Price to Public, Underwriting Discount and Proceeds to the Company will be $124,200,000, $5,566,000 and $118,634,000, respectively. See "Underwriting." --------------- The shares of Series A Common Stock are being offered by the several Underwriters named herein, subject to prior sale, when, as and if accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Series A Common Stock will be made in New York, New York on or about November 12, 1997. --------------- MERRILL LYNCH & CO. CREDIT SUISSE FIRST BOSTON J.P. MORGAN & CO. MORGAN STANLEY DEAN WITTER --------------- The date of this Prospectus Supplement is November 5, 1997. [INSERT ARTWORK/MAP] - -------- * WWWB-TV and WPBF-TV are managed by the Company under a management agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under the Missouri LMA (as defined below) with KCWB. * Hearst has a Program Services and Time Brokerage Agreement (the "Missouri LMA") with KCWB-TV, Inc., the permittee of KCWB. * WNAC-TV's (Providence, RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal. Under FCC rules, a single entity cannot own stations with overlapping signals. The Company will divest WNAC and WDTN, and the Company has entered into a letter of intent to divest WNAC. * WNAC is subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES A COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF SERIES A COMMON STOCK PRIOR TO THE PRICING OF THE SERIES A COMMON STOCK OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE SERIES A COMMON STOCK, THE PURCHASE OF SHARES OF SERIES A COMMON STOCK FOLLOWING THE PRICING OF THE COMMON STOCK OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE SERIES A COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE SERIES A COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN PASSIVE MARKET- MAKING TRANSACTIONS IN THE SERIES A COMMON STOCK ON THE NASDAQ STOCK MARKET'S SMALLCAP MARKET, THE NASDAQ NATIONAL MARKET, IN THE OVER-THE COUNTER MARKET OR OTHERWISE IN ACCORDANCE WITH REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING." S-2 THE COMMON STOCK OFFERING Series A Common Stock Offered: U.S. Offering............. 3,200,000 shares International Offering.... 800,000 shares ---------- Total Shares Offered ....... 4,000,000 shares(/1/) ========== Common Stock to be outstanding immediately after this Offering: Series A Common Stock, $.01 par value.................. 12,291,204 shares Series B Common Stock, $.01 par value.................. 38,611,002 shares(/2/) ---------- Total Common Stock......... 50,902,206 shares(/2/) ========== Nasdaq National Market Symbol...................... HATV
Use of Proceeds................. The Company expects to utilize the net proceeds from this Common Stock Offering and, if consummated, the Debt Offering described below, to repay outstanding indebtedness. All of the net proceeds initially will be used to repay borrowings under its Credit Facility (as defined herein). After such repayment, the Company may repurchase its Subordinated Notes (as defined herein). See "Use of Proceeds." Relative Rights of Series A Common Stock and Series B The Series A Common Stock and Series B Common Common Stock................... Stock (collectively, the "Common Stock") vote together as a single class on all matters submitted to a vote of stockholders, except that with respect to any election of directors, (i) the holders of the shares of Series A Common Stock are entitled to vote separately as a class to elect two members of the Company's Board of Directors (the "Series A Directors") and (ii) the holders of the shares of Series B Common Stock are entitled to vote separately as a class to elect the balance of the Company's Board of Directors (the "Series B Directors"); provided, however, that the number of Series B Directors shall not constitute less than a majority of the Company's Board of Directors. As the holder of all of the issued and outstanding shares of Series B Common Stock, Hearst has the right to elect nine of the 11 members of the Company's Board of Directors. All of the outstanding shares of Series B Common Stock are required to be held by Hearst or its permitted transferees. The shares of Series B Common Stock are convertible at any time at the option of the holder on a share-for-share basis into shares of Series A Common Stock. The shares of Series B Common Stock automatically convert into shares of Series A Common Stock at such time as Hearst and any permitted transferee hold less than 20% of all shares of the Common Stock that are then issued and outstanding. S-3 Debt Offering................. Up to $400,000,000 aggregate principal amount of Senior Notes Due 2007 and Debentures Due 2027. The terms of such Notes and Debentures have not yet been determined, and there can be no assurance that the Debt Offering will be consummated on favorable terms or at all, or that the Debt Offering will not be reduced in size. The sale of the shares of Series A Common Stock offered hereby is not contingent on the completion of the Debt Offering. See "Recent Developments--Concurrent Debt Offering." - -------- (1) Does not include 480,000 shares and 120,000 shares of Series A Common Stock that may be issued by the Company to the U.S. Underwriters and the International Underwriters, respectively, upon the exercise of the Underwriters' over-allotment option. (2) Does not include the Adjustment Shares (as defined herein). See "The Company--The Hearst Transaction." S-4 THE COMPANY General. The Company owns or manages 15 network-affiliated television stations reaching approximately 11.5% of U.S. Television households. The Company is the largest, "pure-play" publicly owned television broadcast group in the U.S., and is the third-largest, non-network owned television group in terms of audience delivered. The Hearst Transaction. The Company was formed in 1994 as a Delaware corporation under the name Argyle Television, Inc. ("Argyle"), and its business operations began in January 1995 with the consummation of its acquisition of three television stations. The Company is the successor to the combined operations of Argyle and the television broadcast group of The Hearst Corporation ("Hearst") pursuant to a merger transaction that was consummated on August 29, 1997 (the "Hearst Transaction"). In that transaction, Hearst contributed its television broadcast group and related broadcast operations (the "Hearst Broadcast Group") to Argyle and merged a wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the surviving corporation (renamed "Hearst-Argyle Television, Inc."). As a result of the Hearst Transaction, Hearst currently owns approximately 38.6 million shares of the Company's Series B Common Stock, comprising approximately 82% of the total outstanding common stock of the Company. In connection with the Hearst Transaction and related transactions, Hearst may receive up to an additional 2.7 million shares of Series B Common Stock (the "Adjustment Shares"), which would result in Hearst's ownership of approximately 83% of the Company's total outstanding Common Stock. Upon consummation of the Common Stock Offering, Hearst will own approximately 76% (and up to approximately 77% after giving effect to the issuance of the Adjustment Shares) of the Company's Common Stock (in each case assuming the Underwriters' over-allotment option is not exercised). Through its ownership of the Company's Series B Common Stock, Hearst has the right to elect nine of the 11 members of the Company's Board of Directors. The Hearst Corporation. Hearst, one of the nation's largest privately-held companies, is a diversified communications company engaged in a broad range of publishing, broadcasting, cable television networks and other communications activities. Hearst publishes 14 monthly consumer magazines that include Cosmopolitan, Harper's Bazaar, Town & Country, Red Book, Good Housekeeping, Country Living, Esquire and Popular Mechanics, among others. Hearst's 12 daily and seven weekly newspapers include The Houston Chronicle, The San Francisco Examiner, The Seattle Post-Intelligencer, The San Antonio Express-News and The Albany Times Union. Hearst was a founding partner in Lifetime, A&E and The History Channel cable networks. Hearst and The Walt Disney Company, through ABC, Inc., wholly own the Lifetime network as equal partners, and are equal partners in the A&E network, in which NBC owns a 25% interest. Hearst also owns 20% of ESPN, which includes ESPN2 and ESPNews. Hearst's book publishing businesses include William Morrow and Avon Books, and its entertainment activities include the production of made-for-television movies and television series, as well as the syndication and licensing of cartoon characters and features. The Stations. The Company owns 12 television stations, eight of which are in the top 50 of the 211 generally recognized geographic designated market areas ("DMAs") according to A.C. Nielsen Co. ("Nielsen"). In addition, the Company manages two television stations and two radio stations that are owned by Hearst: WWWB-TV in Tampa, Florida, WPBF-TV in West Palm Beach, Florida and WBAL(AM) and WIYY(FM) in Baltimore, Maryland. The Company also provides management services to Hearst in order to allow Hearst to fulfill its obligations under a program services and time brokerage agreement between Hearst and the permittee of KCWB-TV in Kansas City, Missouri (the "Missouri LMA"). For the year ended December 31, 1996, on a pro forma basis after giving effect to the consummation of the Hearst Transaction, the Company's total revenues and broadcast cash flow were $370.2 million and $160.0 million, respectively, of which approximately 28% and 26%, respectively, were attributable to WCVB-TV in Boston, Massachusetts, the nation's 6th largest DMA. Under the order of the Federal Communications Commission (the "FCC") approving the Hearst Transaction, because of signal overlaps the Company must divest two of its television stations (WNAC-TV in Providence, Rhode Island, and WDTN-TV in Dayton, Ohio) and file by February 28, 1998 an application with S-5 the FCC for the transfer of ownership of such stations. A letter of intent has been signed for the divestiture of WNAC, and the Company is negotiating with a third party for the divestiture of WDTN. The Company is seeking to complete these divestitures through a tax-deferred exchange of such stations for one or more television stations of a third party, although there can be no assurance that the Company will be able to accomplish such exchange on a fully tax- deferred basis, if at all. The following table sets forth certain information for each of the Company's owned and managed television stations:
PERCENTAGE OF MARKET NETWORK U.S. TELEVISION MARKET RANK(1) STATION AFFILIATION CHANNEL HOUSEHOLDS(2) ------ ------- --------- ----------- ------- --------------- *Boston, MA.............. 6 WCVB ABC 5 2.22% *Tampa, FL(3)............ 15 WWWB WB 32 1.47% *Pittsburgh, PA.......... 19 WTAE ABC 4 1.16% *Baltimore, MD........... 23 WBAL NBC 11 1.01% Cincinnati, OH.......... 30 WLWT NBC 5 0.81% *Kansas City, MO......... 31 KMBC ABC 9 0.81% *Kansas City, MO(3)...... 31 KCWB WB 29 *** *Milwaukee, WI........... 32 WISN ABC 12 0.81% *West Palm Beach, FL(3).. 43 WPBF ABC 25 0.61% Oklahoma City, OK....... 44 KOCO ABC 5 0.61% Providence, RI(4)(5).... 49 WNAC FOX 64 0.57% *Dayton, OH(4)........... 53 WDTN ABC 2 0.52% Honolulu, HI............ 71 KITV ABC 4 0.39% Jackson, MS............. 90 WAPT ABC 16 0.30% Fort Smith/Fayetteville, AR...................... 116 KHBS/KHOG ABC/ABC 40/29 0.22% ----- Total................. 11.51% =====
- -------- * Denotes a station owned or operated by the Company as a consequence of the Hearst Transaction. (1) Market rank is based on the relative size of the DMA among the 211 generally recognized DMAs in the U.S., based on Nielsen estimates for the 1997-98 season. (2) Based on Nielsen estimates for the 1997-98 season. (3) WWWB-TV and WPBF-TV are managed by the Company under a management agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under the Missouri LMA with KCWB. (4) WNAC-TV's (Providence, RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal. Under FCC rules, a single entity cannot own stations with overlapping signals. The Company will divest WNAC and WDTN, and has entered into a letter of intent to divest WNAC. (5) Subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. The Company has an option to acquire WWWB-TV and Hearst's interests and option with respect to KCWB-TV (together with WWWB-TV, the "Option Properties"), as well as a right of first refusal until approximately August 2000 with respect to WPBF-TV (if such station is proposed by Hearst to be sold to a third party). The option period for each Option Property commences in February 1999 and terminates in August 2000 and the purchase price is the fair market value of the station as determined by the parties, or an independent third-party appraisal, subject to certain specified parameters. If Hearst elects to sell an Option Property prior to the commencement of, or during, the option period, the Company will have a right of first refusal to acquire such Option Property. The exercise of the option and the right of first refusal will be by action of the independent directors of the Company, and any option exercise may be withdrawn by the Company after receipt of the third-party appraisal. Business Strategy. The Company's strategic objective is to maintain and build on its position as the largest, "pure-play" publicly owned television broadcast group in the United States. To facilitate this strategy, the Company focuses on the following key areas: S-6 . Size and Market Presence. The Company's newly-expanded station group provides the Company with the critical mass necessary to remain competitive with other station group owners. The Company intends to take advantage of the benefits of scale to obtain attractive programming pricing and terms, strengthen relationships with networks and national advertising sales representatives, attract and retain talent and obtain timely performance and satisfactory service from equipment suppliers. . Growth. As a consequence of the consolidation of ownership occurring in the television broadcast industry, the Company believes continued growth is necessary in order to achieve its strategic objective. The Company intends to generate growth both internally through continuous improvement of existing operations, as well as externally through acquisitions of television station groups and individual stations. The Company intends to finance such acquisitions through a combination of debt and equity in a manner that will permit continued growth in the Company's business and provide flexibility in its capital structure. In combination with such financing, the Company will seek to complete acquisitions at price levels that will increase after-tax cash flow per share. . Geographic and Network Diversity. Ten of the Company's existing stations are affiliated with ABC, two with NBC, two with the WB Network and one with Fox. The stations are located in several distinct regions of the United States, mitigating any potential adverse effect on the Company of any regional economic fluctuations. In pursuing external growth opportunities, the Company intends to focus on network-affiliated television stations in the top 100 markets, with a view to enhancing the geographic and network diversity of its stations. . Strong News and Local Station Identities. The Company positions each of its stations within the station's market to create and enhance a local "brand" with which viewers and advertisers can identify, thereby seeking to build the franchise value of the station and attain the number one or strong number two position in the market in terms of audience delivery, revenue share and profitability. The Company considers strong news and local events programming to be critical in station branding. . Cost Control. The Company closely monitors costs and implements cost controls at each station it operates in a manner consistent with building each station's market position. The Company also intends to capitalize on its newly-expanded station group to generate cost savings through the group acquisition of programming, equipment and services. Principal Offices. The principal executive offices of the Company are located at 888 Seventh Avenue, New York, New York 10106; its telephone number is 212-649-2300. RECENT DEVELOPMENTS Debt Offering. The Company is currently offering to sell up to $400,000,000 aggregate principal amount of Senior Notes Due 2007 and Debentures Due 2027 by a separate prospectus supplement (collectively, the "Senior Notes"). The terms of the Senior Notes have not yet been determined, and there can be no assurance that the Debt Offering will be consummated on favorable terms or at all, or that the Debt Offering will not be reduced in size. The aggregate principal amount of Senior Notes to be offered by the Company also may be reduced to the extent the Company does not refinance the entire amount of the $275 million principal amount of private placement debt that was assumed by the Company as part of the Hearst Transaction (the "Private Placement Debt") and related make-whole premium as described under "Use of Proceeds." The Senior Notes will be redeemable in whole or in part, at the option of the Company at any time at the prices described in the Prospectus Supplement pursuant to which the Senior Notes are being offered. The sale of the shares of Series A Common Stock pursuant to this Prospectus Supplement is not contingent on the completion of the Debt Offering. See "Use of Proceeds." Recent Financial Results. The information set forth below is based on preliminary, unaudited data prepared by the Company and is subject to adjustments and the completion by the Company of its financial S-7 statements with respect to the quarter ended September 30, 1997. There can be no assurance that actual results, when finalized, will not vary from the financial data set forth below. The following financial data gives effect to the Hearst Transaction as if it occurred at the beginning of the periods presented. For the nine months ended September 30, 1997, total revenues on a pro forma basis are estimated to have increased by approximately $7.4 million, or 2.8%, to approximately $274.9 million from $267.5 million for the comparable period ended September 30, 1996. Broadcast cash flow (station operating income, plus depreciation and amortization and write down of intangible assets, plus amortization of program rights, minus program payments) on a pro forma basis for the nine months ended September 30, 1997 is estimated to have increased by approximately $12.4 million, or 11.5%, to approximately $120.2 million from $107.8 million for the comparable period ended September 30, 1996. For the three months ended September 30, 1997, total revenues on a pro forma basis are estimated to have increased by approximately $3.7 million, or 4.3%, to approximately $89.6 million from $85.9 million for the comparable period ended September 30, 1996. Broadcast cash flow on a pro forma basis for the three months ended September 30, 1997 is estimated to have increased by approximately $4.9 million, or 15.2%, to $37.1 million from $32.2 million for the comparable period ended September 30, 1996. The Company is currently reviewing whether or not the Hearst Transaction will result in a one-time restructuring charge to the Company, which could amount to approximately $10.0 million. S-8 RISK FACTORS The shares of Series A Common Stock offered hereby involve a substantial degree of risk. In addition to the other information contained or incorporated by reference in this Prospectus Supplement or the accompanying Prospectus, prospective investors should carefully consider the following risks and investment considerations before purchasing shares of Series A Common Stock. RELIANCE ON ABC TELEVISION NETWORK; BOSTON STATION Nine of the 12 television stations owned by the Company as of the date of this Prospectus are ABC affiliates. On a pro forma basis, these nine stations would have accounted for approximately 73% of the combined revenues and approximately 76% of the broadcast cash flow from the Company's 12 owned stations for the year ended December 31, 1996. The television viewership levels for each of these stations are materially dependent upon network programming. There can be no assurance that such programming will achieve or maintain satisfactory viewership levels in the future. Each of these stations is a party to a network affiliation agreement giving such station the right to rebroadcast programs transmitted by the network. Five of the six television stations contributed to the Company by Hearst are affiliated with the ABC network. The term of each of the Hearst Broadcast Group's affiliation agreements with ABC is two years, renewable for successive two-year periods, and each affiliation agreement is subject to cancellation by either party upon six months notice to the other party, except with respect to WTAE-TV in Pittsburgh, Pennsylvania. In WTAE's case, the affiliation agreement is not subject to cancellation on six months notice, and the term of the affiliation agreement will be successively renewed unless either party gives the other notice of non-renewal six months prior to the end of the then current term. The Company's current affiliation agreements between ABC and KOCO, KITV, WAPT and KHBS expire on January 2, 2000, January 2, 2005, March 6, 2005 and July 1, 1998, respectively. ABC has the right to terminate its affiliation agreement in the event of a material breach of such agreement by a station and in certain other circumstances. In 1994, negotiations commenced to revise Hearst's ABC affiliation agreements to provide, among other things, for 10- year terms and increased compensation. Such agreements are still in the process of negotiation and documentation and have not been finalized, although the Company is receiving its increased compensation. Although the Company expects to continue to be able to renew its network affiliation agreements, no assurance can be given that such renewals will be obtained on as favorable terms or at all. As a result, a material decline in ABC's ratings or the termination or non-renewal of the network affiliation agreements with ABC could have a material adverse effect on the Company. For the year ended December 31, 1996, on a pro forma basis, after giving effect to the Hearst Transaction, approximately 26% and 28% of the Company's broadcast cash flow and total revenues, respectively, were attributable to WCVB-TV in Boston, Massachusetts. A significant decline in net revenues from WCVB-TV, as a result of a ratings decline or otherwise, could have a material adverse effect on the Company's financial position and results of operations. DEPENDENCE ON ADVERTISING; EFFECT OF ECONOMIC CONDITIONS Since the Company is significantly dependent upon sales of advertising for its revenues (on a pro forma basis, giving effect to the Hearst Transaction, approximately 92% of the Company's revenues for each of the year ended December 31, 1996 and the six months ended June 30, 1997), operating results of the Company are and will be affected by the relative popularity of its programming, the activities of competitors, the availability of alternative advertising media and cyclical changes in the national economy, as well as by regional economic conditions in each of the markets in which its stations operate, particularly as such conditions may affect advertising expenditures. In addition, the advertising revenues of the stations generally are highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. Additionally, advertising revenues in even-numbered years benefit from advertising placed by candidates for political offices and demand for S-9 advertising time in Olympic broadcasts. Proposals have been advanced in Congress to require television broadcast stations to provide advertising time to political candidates at no charge, which would eliminate in whole or in part advertising revenues from political candidates. Such political advertising revenues comprised 5.1% of the Company's 1996 pro forma total revenues. CONTROL BY MAJORITY STOCKHOLDER; CONFLICTS OF INTEREST Hearst currently owns in excess of 80% of the outstanding shares of all series of common stock of the Company and, by virtue of its ownership of 100% of the Series B Common Stock, is entitled to elect as a class all but two members of the Board of Directors of the Company. As a result, Hearst is able to control substantially all actions to be taken by the Company's stockholders, and also is able to maintain control over the operations and business of the Company. This control, as well as certain provisions of the Company's Amended and Restated Certificate of Incorporation and Delaware law, may make the Company a less attractive target for a takeover than it otherwise might be, or render more difficult or discourage a merger proposal, tender offer or other transaction involving an actual or potential change of control of the Company. In addition, the interests of Hearst, which owns or has significant investments in other businesses, including cable television networks, newspapers, magazines and electronic media, may from time to time be competitive with, or otherwise diverge from, the interests of the Company, particularly with respect to new business opportunities and future acquisitions. Under the Amended and Restated Merger Agreement dated as of March 26, 1997, among Hearst, Argyle and certain wholly-owned subsidiaries of Hearst (the "Merger Agreement") entered into in connection with the Hearst Transaction, Hearst and the Company have agreed that, without the prior written consent of the other, neither the Company, on the one hand, nor Hearst, on the other hand, will make any acquisition or purchase any assets if such an acquisition or purchase by one party would require the other party to divest or otherwise dispose of any of its assets because of regulatory or other legal prohibitions. As a result, under current law and given the newspaper properties that Hearst currently owns, the Company would be precluded, without Hearst's agreement to sell newspapers in the corresponding markets and from acquiring television broadcast stations in Albany, New York; Flint-Saginaw-Bay City, Michigan; Beaumont, Texas; Houston, Texas; Laredo, Texas; Lubbock, Texas; Midland-Odessa, Texas; San Antonio, Texas; San Francisco, California; Seattle, Washington; and St. Louis, Missouri. A proposal to eliminate the rule banning newspaper-television cross-ownership in the same market has been introduced in Congress. The FCC separately has been asked to consider altering the cross-ownership rule. Whether these proposals will be enacted into law is unknown at this time. Additionally, Hearst is not precluded from purchasing television stations, newspapers or other assets in other markets, the ownership of which assets by Hearst could preclude, under FCC rules, the Company from owning television stations in such markets in the future. Hearst and the Company also have ongoing relationships that may create situations where the interests of the two parties could conflict. Hearst and the Company are parties to a series of agreements with each other, including a Management Agreement (whereby the Company provides certain management services, such as sales, news, programming and financial and accounting management services, with respect to certain Hearst owned or operated television and radio stations); an Option Agreement (whereby Hearst has granted the Company an option to acquire certain Hearst owned or operated television stations, as well as a right of first refusal with respect to another television station if Hearst proposes to sell such station within 36 months of its acquisition); a Studio Lease Agreement (whereby Hearst leases from the Company certain premises for Hearst's radio broadcast stations); a Tax Sharing Agreement (whereby Hearst and the Company have established the sharing of federal, state and local taxes after the Company became part of the consolidated tax return of Hearst); a Name License Agreement (whereby Hearst permits the Company to use the Hearst name in connection with the Hearst- Argyle name and operation of its business); and a Services Agreement (whereby Hearst provides the Company certain administrative services such as accounting, financial, legal, tax, insurance, data processing and employee benefits). The Company believes that the terms of all these agreements are reasonable to both sides; there can be no assurance, however, that more favorable terms would not be available from third parties where applicable. S-10 TELEVISION INDUSTRY COMPETITION AND TECHNOLOGY The television broadcast industry is highly competitive. Some of the stations that compete with the Company's stations are owned and operated by large national or regional companies that have greater resources, including financial resources, than the Company. Technological innovation, and the resulting proliferation of programming alternatives such as cable, direct satellite-to-home services and home video rentals, have fractionalized television viewing audiences and subjected television broadcast stations to new types of competition. Over the past decade, cable television has captured an increasing market share, while the aggregate viewership of the major networks has declined. In addition, the expansion of cable television and other industry changes have increased, and may continue to increase, competitive demand for programming. Such increased demand, together with rising production costs, may in the future increase the Company's programming costs or impair its ability to acquire programming. In addition, new television networks such as United Paramount Network ("UPN") and the WB Network have created additional competition. The FCC has adopted rules for implementing digital (including high-definition) television ("DTV") service in the United States. Implementation of DTV is expected to improve the technical quality of television. Under certain circumstances, however, conversion to DTV operations may reduce a station's geographical coverage area or provide a competitive advantage to one or more competing stations in the market. Implementation of DTV is expected to impose additional costs that are higher than normal on television stations providing the new service, due to increased equipment costs and possible spectrum-related fees. While the Company cannot predict the implementation costs of DTV, these costs are expected to be significant. The Company cannot predict the effect the authorization of DTV service will have on the business of the Company. In addition to competing with other media outlets for audience share, the Company's stations also compete for advertising revenues, their primary source of revenues. The stations compete for such advertising revenues with other television stations in their respective markets, as well as with other advertising media, such as newspapers, radio stations, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail, the Internet and local cable systems. The stations are located in highly competitive markets. Accordingly, the Company's results of operations will be dependent upon the ability of each of its stations to compete successfully for advertising revenues in its market, and there can be no assurance that any one of these stations will be able to maintain or increase its current audience share or revenue share. To the extent that certain of the Company's competitors have, or may in the future obtain, greater resources than the Company, the Company's ability to compete successfully in its broadcasting markets may be impeded. REGULATORY MATTERS FCC Licenses. The television operations of the Company are subject to significant regulation by the FCC under the Communications Act of 1934, as amended (the "Communications Act"), most recently amended further by the Telecommunications Act of 1996 (the "Telecommunications Act"). Approval of the FCC is required for the issuance, renewal and transfer or assignment of television station operating licenses. In particular, the Company is dependent upon its continuing ability to maintain broadcasting licenses from the FCC. License renewals filed after 1996 customarily will be granted for terms of eight years. While broadcast licenses are typically renewed by the FCC, there can be no assurance that the licenses for the Company's stations will be renewed at their expiration dates or, if renewed, that the renewal terms will be for eight-year periods. The non-renewal or revocation of one or more of the FCC licenses held by the Company could have a material adverse effect on the operations of the Company. Common Ownership. The rules of the FCC include restrictions on the common ownership or control of interests in television stations and certain other media interests in the same market, including television and radio broadcast stations, as well as cable television systems and English language daily newspapers. In addition, no person is permitted to hold an attributable interest in television stations collectively reaching more than 35% of all U.S. television households, subject to a 50% discount for UHF television stations. If an acquisition results in an acquiror having holdings that conflict with the common ownership rules, divestiture of one of the common interests is generally required. The FCC, in certain cases, may grant permanent waivers of such common S-11 ownership. The FCC, however, generally only grants temporary waivers of common ownership in order to afford the acquiror a reasonable period of time following the consummation of the acquisition to comply with the applicable law and regulations through disposition of one of the common interests. The Hearst Transaction resulted in the following combinations prohibited by the FCC's "television duopoly rule" (which generally proscribes the common ownership of two or more stations with overlapping signal contours): (i) Argyle's WNAC-TV (Providence, Rhode Island) and Hearst's WCVB-TV (Boston, Massachusetts) and (ii) Argyle's WLWT-TV (Cincinnati, Ohio) and Hearst's WDTN- TV (Dayton, Ohio). On July 15, 1997, the FCC approved the Hearst Transaction and granted a six-month temporary waiver of its television duopoly rule, permitting the Company during the waiver period to own television stations with overlapping signals. Under this waiver, the Company is required to file applications with the FCC for consent to divest WNAC and WDTN by February 28, 1998. A letter of intent has been signed to divest WNAC, and the Company currently is negotiating with a third party to divest WDTN. There can be no assurance that the WNAC divestiture will be completed, or that the current WDTN negotiations will result in an agreement to divest WDTN. If such divestitures do not occur within the near future, subsequently obtaining a buyer for each of the stations to be divested within the six-month waiver period granted by the FCC could result in the receipt of a price that is less than could be obtained for such stations if the Company were not forced to sell the stations within that time frame. Restrictions on Broadcast Advertising. Advertising of cigarettes and certain other tobacco products on broadcast stations has been banned for many years. Various states restrict the advertising of alcoholic beverages. Congress and the FCC are currently examining proposals that, if adopted, would eliminate or severely restrict the advertising of hard liquor, as well as beer and wine. The adoption of such proposals could have an adverse impact on the revenues of the Company. No prediction can be made as to whether any or all of the present proposals will be enacted into law. Proposed Regulations. Among the proposed regulations under consideration by the FCC in determining whether impermissible cross-ownership exists under its television duopoly rule (described above) is a proposal to deem as attributable certain television local marketing agreements ("LMAs") and, if deemed attributable, the extent to which currently effective agreements of this type should be exempted from any new FCC rules. Such attribution under the television duopoly rule, as such rule may be modified, could have a material adverse effect on the Joint Marketing and Programming Agreement between the Company and Clear Channel Communications, Inc. relating to WNAC (Providence, Rhode Island) and the Missouri LMA between Hearst and the licensee of KCWB-TV (Kansas City, Missouri), as well as on the Company's ability to divest WNAC on favorable terms, if at all. If the FCC's ultimate decision were to disfavor the continued validity of such joint operating agreements or LMAs, then these agreements, in the worst case scenario, might be required to be terminated. The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, materially adversely affect the operation and ownership of the Company. The FCC has not yet fully implemented the Telecommunications Act. The Company is unable to predict the outcome of future federal legislation or the impact of any such laws or regulations on the Company's operations. RISKS ASSOCIATED WITH INTEGRATION OF THE COMBINED OPERATIONS As a result of the Hearst Transaction, the Company has experienced significant expansion, including expansion into new markets in which neither Argyle nor the Hearst Broadcast Group had previously operated prior to the Hearst Transaction. As a result, the Company's management will be required to manage a substantially larger number of television stations than historically has been the case. There can be no assurance that the Company will be able to implement effectively the organizational and operational systems necessary for optimal management and integration of its newly expanded group of television stations or any television stations to be acquired in the future, or that the Company will be able to manage its growth successfully. In addition, the management of the Company is evaluating, and will continue to evaluate, the nature and scope of its operations and various short-term and long-term strategic considerations, and will assess to what extent integration, S-12 consolidation or other modification of the two separate businesses is appropriate following the Hearst Transaction. Many operational and strategic decisions with respect to the Company have not yet been made. Significant uncertainties and risks relating to the integration of the combined operations may exist and, therefore, it is difficult to predict or quantify the impact of such decisions on the results of operations and financial condition of the Company. RISKS ASSOCIATED WITH POSSIBLE EXPANSION As part of its business strategy, the Company intends to pursue possible further expansion through the acquisition of additional television stations or television station groups, and intends to continue to evaluate acquisition opportunities. Such acquisition opportunities, however, may become more limited as a consequence of the consolidation of ownership occurring in the television broadcast industry. The Company competes and will continue to compete for the acquisition of television stations with other prospective purchasers, some of whom have greater financial resources than the Company. In addition, any such acquisitions will be subject to FCC approval and limitations on the number and location of broadcasting properties that any one person or entity may own, and FCC rules restricting the ownership of television stations and newspapers in the same market. As a result of these and other factors, there can be no assurance that future acquisitions will be available on attractive terms, if at all. While management expects to realize certain operating synergies and cost savings as a result of any future acquisition, there can be no assurance that such synergies and savings will be achieved, that the integration of the Company and new stations can be accomplished successfully or on a timely basis or that the Company's business strategy can be implemented. As a result, any future acquisition may have an adverse effect on the Company's financial position and results of operations. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Common Stock Offering (assuming the Underwriter's over-allotment option is not exercised), the Company will have outstanding 12,291,204 shares of Series A Common Stock and 38,611,002 shares of Series B Common Stock (excluding any Adjustment Shares). The Company also has shares of Series A Preferred Stock and Series B Preferred Stock outstanding. The Series A Preferred Stock is convertible at any time, into an aggregate of 312,514 shares of Series A Common Stock. The Series B Preferred Stock is convertible at any time after June 11, 2001 into shares of Series A Common Stock at a conversion rate equal to the then current market price of the Series A Common Stock. In addition, the Company has outstanding options to purchase 1,794,125 shares of Series A Common Stock, of which options are currently exercisable for 216,125 shares. All of the shares of Series A Common Stock (including the shares offered hereby) generally will be freely tradeable without restriction or further registration under the Securities Act, except that any shares held by persons who are "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act, or who were at the time of the Company's shareholder vote on the Hearst Transaction "affiliates" of the Company pursuant to Rule 145 under the Securities Act, may be generally sold subject to certain restrictions as to timing, manner and volume. In this regard, the Company has in effect a registration statement covering the resale from time to time of 4,599,260 shares of Series A Common Stock received in the Hearst Transaction by certain former limited partners of a partnership that prior to the Hearst Transaction owned shares of the Company's common stock in order to permit such persons to sell their shares without regard to the restrictions discussed in the preceding sentence. The holders of approximately 4,443,406 shares covered by such registration statement have additional rights under that certain Registration Rights Agreement dated as of August 29, 1997. The Series B Common Stock held by Hearst and the Series A Common Stock into which the Series B Common Stock is convertible may not be sold in the absence of registration under the Securities Act or unless an exemption from registration is available, including the exemption afforded by Rule 144 under the Securities Act. The Company, its directors and executive officers, Hearst and certain holders of the outstanding Series A Common Stock, who will directly or indirectly own 3,610,690 shares of Series A Common Stock and currently S-13 exercisable options to purchase 40,000 shares of Series A Common Stock, and, in the case of Hearst, all of the shares of Series B Common Stock, upon completion of the Common Stock Offering, have, subject to certain exceptions, agreed not to directly or indirectly offer for sale, sell or otherwise dispose of, or announce the offering of, any shares of Series A Common Stock or any securities convertible into or exercisable or exchangeable for Series A Common Stock for a period of 90 days after the date of this Prospectus Supplement without the prior consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Company can make no prediction as to the effect, if any, that sales of shares of its Series A Common Stock, or the availability of shares for future sale, will have on the market price of the Series A Common Stock prevailing from time to time. Sales of substantial amounts of Series A Common Stock (including shares owned upon the exercise of options) in the public market, or the perception that such sales could occur, could depress the prevailing market price for the Series A Common Stock. Such sales may also make it more difficult for the Company to sell equity securities or equity-related securities in the future at a time and price that it deems appropriate. See "Shares Eligible for Future Sale." LIMITATIONS ON DIVIDENDS The Company does not anticipate that it will pay any dividends on its Series A Common Stock in the foreseeable future. The terms of the Credit Facility and the indenture pursuant to which the Subordinated Notes (as defined herein) were issued limit the ability of the Company to pay dividends on the Series A Common Stock under certain conditions. S-14 USE OF PROCEEDS The net proceeds to the Company from the Common Stock Offering are estimated to be approximately $103 million ($118 million if the Underwriters' over- allotment option is exercised in full), after giving effect to underwriting discounts and commissions and expenses payable by the Company. The Company is conducting the Debt Offering (together with the Common Stock Offering, the "Offerings"), the net proceeds of which are estimated to be approximately $396 million (assuming that $400 million aggregate principal amount of Senior Notes are offered and sold) after giving effect to underwriting discounts and commissions and expenses payable by the Company. The Company expects to utilize the net proceeds from the Offerings to repay outstanding indebtedness as follows:
APPROXIMATE PERCENTAGE OF INDEBTEDNESS DOLLAR AMOUNT NET PROCEEDS ------------ ------------- ------------- Credit Facility............. $329 million(/1/)(/2/)(/3/) 65.9%(/1/)(/2/) Subordinated Notes.......... 170 million(/2/) 34.1%(/2/) ------------ ----- Total..................... $499 million 100.0% ============ =====
- -------- (1) If only the Common Stock Offering is completed, the approximate dollar amount of indebtedness the Company expects to repay under the Credit Facility will be $103 million, or 100% of the net proceeds. (2) All of the net proceeds initially will be used to repay a portion of outstanding indebtedness under the Credit Facility. After such repayment, the Company may make additional borrowings under the Credit Facility to redeem all or a portion of the Subordinated Notes. The amount indicated assumes all of the Subordinated Notes will be repurchased. See "-- Subordinated Notes." Morgan Guaranty Trust Company, an affiliate of J.P. Morgan Securities Inc., is an agent and a lender under the Company's Credit Facility and is expected to receive approximately $47.6 million of repayment under the Credit Facility from the net proceeds of the Offerings. See "Underwriting." (3) Assumes that the entire $275 million principal amount of private placement debt that was assumed by the Company as part of the Hearst Transaction (the "Private Placement Debt") and related make-whole premium of approximately $16 million will be refinanced using borrowings under the Credit Facility. The Company expects to refinance the Private Placement Debt after the consummation of the Common Stock Offering. If the Company refinances a portion rather than the entire amount of Private Placement Debt, the Company may reduce the size of the Debt Offering (and, consequently the proceeds therefrom) by an amount approximately equal to the Private Placement Debt and related make-whole premium not refinanced. Credit Facility. Upon consummation of the Hearst Transaction, the Company entered into a $1 billion credit facility with the Chase Manhattan Bank, which matures on December 31, 2004 (the "Credit Facility"). At October 15, 1997, outstanding indebtedness under the Credit Facility was approximately $140 million as a result of borrowings made to (i) finance the cash consideration of approximately $100 million payable in connection with the Hearst Transaction: (ii) refinance the Company's previous credit facility of approximately $40 million, net of repayments; and, (iii) pay certain fees and expenses associated with the Hearst Transaction. Such borrowings bear interest at an applicable margin that varies based on the Company's ratio of total debt to operating cash flow, plus, at the Company's option, LIBOR or an alternate base rate (such interest being approximately 6% at October 15, 1997). The Company expects to use the net proceeds from the Offerings to repay a portion of borrowings under the Credit Facility. Subordinated Notes. The Company currently has outstanding $150 million principal amount of senior subordinated notes, which it issued in October 1995 (the "Subordinated Notes"). The Subordinated Notes are due in 2005 and bear interest at 9 3/4% payable semiannually. Under the indenture governing the Subordinated Notes, the consummation of the Hearst Transaction constituted a "change of control" of Argyle, which required the Company to commence an offer to repurchase the Subordinated Notes for cash at 101% of their principal amount plus accrued and unpaid interest to the date of repurchase (the "Change of Control Offer"). The Change of Control Offer expired on October 27, 1997, and none of the Subordinated Notes were tendered into the Change of Control Offer. Within 180 days after the completion of the Change of Control Offer, the Company is permitted under the indenture governing the Subordinated Notes to redeem Subordinated Notes that are not repurchased in the Change of Control Offer. After using the net proceeds from the Offerings initially to repay a portion of outstanding indebtedness under the Credit Facility, the Company may make additional borrowings under the Credit Facility in such requisite amounts to repurchase all or a portion of the Subordinated Notes and to pay any applicable redemption premium and accrued and unpaid interest. S-15 PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Series A Common Stock is quoted on the Nasdaq National Market under the symbol "HATV." Prior to the consummation of the Hearst Transaction, shares of the Series A Common Stock of Argyle were traded on the Nasdaq National Market under the symbol "ARGL." The Company's Series B Common Stock, 100% of which is held by Hearst, is not publicly traded. The table below sets forth, for the calendar quarters indicated, the high and the low sales prices of the Series A Common Stock of Argyle prior to the consummation of the Hearst Transaction on August 29, 1997, and of the Company's Series A Common Stock subsequent to the consummation of the Hearst Transaction, in each case as reported by the Nasdaq National Market:
PRICE RANGE OF COMMON STOCK ------------------- HIGH LOW ------- ------- 1995 Fourth Quarter (beginning October 24, 1995)........... 18 1/4 15 1/2 1996 First Quarter......................................... 23 17 Second Quarter........................................ 27 19 1/2 Third Quarter......................................... 29 1/4 22 Fourth Quarter........................................ 28 3/4 23 3/4 1997 First Quarter......................................... 29 1/8 23 7/8 Second Quarter........................................ 25 1/2 22 1/2 Third Quarter......................................... 30 5/8 24 7/8 Fourth Quarter (through November 5, 1997)............. 32 5/8 26 1/2
On August 9, 1996, the last full trading day prior to the public announcement of Argyle's exploration of strategic alternatives, the closing price of Argyle's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $23.00 per share. On March 26, 1997, the last full trading day prior to the public announcement of the Hearst Transaction, the closing price of Argyle's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $27.50 per share. On August 28, 1997, the last full trading day prior to the consummation of the Hearst Transaction, the closing price of Argyle's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $27.625 per share. On November 5, 1997, the closing price of the Company's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $27.875 per share. The Company has not paid any dividends on its Series A Common Stock since inception and does not expect to pay any dividends on its Series A Common Stock in the immediate future. The Credit Facility and the indenture pursuant to which the Subordinated Notes were issued limit the ability of the Company to pay dividends on the Series A Common Stock under certain conditions. S-16 CAPITALIZATION The following table sets forth the capitalization of the Company as of June 30, 1997; (i) on a pro forma basis giving effect to the Hearst Transaction; (ii) on a pro forma basis as adjusted to give effect to the consummation of the Common Stock Offering and the application of the net proceeds therefrom as described under "Use of Proceeds;" and, (iii) on a pro forma basis as adjusted to give effect to the consummation of the Offerings and the application of the net proceeds therefrom as described under "Use of Proceeds." This table should be read in conjunction with and is qualified by reference to the selected historical and pro forma financial data contained in this Prospectus Supplement and the unaudited pro forma combined condensed financial statements and notes thereto included in documents incorporated by reference in the accompanying Prospectus.
JUNE 30, 1997 --------------------------------------------------- PRO FORMA PRO FORMA AS ADJUSTED FOR PRO FORMA AS HEARST COMMON ADJUSTED FOR TRANSACTION (1)(2) STOCK OFFERING (3) OFFERINGS (4) ------------------ ------------------ ------------- (DOLLARS IN THOUSANDS) Long-term debt: Notes.................... $ -- $ -- $400,000 Credit Facility (2)...... 454,000 521,480 125,480 Subordinated Notes....... 150,000 -- -- -------- -------- -------- Total long-term debt... 604,000 521,480 525,480 -------- -------- -------- Shareholders' equity: Preferred Stock, $.01 par value; 1,000,000 shares authorized: Series A preferred stock, 10,938 shares issued and outstanding........... 1 1 1 Series B preferred stock, 10,938 shares issued and outstanding........... 1 1 1 Series A common stock, $.01 par value; 100,000,000 shares authorized; 8,277,054 shares issued and outstanding prior to Common Stock Offering; 12,277,054 shares to be issued and outstanding after Common Stock Offering (5)............ 82 122 122 Series B common stock, $.01 par value; 100,000,000 shares authorized; 39,611,002 shares issued and outstanding (6)......... 396 396 396 Additional paid-in capital................. 183,531 286,011 286,011 Retained earnings (deficit)............... (17,672) (17,672) (17,672) -------- -------- -------- Total shareholders' equity................ 166,339 268,859 268,859 -------- -------- -------- Total capitalization... $770,339 $790,339 $794,339 ======== ======== ========
- -------- (1) The pro forma information gives effect to the Hearst Transaction, does not give effect to the divestiture of WDTN and WNAC and does not give effect to the issuance of 1.7 million of the total 2.7 million Adjustment Shares. For a description of pro forma adjustments, see the Company's unaudited pro forma combined condensed financial statements incorporated by reference in the accompanying Prospectus. (2) Assumes that the entire amount of Private Placement Debt assumed by the Company in the Hearst Transaction and related make-whole premium will have been refinanced from the proceeds of additional borrowings made under the Credit Facility. If the Company instead refinances a portion of the Private Placement Debt, the size of the Debt Offering (and consequently the proceeds therefrom) may be reduced by an amount approximately equal to the Private Placement Debt and related make-whole premium not refinanced. (3) The pro forma, as adjusted for the Common Stock Offering, information gives effect to (i) the Hearst Transaction; (ii) the Common Stock Offering (assuming the Underwriters' over-allotment option is not exercised); and, (iii) the application of the net proceeds from the Common Stock Offering. See "Use of Proceeds." (4) The pro forma, as adjusted for the Offerings, information gives effect to (i) the Hearst Transaction; (ii) the Common Stock Offering; (iii) the Debt Offering; and, (iv) the application of the net proceeds from the Offerings. See "Use of Proceeds." (5) Excludes 1,794,125 shares of Series A Common Stock issuable upon exercise of stock options. Options for 216,125 shares of Series A Common Stock are currently exercisable. (6) Includes 1.0 million shares of the total 2.7 million Adjustment Shares to be issued to Hearst in connection with the working capital adjustment and pension-related matters associated with the Hearst Transaction. S-17 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA The selected unaudited pro forma financial data for the year ended December 31, 1996 have been derived from the unaudited pro forma combined condensed financial statements of Argyle and the audited historical financial statements of the assets and properties of Hearst's six network-affiliated television broadcast stations and Hearst Broadcast Productions contributed by Hearst to Argyle prior to consummation of the Hearst Transaction (the "Hearst Broadcast Group"), in each case included in documents incorporated by reference in the accompanying Prospectus. The selected unaudited pro forma financial data for the six months ended June 30, 1996 and 1997 have been derived from the unaudited pro forma combined condensed financial statements of Argyle and the unaudited historical financial statements of the Hearst Broadcast Group, in each case included in documents incorporated by reference in the accompanying Prospectus. The following data should be read in conjunction with the Company's consolidated financial statements and related notes thereto included in Argyle's Annual Report on Form 10-K for the year ended December 31, 1996, Argyle's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, and June 30, 1997, Argyle's Current Report on Form 8-K dated January 31, 1997, filed on February 14, 1997, as amended by Current Report on Form 8-K/A dated January 31, 1997, filed on April 15, 1997, Argyle's Proxy Statement/Prospectus filed on July 31, 1997, the Company's Form 8-K/A filed on September 4, 1997, the Company's Current Report on Form 8-K dated August 29, 1997, filed on September 15, 1997, as amended by Current Report on Form 8-K/A dated August 29, 1997, filed on September 26, 1997 and, the Company's Current Report on Form 8-K dated August 29, 1997, filed on October 16, 1997, each of which is incorporated by reference in the accompanying Prospectus. S-18 HEARST-ARGYLE TELEVISION, INC. SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
HEARST-ARGYLE PRO FORMA(A) -------------------------------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, ------------ ------------------- 1996(A) 1996(A) 1997(A) ------------ -------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Total revenues.............................. $370,249 $181,571 $ 185,332 Station operating expenses.................. 161,103 79,990 80,947 Amortization of program rights.............. 45,522 23,765 21,187 Depreciation and amortization............... 31,848 16,119 15,725 -------- -------- --------- Station operating income.................... 131,776 61,697 67,473 Corporate expenses.......................... 11,000 5,500 5,500 -------- -------- --------- Operating income............................ 120,776 56,197 61,973 Interest expense, net....................... 44,650 22,325 22,325 -------- -------- --------- Income from continuing operations before income taxes............................... 76,126 33,872 39,648 Income taxes................................ 33,027 14,799 17,162 -------- -------- --------- Income from continuing operations........... 43,099 19,073 22,486 Less preferred stock dividends.............. (1,422) (712) (712) -------- -------- --------- Earnings applicable to common stock......... $ 41,677 $ 18,361 $ 21,774 ======== ======== ========= Earnings per common share................... $ 0.87 $ 0.38 $ 0.45 ======== ======== ========= Number of shares used in per share calculation(b)............................. 47,888 47,888 47,888 OTHER DATA: Broadcast cash flow, as defined(c).......... $159,952 $ 75,576 $ 83,062 Broadcast cash flow margin(d)............... 43.2% 41.6% 44.8% Operating cash flow, as defined(e).......... $148,952 $ 70,076 $ 77,562 Operating cash flow margin(f)............... 40.2% 38.6% 41.8% After tax cash flow (g)..................... $ 74,947 $ 35,192 $ 38,211 Program payments(h)......................... 49,194 26,005 21,323 PRO FORMA AS OF JUNE 30, BALANCE SHEET DATA: 1997 --------- Cash and cash equivalents......................................... $ 7,210 Total assets...................................................... 910,522 Total debt........................................................ 604,000 Stockholders' equity.............................................. 166,339
See notes on the following page. S-19 NOTES TO SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF HEARST-ARGYLE (DOLLARS IN THOUSANDS) (a) Includes the unaudited pro forma combined results of operations of Argyle and the historical results of operations of the Hearst Broadcast Group on a combined pro forma basis as if the Hearst Transaction had occurred at the beginning of the periods presented. The data does not include the required divestiture of WNAC and WDTN. See The Company's unaudited pro forma combined condensed financial statements incorporated by reference in the accompanying Prospectus. (b) Excludes any effect of preferred stock conversion and the effect of any Company options. (c) Broadcast cash flow is defined as station operating income, plus depreciation and amortization and write down of intangible assets, plus amortization of program rights, minus program payments. Pro forma broadcast cash flow would be $162,452 for the year ended December 31, 1996 and $77,076 for the six months ended June 30, 1996 using normalized program payments for each respective period. (See note (h) below.) Broadcast cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. Broadcast cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (d) Broadcast cash flow margin is broadcast cash flow divided by total revenues, expressed as a percentage. (e) Operating cash flow is defined as operating income, plus depreciation and amortization, and amortization of program rights, minus program payments and adjusted for any non-cash compensation expense. Pro forma operating cash flow would be $151,452 for the year ended December 31, 1996 and $71,576 for the six months ended June 30, 1996 using normalized program payments for each respective period. (See note (h) below.) Operating cash flow is presented here not as a measure of operating results, but rather as a measure of debt service ability. Operating cash flow does not purport to represent cash provided by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (f) Operating cash flow margin is operating cash flow divided by total revenues, expressed as a percentage. (g) After tax cash flow is defined as net income plus depreciation and amortization. After tax cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. After tax cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (h) Program payments for the year ended December 31, 1996 and the six months ended June 30, 1996 include $2.5 million and $1.5 million, respectively, of the last year of Hearst Broadcast Group scheduled program payments for a program that was replaced during the end of 1995. Without these amounts, program payments are normalized period to period. S-20 SELECTED FINANCIAL DATA OF ARGYLE The historical financial data for the years ended December 31, 1992, 1993 and 1994 have been derived from the audited combined financial statements consisting of Northstar Television of Grand Rapids Inc., Northstar Television of Jackson, Inc. and Northstar Television of Providence, Inc., collectively the "Northstar Stations," the accounting predecessor to Argyle, included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the years ended December 31, 1995 and 1996 have been derived from the audited consolidated financial statements of Argyle included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the six months ended June 30, 1996 and 1997 have been derived from the unaudited condensed consolidated financial statements of Argyle, included in documents incorporated by reference in the accompanying Prospectus. The pro forma consolidated financial data for the year ended December 31, 1996 and for the six months ended June 30, 1996 and 1997 have been prepared as if the acquisition of KHBS and KHOG (the "Arkansas Stations"), which occurred effective June 1, 1996; the Company's Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. relating to WNAC (the "Clear Channel Venture"), which occurred effective July 1, 1996; and the exchange of two television stations owned by the Company with two television stations owned by Gannett, Inc. (the "Gannett Swap"), which occurred effective January 31, 1997, had been completed at the beginning of the periods presented. Such pro forma data is not necessarily indicative of the actual results that would have occurred or of results that may occur. The historical financial data for the six months ended June 30, 1996 and 1997 are unaudited but, in the opinion of the Company's management, have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for those periods. Results for the six month periods ended June 30, 1996 and 1997 are not necessarily indicative of the results for a full year. S-21 SELECTED FINANCIAL DATA OF ARGYLE
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, ---------------------------------------------------------- ------------------------------------ ARGYLE ARGYLE PREDECESSOR HISTORICAL ARGYLE HISTORICAL PRO FORMA ARGYLE HISTORICAL PRO FORMA -------------------------- ------------------- --------- ------------------ ---------------- 1992 1993 1994 1995(A) 1996(B) 1996(C) 1996(B) 1997(D) 1996(C) 1997(C) -------- ------- ------- --------- -------- --------- -------- -------- ------- ------- STATEMENT OF (IN THOUSANDS) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATIONS DATA: Total revenues....... $ 27,103 $28,440 $34,538 $ 46,944 $ 73,294 $ 84,243 $ 34,057 $ 39,765 $41,049 $40,740 Station operating expenses............ 13,209 14,295 16,430 23,603 37,639 41,772 18,372 21,367 22,497 21,641 Write-down of intangible assets .. 25,500 -- -- -- -- -- -- -- -- -- Amortization of program rights...... 4,670 3,876 3,600 3,961 4,725 5,225 2,571 2,119 2,289 2,135 Depreciation and amortization........ 3,511 2,884 3,126 12,294 23,965 26,075 10,724 12,760 12,378 12,898 -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Station operating income (loss)....... (19,787) 7,385 11,382 7,086 6,965 11,171 2,390 3,519 3,885 4,066 Corporate expenses... 786 1,174 1,103 2,324 4,285 4,285 1,867 1,904 1,867 1,904 Non-cash compensation expense............. -- -- -- 675 675 675 337 503 337 504 -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Operating income (loss).............. (20,573) 6,211 10,279 4,087 2,005 6,211 186 1,112 1,681 1,658 Interest expense, net................. 7,849 5,885 4,745 12,052 16,566 18,119 7,304 9,407 8,376 9,407 -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Income (loss) from continuing operations before income taxes........ (28,422) 326 5,534 (7,965) (14,561) (11,908) (7,118) (8,295) (6,695) (7,749) Income taxes......... -- 301 170 -- -- -- -- -- -- -- -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Income (loss) from continuing operations.......... (28,422) 25 5,364 (7,965) (14,561) (11,908) (7,118) (8,295) (6,695) (7,749) Cumulative effect of a change in accounting principle (e)................. -- (213) -- -- -- -- -- -- -- -- Extraordinary item(f)............. -- -- (774) (7,842) -- -- -- -- -- -- -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Net income (loss) ... $(28,422) $ (188) $ 4,590 (15,807) (14,561) (11,908) (7,118) (8,295) (6,695) (7,749) ======== ======= ======= Less preferred stock dividends (g)....... -- (829) (1,422) (118) (711) (712) (712) --------- -------- -------- -------- -------- ------- ------- Loss applicable to common stock........ $ (15,807) $(15,390) $(13,330) $ (7,236) $ (9,006) $(7,407) $(8,461) ========= ======== ======== ======== ======== ======= ======= Loss per common share............... $ (1.25) $ (1.37) $ (1.17) $ (0.65) $ (0.79) $ (0.65) $ (0.75) Number of shares used in per share calculation......... 6,388 11,246 11,347 11,144 11,347 11,347 11,347 OTHER DATA: Broadcast cash flow, as defined(h)....... $ 9,577 $ 9,868 $14,223 $ 20,440 $ 31,889 $ 37,800 $ 13,776 $ 16,060 $16,458 $16,884 Broadcast cash flow margin(i)........... 35.3% 34.7% 41.2% 43.5% 43.5% 44.8% 40.4% 40.4% 40.1% 41.4% Operating cash flow, as defined(j)....... $ 8,791 $ 8,694 $13,120 $ 18,116 $ 27,604 $ 33,515 $ 11,909 $ 14,156 $14,591 $14,980 Operating cash flow margin(k)........... 32.4% 30.6% 38.0% 38.6% 37.7% 39.7% 35.0% 35.6% 35.5% 36.8% Cash flow from (used in) operating activities.......... $ 9,681 $ 9,734 $12,774 $ 6,859 $ 6,943 N/A $ (260) $ 1,601 N/A N/A Cash flow used in investing activities.......... (666) (1,103) (668) (237,501) (28,745) N/A (10,450) (27,179) N/A N/A Cash flow from (used in) financing activities.......... (9,727) (8,734) (10,887) 232,846 20,545 N/A 11,382 26,789 N/A N/A Capital expenditures........ 669 1,136 701 3,767 6,633 3,590 4,091 N/A N/A Program payments .... 4,317 4,277 3,885 2,901 3,766 $ 4,671 1,909 2,338 $ 2,094 $ 2,215 BALANCE SHEET DATA (AT PERIOD END): Cash and cash equivalents......... 196 93 1,313 2,206 949 736 2,878 2,160 N/A N/A Total assets......... 79,079 76,015 78,575 291,141 328,608 356,974 322,886 338,468 N/A N/A Total debt (including current portion).... 66,635 63,235 42,670 150,000 171,500 191,500 161,500 199,000 N/A N/A Stockholders' equity (deficit)(l)........ (3,078) (3,440) 24,513 116,293 129,152 144,082 136,969 120,650 N/A N/A
See notes on the following page. S-22 NOTES TO SELECTED FINANCIAL DATA OF ARGYLE (a) Includes the results of operations of Argyle, the results of operations of the acquired WZZM (Grand Rapids, MI), WAPT (Jackson, MS) and WNAC (Providence, RI) for the full period, the results of operations of the acquired KITV (Honolulu, HI) from June 13, 1995 and the results of operations of the acquired WGRZ (Buffalo, NY) from December 5, 1995. (b) Includes the results of operations of Argyle, the results of operations of the acquired Arkansas Stations from June 1, 1996 and the Clear Channel Venture from July 1, 1996. (c) As to 1996, gives effect to the acquisition of the Arkansas Stations, the Clear Channel Venture and the Gannett Swap as if all such transactions had occurred at the beginning of 1996. As to 1997, gives effect to the Gannett Swap as if such had occurred at the beginning of 1997. The acquisitions have been accounted for using the purchase method of accounting. (d) Includes the results of operations of Argyle and the effect on the Gannett Swap, which occurred effective January 31, 1997. (e) Represents the cumulative effect of the adoption of SFAS No. 109, "Accounting for Income Taxes." (f) Represents the write-offs of unamortized financing costs due to early extinguishment of bank debt. (g) Dividends associated with preferred stock related to the acquisition of the Arkansas Stations. (h) Broadcast cash flow is defined as station operating income (loss), plus depreciation and amortization and write down of intangible assets, plus amortization of program rights, minus program payments. Broadcast cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. Broadcast cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (i) Broadcast cash flow margin is broadcast cash flow divided by total revenues, expressed as a percentage. (j) Operating cash flow is defined as operating income (loss), plus depreciation and amortization, write down of intangible assets and amortization of program rights, minus program payments, plus non-cash compensation expense. Operating cash flow is presented here not as a measure of operating results, but rather as a measure of debt service ability. Operating cash flow does not purport to represent cash provided by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (k) Operating cash flow margin is operating cash flow divided by total revenues, expressed as a percentage. (l) Argyle has not paid any dividends on its common stock since inception. (See note (g) above.) S-23 SELECTED FINANCIAL DATA OF THE HEARST BROADCAST GROUP The historical financial data for the six months ended June 30, 1996 and 1997 and for the years ended December 31, 1992 and 1993 have been derived from the unaudited combined financial statements of the Hearst Broadcast Group, included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the years ended December 31, 1994, 1995 and 1996 have been derived from the audited combined financial statements of the Hearst Broadcast Group, included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the years ended December 31, 1992 and 1993 and for the six months ended June 30, 1996 and 1997 are unaudited but, in the opinion of management of the Hearst Broadcast Group, have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for those periods. Results for the six month periods ended June 30, 1996 and 1997 are not necessarily indicative of the results for a full year.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------ ------------------ 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Total revenues.......... $221,159 $224,067 $259,459 $279,340 $283,971 $139,616 $143,566 Station operating expenses............... 106,430 103,880 106,281 117,535 121,501 58,594 60,596 Amortization of program rights................. 36,768 37,087 40,266 38,619 40,297 21,476 19,052 Depreciation and amortization........... 26,107 26,008 23,071 22,134 16,971 8,584 8,190 -------- -------- -------- -------- -------- -------- -------- Station operating income................. 51,854 57,092 89,841 101,052 105,202 50,962 55,728 Corporate expenses...... 5,657 5,924 8,007 7,857 7,658 3,965 4,467 -------- -------- -------- -------- -------- -------- -------- Operating income........ 46,197 51,168 81,834 93,195 97,544 46,997 51,261 Interest expense, net... 22,510 22,773 22,678 22,218 21,235 12,823 12,485 -------- -------- -------- -------- -------- -------- -------- Income from continuing operations before income taxes........... 23,687 28,395 59,156 70,977 76,309 34,174 38,776 Income taxes............ 10,658 17,123 25,265 30,182 31,907 14,244 16,054 -------- -------- -------- -------- -------- -------- -------- Net income.............. $ 13,029 $ 11,272 $ 33,891 $ 40,795 $ 44,402 $ 19,930 $ 22,722 ======== ======== ======== ======== ======== ======== ======== OTHER DATA: Broadcast cash flow, as defined(a)............. $ 82,077 $ 82,626 $113,999 $123,038 $117,947 $ 57,111 $ 63,862 Broadcast cash flow margin(b).............. 37.1% 36.9% 43.9% 44.0% 41.5% 40.9% 44.5% Operating cash flow, as defined(c)............. $ 77,891 $ 79,147 $108,749 $117,087 $109,457 $ 50,637 $ 56,017 Operating cash flow margin(d).............. 35.2% 35.3% 41.9% 41.9% 38.5% 36.3% 39.0% Cash flows from Operating Activities... N/A N/A $ 44,460 $ 61,185 $ 65,802 $ 29,116 $ 22,122 Cash flows used in Investing Activities... N/A N/A (8,430) (8,621) (7,764) (3,185) (1,683) Cash flows used in Financing Activities... N/A N/A (33,584) (52,020) (58,145) (24,991) (18,271) Capital expenditures.... $ 6,398 $ 4,879 8,430 8,621 7,764 3,185 1,683 Program payments ....... 32,652 37,561 39,179 38,767 44,523 23,911 19,108 BALANCE SHEET DATA: Cash and cash equivalents............ N/A N/A 2,446 2,990 2,882 3,930 5,050 Total assets............ N/A N/A 387,984 385,406 366,956 355,990 349,836 Due to Parent Company and Affiliates......... N/A N/A 283,988 272,762 259,020 267,700 263,471
See notes on the following page. S-24 NOTES TO SELECTED FINANCIAL DATA OF THE HEARST BROADCAST GROUP (a) Broadcast cash flow is defined as station operating income, plus depreciation and amortization, plus amortization of program rights, minus program payments. Broadcast cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. Broadcast cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (b) Broadcast cash flow margin is broadcast cash flow divided by total revenues, expressed as a percentage. (c) Operating cash flow is defined as operating income, plus depreciation and amortization, plus amortization of program rights, minus program payments, and adjusted for non-cash compensation expense. Operating cash flow is presented here not as a measure of operating results, but rather as a measure of debt service ability. Operating cash flow does not purport to represent cash provided by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (d) Operating cash flow margin is operating cash flow divided by total revenues, expressed as a percentage. S-25 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding beneficial ownership of the Company's Series A Common Stock as of November 1, 1997 and as adjusted to reflect the sale of the shares offered hereby (assuming no exercise of the Underwriters' over-allotment option) by (i) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock; (ii) each director and executive officer of the Company; and (iii) all directors and executive officers of the Company as a group. Unless otherwise indicated below, to the knowledge of the Company, all persons listed below have sole voting and investment power with respect to their shares of Common Stock.
SERIES A COMMON STOCK SERIES A COMMON STOCK BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP PRIOR TO OFFERING(1) AFTER OFFERING(1) ------------------------ --------------------- PERCENT OF PERCENT OF NAME (2) NUMBER SERIES NUMBER SERIES - -------- ---------- ---------- ---------- ---------- Bob Marbut(3).................. 955,361 11.5% 955,361 7.8% John Conomikes................. -- -- -- -- David J. Barrett............... -- -- -- -- Anthony J. Vinciquerra......... 11,403 * 11,403 * Dean H. Blythe................. 12,036(4) * 12,036 * Harry T. Hawks(3).............. 104,649 1.3% 104,649 * Ibra Morales(3)................ 198,300 2.4% 198,300 1.6% Frank A. Bennack, Jr........... -- -- -- -- Victor F. Ganzi................ -- -- -- -- George R. Hearst, Jr........... -- -- -- -- William R. Hearst III.......... -- -- -- -- Gilbert C. Maurer.............. -- -- -- -- David Pulver(3)................ 81,656(5) 1.0% 81,656 * Virginia H. Randt.............. -- -- -- -- Caroline L. Williams........... 37,646(5) * 37,646 * All Hearst-Argyle directors and executive officers as a group (15 persons).................. 1,401,051(6) 16.8% 1,401,051 11.4% The Hearst Corporation(7)...... 38,611,002(8) 82.3% 38,611,002 75.9% Chase Manhattan Investment Holdings, L.P.(3)(9).......... 1,157,302 14.0% 1,157,302 9.4% Blake Byrne(3)(10)............. 600,632 7.2% 600,632 4.9%
- -------- * Represents beneficial ownership of less than 1% of the issued and outstanding shares of Series A Common Stock. (1) Number and percent of outstanding Series A Common Stock prior to and after the Common Stock Offering does not include any shares of Series A Common Stock issuable upon the conversion of the Series B Common Stock, Series A Preferred Stock or Series B Preferred Stock into Series A Common Stock or the issuance of any Adjustment Shares. (2) Unless otherwise indicated, the address of each person or entity named in the table is c/o Hearst-Argyle Television, Inc., 888 Seventh Avenue, New York, New York 10106. (3) Indicates that such person or entity is a party to a Registration Rights Agreement with the Company dated as of August 29, 1997. See "Shares Eligible for Future Sale." (4) Includes 10,000 shares of Series A Common Stock issuable pursuant to presently exercisable stock options. (5) Includes 15,000 shares of Series A Common Stock issuable pursuant to presently exercisable stock options. (6) Includes 40,000 shares of Series A Common Stock issuable pursuant to presently exercisable stock options. (7) The Hearst Family Trust is the sole common stockholder of Hearst. The address of The Hearst Family Trust is 888 Seventh Avenue, New York, New York 10106. The address of Hearst is 959 Eighth Avenue, New York, New York 10019. (8) Indicates the number of shares of Series B Common Stock held by Hearst (excluding the Adjustment Shares). The shares of Series B Common Stock are convertible at any time at the option of the holder on a share-for- share basis into shares of Series A Common Stock. (9) Chase Manhattan Bank, an affiliate of Chase Manhattan Investment Holdings, L.P., is the lead bank under the Company's existing Credit Facility and was the lead bank under the Company's prior credit facility. Frank A. Bennack, Jr., a director of the Company, is a director of Chase Manhattan Bank. The address of Chase Manhattan Investment Holdings, L.P. is 380 Madison Avenue, New York, New York 10017. (10) Mr. Byrne is a former director and executive officer of Argyle. His address is 9220 Sunset Boulevard, Suite 210, Los Angeles, California 10017. S-26 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Common Stock Offering (assuming the Underwriters' over-allotment option is not exercised), the Company will have outstanding 12,291,204 shares of Series A Common Stock and 38,611,002 shares of Series B Common Stock (excluding any Adjustment Shares). The Company also has shares of Series A Preferred Stock and Series B Preferred Stock outstanding. The Series A Preferred Stock is convertible at any time into an aggregate of 312,514 shares of Series A Common Stock. The Series B Preferred Stock is convertible at any time after June 11, 2001 into shares of Series A Common Stock at a conversion rate equal to the then current market price of the Series A Common Stock. In addition, the Company has outstanding options to purchase 1,794,125 shares of Series A Common Stock, of which options are currently exercisable for 216,125 shares. All of the shares of Series A Common Stock (including the shares offered hereby) generally will be freely tradeable without restriction or further registration under the Securities Act, except that the sale of any shares held by persons who are "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act, or who were at the time of the Company's shareholder vote on the Hearst Transaction "affiliates" of the Company pursuant to Rule 145 under the Securities Act, may be generally sold subject to certain restrictions as to timing, manner and volume. In this regard, the Company has in effect a registration statement covering the resale from time to time of 4,599,260 shares of Series A Common Stock received in the Hearst Transaction by certain former limited partners of a partnership that prior to the Hearst Transaction owned shares of the Company's common stock in order to permit such persons to sell their shares without regard to the restrictions discussed in the preceding sentence. The holders of approximately 4,443,406 shares covered by such registration statement have additional rights under that certain Registration Rights Agreement with the Company dated as of August 29, 1997. Pursuant to the Registration Rights Agreement such holders of the Company's Series A Common Stock (the "Holders") have the right, subject to certain limitations and conditions, to require the Company to register for distribution through a firm commitment underwriting all or any portion of the Company's Series A Common Stock issued to such Holders in the Hearst Transaction. Such Holders also have piggyback registration rights pursuant to the Registration Rights Agreement with respect to any proposed offering of the Company's Series A Common Stock for cash through a firm commitment underwriting sought by the Company. The Series B Common Stock held by Hearst and the Series A Common Stock into which the Series B Common Stock is convertible may not be sold without registration under the Securities Act or unless an exemption from registration is available, including the exemption afforded by Rule 144 under the Securities Act. In general, under Rule 144 under the Securities Act as currently in effect a person (or persons whose shares are aggregated) who has beneficially owned restricted securities within the meaning of Rule 144 ("Restricted Securities") for at least one year, and including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then- outstanding shares of Series A Common Stock or the average weekly trading volume of the Series A Common Stock on the Nasdaq National Market during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. Any person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of the Company at any time during the three months preceding a sale, and who has beneficially owned shares for at least two years (including any period of ownership of preceding non-affiliated holders), would be entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements. An "affiliate" is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or under common control with, such issuer. Rule 144A under the Securities Act as currently in effect generally permits unlimited resales of certain Restricted Securities of any issuer provided that the purchaser is a qualified institution that owns and invests on a discretionary basis at least $100 million in securities (and, in the case of a bank or savings and loan association has a net worth of at least $25 million) or is a registered broker-dealer that owns and invests on a discretionary basis at least $10 million in securities. Rule 144A allows certain existing shareholders of the Company to sell their shares of Series A Common Stock held prior to this Common Stock Offering to such institutions and registered broker-dealers without regard to any volume or other restrictions. S-27 The Company, its directors and executive officers, Hearst and certain holders of the Series A Common Stock, (collectively, the "Restricted Holders") have agreed not to offer to sell, sell, distribute, grant any option to purchase or otherwise dispose of directly or indirectly, any shares of Series A Common Stock or securities convertible into, or exercisable or exchangeable for, shares of Series A Common Stock owned by them prior to the expiration of 90 days from the date of this Prospectus Supplement, except (i) with the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated; (ii) in the case of the Company, (A) for the issuance of shares of Series B Common Stock, (B) for the issuance of shares of Series A Common Stock in connection with acquisition transactions in which the recipients of such shares are restricted from selling such shares until after expiration of 90 days from the date of this Prospectus Supplement, (C) upon the exercise of outstanding options or the grant of options under the Company's stock option plans or compensation arrangements, and (D) upon the conversion of the Company's Series A Preferred Stock; and, (iii) in the case of the directors and executive officers of the Company, for the exercise by such individuals of outstanding options. The Company can make no prediction as to the effect, if any, that sales of shares of its Series A Common Stock, or the availability of shares for future sale, will have on the market price of the Series A Common Stock prevailing from time to time. Sales of substantial amounts of Series A Common Stock (including shares owned upon the exercise of options) in the public market, or the perception that such sales could occur, could depress the prevailing market price for the Series A Common Stock. Such sales may also make it more difficult for the Company to sell equity securities or equity-related securities in the future at a time and price that it deems appropriate. S-28 UNDERWRITING Subject to the terms and conditions set forth in a purchase agreement (the "U.S. Purchase Agreement") among the Company and each of the underwriters named below (the "U.S. Underwriters), each of the U.S. Underwriters has severally agreed to purchase from the Company the aggregate number of shares of Series A Common Stock set forth opposite its name below (the "U.S. Offering").
NUMBER U.S. UNDERWRITERS OF SHARES ----------------- --------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................ 545,000 Credit Suisse First Boston Corporation........................... 545,000 J.P. Morgan Securities Inc....................................... 545,000 Morgan Stanley & Co. Incorporated................................ 545,000 Bear, Stearns & Co. Inc. ........................................ 60,000 BT Alex. Brown Incorporated...................................... 60,000 Donaldson, Lufkin & Jenrette Securities Corporation.............. 60,000 A.G. Edwards & Sons, Inc. ....................................... 60,000 Furman Selz LLC.................................................. 60,000 Goldman, Sachs & Co. ............................................ 60,000 Lazard Freres & Co. LLC.......................................... 60,000 Lehman Brothers Inc. ............................................ 60,000 NationsBanc Montgomery Securities, Inc. ......................... 60,000 PaineWebber Incorporated......................................... 60,000 Prudential Securities Incorporated............................... 60,000 Salomon Brothers Inc ............................................ 60,000 Schroder & Co. Inc. ............................................. 60,000 Smith Barney Inc. ............................................... 60,000 Southwest Securities, Inc. ...................................... 60,000 Wasserstein Perella Securities, Inc. ............................ 60,000 Arneson, Kercheville, Ehrenberg & Associates, Inc. .............. 30,000 Gabelli & Company, Inc. ......................................... 30,000 --------- Total....................................................... 3,200,000 =========
The Company has also entered into a purchase agreement (the "International Purchase Agreement") with Merrill Lynch International, Credit Suisse First Boston (Europe) Limited, J.P. Morgan Securities Ltd. and Morgan Stanley & Co. International Limited outside the United States (the "International Underwriters"), providing for the concurrent offer and sale of 800,000 shares of Series A Common Stock outside of the United States and Canada. The closings with respect to the U.S. Offering and the International Offering are conditioned upon one another. The U.S. Purchase Agreement provides that the obligation of the U.S. Underwriters to pay for and accept delivery of the shares is subject to the approval of certain legal matters by their counsel and to certain other conditions. The U.S. Underwriters are obligated to take and pay for all of the shares if any are purchased. The U.S. Underwriters have advised the Company that the U.S. Underwriters propose to offer the shares of Series A Common Stock offered hereby to the public initially at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not to exceed $.71 per share below the public offering price. The U.S. Underwriters may allow, and such dealers may reallow, a discount not in excess of $.10 per share below the public offering price on sales to certain dealers. After the initial offering, the offering price and other selling terms may from time to time be varied by the U.S. Underwriters. The public offering concession and discount per share of Series A Common Stock are identical under the U.S. Purchase Agreement and the International Purchase Agreement. S-29 The U.S. Underwriters and the International Underwriters have entered into an Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for the coordination of their activities. Pursuant to the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom they sell shares of Series A Common Stock will not offer to sell or sell shares of Series A Common Stock to non-United States or non-Canadian persons or to persons they believe intend to resell to non-United States or non-Canadian persons, and the International Underwriters and any dealer to whom they sell shares of Series A Common Stock will not offer to sell or sell shares of Series A Common Stock to United States or Canadian persons, except, in each case, for transactions pursuant to the Intersyndicate Agreement. The Intersyndicate Agreement also provides, among other things, that sales may be made between the International Underwriters and the U.S. Underwriters of such number of shares of Series A Common Stock as may be mutually agreed. The price of any shares of Series A Common Stock so sold shall be the public offering price, less an amount not greater than the selling concession. The Company has granted to the U.S. Underwriters an option to purchase up to an aggregate of 480,000 additional shares of Series A Common Stock, to cover over-allotments, if any, at the public offering price set forth on the cover page of this Prospectus Supplement less the underwriting discount and commissions. Such option, which will expire 30 days after the date of this Prospectus Supplement, may be exercised solely to cover over-allotments. To the extent such option is exercised, each U.S. Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number of shares set forth opposite each U.S. Underwriter's name in the preceding table bears to the total number of shares of Series A Common Stock offered by the U.S. Underwriters hereby. The Company has granted to the International Underwriters an option to purchase up to an aggregate of 120,000 additional shares of Series A Common Stock, exercisable in whole or in part for 30 days after the date of this Prospectus Supplement, solely to cover over-allotments, if any, on terms similar to those granted to the U.S. Underwriters. All or a portion of an over-allotment option in either of the U.S. Offering or the International Offering may be allocated to cover an over-allotment in the other Offering, in each case in the sole discretion of the U.S. Underwriters and the International Underwriters. At the request of the Company, the U.S. Underwriters have reserved for sale, at the initial public offering price, up to 200,000 of the shares of Series A Common Stock offered hereby to be sold to certain directors, officers, employees and other persons associated with the Company or Hearst. The number of shares of Series A Common Stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares which are not orally confirmed for purchase within one day of the pricing of the Offering will be offered by the U.S. Underwriters to the general public on the same terms as the other shares offered hereby. The Company agreed to indemnify the U.S. Underwriters against certain liabilities, including liabilities under the Securities Act and other applicable securities laws, or to contribute to payments the U.S. Underwriters may be required to make in respect thereof. Under certain circumstances, the Company will reimburse the U.S. Underwriters for certain of their expenses. The Company, its directors and executive officers, Hearst and certain other holders of Series A Common Stock (the "Restricted Holders") have agreed not to offer to sell, sell, distribute, grant any option to purchase or otherwise dispose of directly or indirectly, any shares of Series A Common Stock or securities convertible into, or exercisable or exchangeable for, shares of Series A Common Stock owned by them prior to the expiration of 90 days from the date of this Prospectus Supplement, except (i) with the prior written consent of Merrill Lynch; (ii) in the case of the Company, (A) for the issuance of shares of Series B Common Stock, (B) for the issuance of shares of Series A Common Stock in connection with acquisition transactions in which the recipients of such shares are restricted from selling such shares until after expiration of 90 days from the date of this Prospectus Supplement, (C) upon the exercise of outstanding options or the grant of options under the Company's stock option plans or compensation arrangements and (D) upon the conversion of the Company's Series A Preferred Stock; and, (iii) in the case of the directors and executive officers of the Company, for the exercise by such individuals of outstanding options. S-30 Until the distribution of Series A Common Stock is completed, rules of the Securities and Exchange Commission (the "Commission") may limit the ability of the U.S. Underwriters to bid for and purchase the Series A Common Stock. As an exception to these rules, the U.S. Underwriters are permitted to engage in certain transactions that stabilize the price of the Series A Common Stock. Such transactions consist of bids or purchases for the purposes of pegging, fixing or maintaining the price of the Series A Common Stock. In connection with the U.S. Offering and the International Offering, the U.S. Underwriters and the International Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the shares of Series A Common Stock. Specifically, the U.S. Underwriters and the International Underwriters may over-allot the offering, creating a short position. In addition, the U.S. Underwriters and the International Underwriters may bid for and purchase shares of Series A Common Stock in the open market to cover short sales or to stabilize the price of the shares of Series A Common Stock. Finally, the underwriting syndicate may reclaim selling concessions allowed for distributing the shares of Series A Common Stock in the U.S. Offering and the International Offering if the syndicate repurchases previously distributed shares of Series A Common Stock in syndicate covering transactions, stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the shares of Series A Common Stock above independent market levels. The U.S. Underwriters and the International Underwriters are not required to engage in these activities and may end any of these activities at any time. The U.S. Underwriters and the International Underwriters may engage in passive market making transactions in the Series A Common Stock in accordance with Rule 103 of Regulation M promulgated by the Commission. In general, a passive market maker may not bid or purchase the Series A Common Stock at a price that exceeds the highest independent bid. In addition, the net daily purchases made by any passive market maker generally may not exceed 30% of its average daily trading volume in the Series A Common Stock during a specified two month prior period, or 200 shares, whichever is greater. A passive market maker must identify passive market making bids on the Nasdaq electronic inter- dealer reporting system. Passive market making may stabilize or maintain the market price of the Series A Common Stock above independent market levels. Underwriters and selling group members are not required to engage in passive market making and may end passive market making activities at any time. From time to time certain of the Underwriters or their affiliates engage in transactions, including commercial banking and investment banking transactions, with and perform services for the Company and its affiliates in the ordinary course of business, from which they have received and will continue to receive customary fees. In addition, in the ordinary course of business the Underwriters may actively trade securities of the Company for such Underwriter's own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. For its advisory services to the Company in connection with the Hearst Transaction, the Company paid Merrill Lynch a fee of $2.1 million, reimbursed Merrill Lynch for its out-of-pocket expenses and agreed to indemnify Merrill Lynch and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. For its advisory services to Argyle Television Investors, L.P., the Company's largest stockholder prior to the Hearst Transaction, the Company paid Credit Suisse First Boston Corporation a fee of $800,000, reimbursed Credit Suisse First Boston Corporation for its out-of-pocket expenses and agreed to indemnify Credit Suisse First Boston Corporation and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. For its advisory services to Hearst in connection with the Hearst Transaction, Hearst paid J.P. Morgan Securities Inc. a fee of $1.5 million, reimbursed J.P. Morgan Securities Inc. for its out-of-pocket expenses and agreed to indemnify J.P. Morgan Securities Inc. and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. The Company reimbursed Hearst for amounts paid to J.P. Morgan Securities Inc. Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities Inc., acts as the documentation agent and a lender under the Company's Credit Facility, for which it has received and will continue to receive customary fees. It is expected that Morgan Guaranty Trust Company will receive approximately $47.6 million of repayment under the Credit Facility from the net proceeds of the Offerings. Under S-31 the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"), special considerations apply to a public offering of securities where more than 10% of the net proceeds thereof will be paid to a participating underwriter or any of its affiliates. Therefore, this offering is being conducted pursuant to Rule 2710 (c)(8) of the NASD Conduct Rules which establishes certain procedural safeguards in connection with offerings in such circumstances in which NASD member firms intend to participate and where more than 10% of the offering proceeds are to be paid to them or their affiliates. See "Use of Proceeds." Merchant GP, Inc., Credit Suisse First Boston Fund Investments 1995, L.P. and Credit Suisse First Boston Fund Investments 1994, L.P., each an affiliate of Credit Suisse First Boston Corporation (collectively, the "CSFB Funds"), beneficially own 4.2% of the Company's Series A Common Stock and are parties to a Registration Rights Agreement with the Company and certain other holders of the Company's Series A Common Stock providing the CSFB Funds and such other holders with piggyback registration rights with respect to any proposed offering of the Company's Series A Common Stock for cash through a firm commitment underwriting sought by the Company, and, subject to certain limitations and conditions, with the right to require the Company to register for distribution through a firm commitment underwriting of all or any portion of the Company's Series A Common Stock issued to them in the Hearst Transaction. CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS OF SERIES A COMMON STOCK The following is a general discussion of certain United States federal income and estate and gift tax consequences of the ownership and sale or other disposition of Series A Common Stock by a holder that, for United States federal income tax purposes, is not a "United States person" (a "Non-United States Holder"). For purposes of this discussion, a "United States person" means a citizen or resident (as determined for U.S. federal income tax purposes) of the United States; a corporation, partnership or other entity created or organized in the United States or under the laws of the United States or of any political subdivision thereof; an estate the income of which is includible in gross income for U.S. federal income tax purposes, regardless of its source; or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Resident alien individuals will be subject to United States federal income tax with respect to the Series A Common Stock as if they were United States citizens. THIS DISCUSSION IS BASED ON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AND THE ADMINISTRATIVE INTERPRETATIONS THEREOF AS OF THE DATE HEREOF, ALL OF WHICH MAY BE CHANGED EITHER RETROACTIVELY OR PROSPECTIVELY. THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY, DOES NOT CONSIDER ANY SPECIFIC FACTS OR CIRCUMSTANCES THAT MAY APPLY TO A PARTICULAR NON-UNITED STATES HOLDER AND DOES NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF OWNING AND DISPOSING OF SERIES A COMMON STOCK (INCLUDING THE INVESTOR'S STATUS AS A UNITED STATES PERSON OR NON-UNITED STATES HOLDER), AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. DIVIDENDS Dividends, if any, paid to a Non-United States Holder will generally be subject to the withholding of United States federal income tax at the rate of 30%, unless the dividend is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined herein) within the United States of the Non-United States Holder, in which case the dividend will be subject to S-32 the rules described in the next paragraph. Non-United States Holders should consult any applicable income tax treaties, which may provide for a reduced withholding rate or other rules different from those described above. For purposes of determining whether tax is to be withheld at a 30% rate or a reduced rate as specified by an income tax treaty, current law permits the Company to presume that dividends paid to an address in a foreign country are paid to a resident of such country absent definite knowledge that such presumption was not warranted (the "address rule"). However, on October 6, 1997, the U.S. Treasury Department issued final regulations on withholding of income tax on payments to foreign persons, effective January 1, 1999, which will abolish the address rule. Under these regulations, a Non-United States Holder seeking a reduced rate of withholding under an income tax treaty for dividends paid after December 31, 1998 would be required to provide to the Company a valid Internal Revenue Service Form W-8, certifying that such Non- United States Holder is entitled to benefits under an income tax treaty. The final regulations also provide special rules for determining whether, for purposes of assessing the applicability of an income tax treaty, dividends paid to a Non-United States Holder that is an entity should be treated as being paid to the entity itself or to the persons holding an interest in that entity. A Non-United States Holder who is eligible for a reduced withholding rate may obtain a refund of any excess amounts withheld by filing an appropriate claim for a refund with the Internal Revenue Service (the "Service"). The Company will not withhold federal income tax upon dividends paid to a Non-United States Holder if the Company receives the appropriate form of the Service (currently Form 4224) from that Non-United States Holder, certifying that such income is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder, unless the Company has knowledge to the contrary. Dividends paid to a Non-United States Holder of Series A Common Stock that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder will generally be taxed on a net income basis (that is, after allowance for applicable deductions) at the graduated rates that are applicable to United States persons. In the case of a Non-United States Holder that is a corporation, such income may also be subject to the United States federal branch profits tax (which is generally imposed on a foreign corporation upon the deemed repatriation from the United States of effectively connected earnings and profits) at a 30% rate, unless the rate is reduced or eliminated by an applicable income tax treaty and the Non-United States Holder is a qualified resident of the treaty country. GAIN ON SALE OR OTHER DISPOSITION Subject to special rules applicable to individuals as described below, a Non-United States Holder will generally not be subject to regular United States federal income or withholding tax on gain recognized on a sale or other disposition of Series A Common Stock, unless (i) the gain is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder or of a partnership, trust or estate in which such Non-United States Holder is a partner or beneficiary, or (ii) the Company has been, is or becomes a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code at any time within the shorter of the five-year period preceding such sale or other disposition or such Non-United States Holder's holding period for the Series A Common Stock and certain other conditions are satisfied. The Company believes that it has not been, is not currently and is not likely to become a United States real property holding corporation. Gains realized by a Non-United States Holder of Series A Common Stock that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder will generally be taxed on a net income basis (that is, after allowance for applicable deductions) at the graduated rates that are applicable to United States persons. In the case of a Non-United States Holder that is a corporation, such income may also be subject to the United States federal branch profits tax (which is generally imposed on a foreign corporation upon the deemed repatriation from the United States of effectively connected earnings and profits) at a 30% rate, unless the rate is reduced or eliminated by an applicable income tax treaty and the Non-United States Holder is a qualified resident of the treaty county. S-33 In addition to being subject to the rules described above, an individual Non-United States Holder who holds Series A Common Stock as a capital asset will generally be subject to tax at a 30% rate on any gain recognized on the sale or other disposition of such stock if (i) such gain is not effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is not attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder, and (ii) such individual is present in the United States for 183 days or more in the taxable year of the sale or other disposition and either (A) has a "tax home" in the United States (as specially defined for purposes of the United States federal income tax), or (B) maintains an office or other fixed place of business in the United States and the income from the sale of the stock is attributable to such office or other fixed place of business. Individual Non- United States Holders may also be subject to tax pursuant to provisions of United States federal income tax law applicable to certain United States expatriates (including former long-term residents of the United States). In the past years, legislation has been proposed, but never enacted, that would under certain circumstances have imposed United States federal income tax on gain realized from the sale or other disposition of Series A Common Stock by certain Non-United States Holders who owned at or prior to the time of sale or other disposition 10% or more of the Series A Common Stock. There can be no assurance that similar legislation will not again be proposed and, if proposed, enacted. FEDERAL ESTATE AND GIFT TAXES Series A Common Stock owned or treated as owned by an individual (regardless of whether such an individual is a citizen or a resident of the United States) at the date of death will be included in such individual's estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. A Non-United States Holder will not be subject to United States federal gift tax on a transfer of Series A Common Stock, unless such person is a domiciliary of the United States or such person is an individual subject to provisions of United States federal gift tax law applicable to certain United States expatriates (including former long-term residents of the United States). INFORMATION REPORTING AND BACKUP WITHHOLDING The Company must report annually to the Service and to each Non-United States Holder the amount of dividends paid to, and the tax withheld with respect to, such Non-United States Holder, regardless of whether tax was actually withheld and whether withholding was reduced by an applicable income tax treaty. Pursuant to certain income tax treaties and other agreements, that information may also be made available to the tax authorities of the country in which the Non-United States Holder resides. United States federal backup withholding (which generally is withholding tax imposed at the rate of 31% on certain payments to persons not otherwise exempt who fail to furnish certain identifying information) will generally not apply to (i) dividends paid to a Non-United States Holder that is subject to withholding at the 30% rate (or that is subject to withholding at a reduced rate under an applicable income tax treaty), or (ii) under current law, dividends paid to a Non-United States Holder at an address outside of the United States (unless the payor has knowledge that the payee is a United States person). However, under final U.S. Treasury Department regulations, effective as of January 1, 1999, a Non-United States Holder will generally be subject to United States withholding tax at a 31% rate, unless certain certification procedures (or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures) are satisfied, directly or through a foreign intermediary. The backup withholding and information reporting requirements also apply to the gross proceeds paid to a Non-United States Holder upon the sale or other disposition of Series A Common Stock by or through a United States office of a United States or foreign broker, unless the Non-United States Holder certifies to the broker under penalties of perjury as to, among other things, its name, address and status as a Non-United States Holder by filing the Service's Form W-8 with the broker, or unless the Non-United States Holder otherwise establishes S-34 an exemption. Information reporting requirements (but not backup withholding) will generally apply to a payment of the proceeds of a sale or other disposition of Class A Common Stock effected at a foreign office of (i) a United States broker, (ii) a foreign broker 50% or more of whose gross income for certain periods is effectively connected with the conduct of a trade or business within the United States, (iii) a foreign broker that is a "controlled foreign corporation" for United States federal income tax purposes, or (iv) effective January 1, 1999, a foreign broker that is (A) a foreign partnership, one or more of whose partners are U.S. persons, that in the aggregate hold more than 50% of the income or capital interest in the partnership at any time during its tax year, or (B) a foreign partnership engaged at any time during its tax year in the conduct of a trade or business in the United States, unless the broker has documentary evidence in its records that the Non-United States Holder is a Non-United States Holder (and the broker has no knowledge to the contrary) and certain other conditions are met, or unless the Non-United States Holder otherwise establishes an exemption. Neither backup withholding nor information reporting will generally apply to a payment of the proceeds of a sale or other disposition of Series A Common Stock effected at a foreign office of a foreign broker not subject to the preceding sentence. Any amounts withheld under the backup withholding rules will be refunded or credited against the Non-United States Holder's United States federal income tax liability, provided that the Non-United States Holder files an appropriate claim for a refund with the Service. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This Prospectus Supplement contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under "The Company," "Recent Developments," "Risk Factors," and those preceded by, followed by or that include the words "believes," "expects," "anticipates" or similar expressions. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Prospective purchasers should understand that the following important factors, in addition to those discussed elsewhere in this Prospectus Supplement and the accompanying Prospectus and in the documents that are incorporated by reference, could affect the future results of the Company and could cause those results to differ materially from those expressed in each forward- looking statement: material adverse changes in economic conditions in the markets served by the Company; future regulatory actions and conditions in the television stations' operating areas; the possibility that currently unanticipated difficulties may arise in integrating the operations of the Company's predecessors; and, competition from others in the broadcast television markets served by the businesses. S-35 PROSPECTUS HEARST-ARGYLE TELEVISION, INC. $600,000,000 DEBT SECURITIES --------------- 10,000,000 SHARES SERIES A COMMON STOCK --------------- Hearst-Argyle Television, Inc., a Delaware corporation (the "Company"), may issue, from time to time, together or separately, (i) up to an initial aggregate offering price or purchase price of $600,000,000 (or the equivalent thereof if any of the Debt Securities are denominated in a foreign currency or composite currency such as the European Currency Unit ("ECU")) of its unsecured debt securities ("Debt Securities"), in one or more series, consisting of debentures, notes or other evidences of indebtedness and having such prices and terms as are determined at the time of sale and (ii) shares of Series A Common Stock, par value $.01 per share ("Series A Common Stock"). The Debt Securities and the Series A Common Stock are collectively referred to herein as "Securities." The Securities may be issued as units and in any combination. Specific terms of the Securities ("Offered Securities") in respect of which this Prospectus is being delivered will be set forth in an applicable Prospectus Supplement ("Prospectus Supplement"), together with the terms of the offering of the Offered Securities and the initial price and net proceeds to the Company from the sale thereof. The Prospectus Supplement will set forth with regard to the particular Offered Securities, without limitation, the following: (i) in the case of Debt Securities, the specific designation, aggregate principal amount, purchase price, authorized denomination, maturity, rate or rates of interest (or method of calculation thereof) and dates for payment thereof, dates from which interest shall accrue, any exchangeability, conversion, redemption, prepayment or sinking fund provisions, the currency or currencies or currency unit or currency units in which principal, premium, if any, or interest, if any, is payable, and any listing on a national securities exchange; and (ii) in the case of the Series A Common Stock, the number of shares of Series A Common Stock and the terms of the offering and sale thereof and any listing on a national securities exchange. The Series A Common Stock is quoted on the Nasdaq National Market. The Company contemplates making an application for the quotation of any additional issuances of Series A Common Stock on the Nasdaq National Market or on any other national securities exchange on which the Series A Common Stock may then be listed. --------------- 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. The Securities may be sold by the Company directly to purchasers, through agents designated from time to time, or to or through underwriters or dealers. If underwriters or agents are involved in the offering of Securities, the names of the underwriters or agents will be set forth in the Prospectus Supplement. If an underwriter, agent or dealer is involved in the offering of any Securities, the underwriter's discount, agent's commission or dealer's purchase price will be set forth in, or may be calculated from the information set forth in, the Prospectus Supplement, and the net proceeds to the Company from such offering will be the public offering price of the Securities less such discount, in the case of an offering through an underwriter, or the purchase price of the Securities less such commission, in the case of an offering through an agent, and less, in each case, the other expenses of the Company associated with the issuance and distribution of the Securities. See "Plan of Distribution." --------------- Prior to issuance there will have been no market for the Debt Securities, and there can be no assurance that a secondary market for any such Debt Securities will develop. This Prospectus may not be used to consummate sales of any Offered Securities unless accompanied by a Prospectus Supplement. --------------- The date of this Prospectus is October 17, 1997. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, New York, New York 10048. Copies of such materials can be obtained upon written request from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Series A Common Stock is listed on the Nasdaq National Market. In addition, such materials may also be inspected and copied at the offices of the Nasdaq Stock Market, Inc. Listing Section, 1735 K Street, N.W., Washington, DC 20006, where copies may be obtained at prescribed rates. Copies of reports, proxy statements and other information electronically filed with the Commission by the Company may be inspected by accessing the Commission's World Wide Web site at http://www.sec.gov. The Company has filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. Such additional information may be obtained from the Commission's principal office in Washington, D.C. Statements contained in this Prospectus as to the contents of any contract or other document referred to herein or therein are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or such other document. A copy of the Registration Statement and the exhibits and schedules thereto may be examined without charge at the Commission's principal offices at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and copies of such materials can be obtained from the Public Reference Section of the Commission at prescribed rates. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission (File No. 0-27000) pursuant to the Exchange Act are incorporated herein by reference: (i) Annual Report on Form 10-K for the year ended December 31, 1996; (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; (iv) Current Report on Form 8-K dated January 31, 1997, filed on February 14, 1997, as amended by Current Report on Form 8-K/A dated January 31, 1997, filed on April 15, 1997; (v) Proxy Statement/Prospectus filed on July 31, 1997; (vi) Form 8-A/A filed on September 4, 1997; (vii) Current Report on Form 8-K dated August 29, 1997, filed on September 15, 1997, as amended by Current Report on Form 8-K/A dated August 29, 1997, filed on September 26, 1997; (viii) Current Report on Form 8-K dated August 29, 1997, filed on October 16, 1997; and (ix) all documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents which are incorporated 2 herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to Hearst-Argyle Television, Inc., 888 Seventh Avenue, New York, New York 10106, Attention: Corporate Secretary (tel. (212) 649-2300). Any statement contained in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified shall not be deemed to constitute a part of this Prospectus except as so modified, and any statement so superseded shall not be deemed to constitute part of this Prospectus. This Prospectus may not be used to consummate sales of Offered Securities unless accompanied by a Prospectus Supplement. The delivery of this Prospectus together with a Prospectus Supplement relating to particular Offered Securities in any jurisdiction shall not constitute an offer in the jurisdiction of any other securities covered by this Prospectus. 3 THE COMPANY The Company owns or manages 15 television stations reaching approximately 11.5% of U.S. television households. The Company is the largest "pure-play" publicly owned television broadcast company in the U.S. and is the third- largest, non-network owned television group in terms of audience delivered. Formed as a Delaware corporation in 1994 under the name Argyle Television, Inc. ("Argyle"), the Company is the successor to the combined operations of Argyle and the television broadcast group of The Hearst Corporation ("Hearst") pursuant to a merger transaction that was consummated on August 29, 1997 (the "Hearst Transaction"). In that transaction, Hearst contributed its television broadcast group and related broadcast operations (the "Hearst Broadcast Group") to Argyle and merged a wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the surviving corporation (renamed "Hearst-Argyle Television, Inc."). The Company owns 12 television stations, and manages three additional television stations and two radio stations that are owned or operated by Hearst. The Company has an option to acquire one of the managed television stations and Hearst's interests in another of the managed television stations, and has a right of first refusal with respect to the third managed television station. Under Federal Communications Commission ("FCC") regulations, the Company must divest two of its television stations (WNAC in Providence, Rhode Island; and WDTN-TV in Dayton, Ohio). A letter of intent has been signed for the divestiture of WNAC-TV and the Company is negotiating with a third party for the divestiture of WDTN. The following table sets forth certain information for each of the Company's owned and managed television stations:
PERCENTAGE OF MARKET NETWORK U.S. TELEVISION MARKET RANK(1) STATION AFFILIATION CHANNEL HOUSEHOLDS(2) ------ ------- --------- ----------- ------- --------------- *Boston, MA.............. 6 WCVB ABC 5 2.22% *Tampa, FL(3)............ 15 WWWB WB 32 1.47% *Pittsburgh, PA.......... 19 WTAE ABC 4 1.16% *Baltimore, MD........... 23 WBAL NBC 11 1.01% Cincinnati, OH.......... 30 WLWT NBC 5 0.81% *Kansas City, MO......... 31 KMBC ABC 9 0.81% *Kansas City, MO(3)...... 31 KCWB WB 29 *** *Milwaukee, WI........... 32 WISN ABC 12 0.81% *West Palm Beach, FL(3).. 43 WPBF ABC 25 0.61% Oklahoma City, OK....... 44 KOCO ABC 5 0.61% Providence, RI(4)(5).... 49 WNAC FOX 64 0.57% *Dayton, OH(4)........... 53 WDTN ABC 2 0.52% Honolulu, HI............ 71 KITV ABC 4 0.39% Jackson, MS............. 90 WAPT ABC 16 0.30% Fort Smith/Fayetteville, AR...................... 116 KHBS/KHOG ABC/ABC 40/29 0.22% ----- Total................ 11.51% =====
- -------- * Denotes a station owned or operated by the Company as a consequence of the Hearst Transaction. (1) Market rank is based on the relative size of the Designated Market Area defined by A.C. Nielsen Co. ("Nielsen") as geographic markets for the sale of national "spot" and local advertising time ("DMA") among the 211 generally recognized DMAs in the U.S., based on Nielsen estimates for the 1997-98 season. (2) Based on Nielsen estimates for the 1997-98 season. (3) WWWB-TV and WPBF-TV are managed by the Company under a management agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under a Program Services and Time Brokerage Agreement with KCWB-TV, Inc., the permittee of KCWB. (4) WNAC-TV's (Providence, RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal. Under FCC rules, a single entity cannot own stations with overlapping signals. The Company will divest WNAC and WDTN, and has entered into a letter of intent to divest WNAC. (5) Subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. 4 As a result of the Hearst Transaction, Hearst currently owns approximately 38.6 million shares of the Company's Series B Common Stock, comprising approximately 82% of the total outstanding common stock of the Company. In connection with the Hearst Transaction and related transactions, Hearst may receive up to an additional 2.7 million shares of Series B Common Stock which would result in Hearst's ownership of approximately 83% of the Company's total outstanding common stock. Through its ownership of the Company's Series B Common Stock, Hearst has the right to elect nine of the 11 members of the Company's Board of Directors. The remaining common stock of the Company is in the form of Series A Common Stock, which is quoted on the Nasdaq National Market under the symbol "HATV." The principal executive offices of the Company are located at 888 Seventh Avenue, New York, New York 10106; its telephone number is 212-649-2300. USE OF PROCEEDS Except as may be set forth in an accompanying Prospectus Supplement, the Company expects to add substantially all of the net proceeds from the sale of the Securities to its funds to be used for general corporate purposes, which may include repayment of long-term and short-term debt, capital expenditures, working capital and the financing of acquisitions. Funds not required immediately may be invested in short-term marketable securities. 5 RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges for (i) the Company and its consolidated subsidiaries on a pro forma basis (Hearst-Argyle) giving effect to the consummation of the Hearst Transaction for each of the periods indicated, (ii) the Hearst Broadcast Group (the accounting acquiror in the Hearst Transaction) on a historical basis for each of the periods indicated and (iii) Argyle and its consolidated subsidiaries on a historical basis. The ratios for the Company on a pro forma basis giving effect to the Hearst Transaction for the periods indicated were derived from the unaudited pro forma combined condensed financial statements of the Company. The ratios for the Hearst Broadcast Group were derived from the audited historical combined financial statements of the Hearst Broadcast group for the years ended December 31, 1994, 1995 and 1996, and from the unaudited combined financial statements for the years ended December 31, 1992 and 1993 and the six months ended June 30, 1996 and 1997. The ratios for Argyle on a historical basis for the periods indicated were derived from Argyle's audited and unaudited historical financial statements.
PRO FORMA ----------------------- SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------- The Company Pro Forma Ratio of Earnings to Fixed Charges.............................................. 2.66x 2.73x
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------- ------------ 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- ----- ----- Hearst Broadcast Group Ratio of Earnings to Fixed Charges........ 2.01x 2.21x 3.51x 4.06x 4.43x 3.56x 3.98x
SIX MONTHS YEARS ENDED ENDED DECEMBER 31, JUNE 30, ------------ ------------ 1995(1) 1996 1996 1997 ------- ---- ----- ----- Argyle Ratio of Earnings to Fixed Charges............ (2) (2) (2) (2)
- -------- (1) Argyle was formed in August 1994. (2) Argyle's earnings are inadequate to cover fixed charges by $7,965 and $14,560 for the years ended December 31, 1995 and 1996, respectively and by $7,118 and $8,295 for six months ended June 30, 1996 and 1997, respectively. For purposes of computing the foregoing ratios: (i) Earnings consist of income from continuing operations before income tax expense plus Fixed Charges (excluding capitalized interest); and (ii) Fixed Charges consist of interest, whether expended or capitalized, and the portion of operating rental expenses estimated to represent an interest component. 6 GENERAL DESCRIPTION OF SECURITIES AND RISK FACTORS The Company may offer shares of Series A Common Stock or Debt Securities individually or as units consisting of one or more Securities under this Prospectus. CERTAIN OF THE SECURITIES TO BE OFFERED HEREBY THEMSELVES MAY INVOLVE A SIGNIFICANT DEGREE OF RISK. SUCH RISKS WILL BE SET FORTH IN THE PROSPECTUS SUPPLEMENT RELATING TO SUCH SECURITY, IF APPLICABLE. DESCRIPTION OF DEBT SECURITIES GENERAL The Debt Securities will be issued under an Indenture, as supplemented from time to time in accordance with its terms (the "Indenture"), to be entered into between the Company and a trustee to be appointed (the "Trustee"). The following brief summary of the Indenture and the Debt Securities is subject to the detailed provisions of the Indenture, a copy of which is an exhibit to the Registration Statement. Wherever references are made to particular provisions of the Indenture, such provisions are incorporated by reference as a part of the statements made herein and such statements are qualified in their entirety by such reference. Certain defined terms in the Indenture are capitalized herein. Italicized references appearing in parenthesis are to section numbers of the Indenture. The Indenture does not limit the amount of Debt Securities that may be issued thereunder. It provides that Debt Securities may be issued from time to time in series. The Debt Securities will be unsecured obligations of the Company and will rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. Reference is made to the Prospectus Supplement for a description of the following additional terms of the Debt Securities in respect of which this Prospectus is being delivered: (i) the title of such Debt Securities; (ii) the limit, if any, upon the aggregate principal amount of such Debt Securities; (iii) the dates on which or periods during which such Debt Securities may be issued and the date or dates on which the principal of (and premium, if any, on) such Debt Securities will be payable; (iv) the rate or rates, if any, or the method of determination thereof, at which such Debt Securities will bear interest, if any; the date or dates from which such interest will accrue; the dates on which such interest will be payable; and the regular record dates for the interest payable on such interest payment dates; (v) the obligation, if any, of the Company to redeem, repay or purchase such Debt Securities pursuant to any sinking fund or analogous provisions or at the option of a holder and the periods within which or the dates on which, the prices at which and the terms and conditions upon which such Debt Securities will be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (vi) the periods within which or the dates on which, the prices, if any, at which and the terms and conditions upon which such Debt Securities may be redeemed, in whole or in part, at the option of the Company; (vii) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which such Debt Securities will be issuable; (viii) whether such Debt Securities are to be issued at less than the principal amount thereof and the amount of discount with which such Debt Securities will be issued; (ix) provisions, if any, for the defeasance of such Debt Securities; (x) if other than United States dollars, the currency or composite currency in which such Debt Securities are to be denominated, or in which payment of the principal of (and premium, if any) and interest on such Debt Securities will be made and the circumstances, if any, when such currency of payment may be changed; (xi) if the principal of (and premium, if any) or interest on such Debt Securities are to be payable, at the election of the Company or a holder, in a currency or composite currency other than that in which such Debt Securities are denominated or stated to be payable, the periods within which, and the terms and conditions upon which, such election may be made and the time and the manner of determining the exchange rate between the currency or composite currency in which such Debt Securities are denominated or stated to be payable and the currency in which such Debt Securities are to be paid pursuant to such election; (xii) if the amount of payments of principal of (and premium, if any) or interest on the Debt Securities may be determined with reference to an index including, but not limited to an index based on a currency or currencies other than that in which such Debt 7 Securities are stated to be payable, the manner in which such amounts shall be determined; (xiii) whether such Debt Securities will be issued in the form of one or more Global Securities and, if so, the identity of the depository for such Global Securities; (xiv) any additions to or changes in the Events of Default or covenants relating solely to such Debt Securities or any Events of Default or covenants generally applicable to Debt Securities which are not to apply to the particular series of Debt Securities in respect of which the Prospectus Supplement is being delivered; (xv) if the Company will pay additional amounts on any of the Debt Securities of any series to any Holder who is a United States Alien, in respect of any tax or assessment withheld, under what circumstances and with what procedures the Company will pay such amounts; (xvi) any terms applicable to original issue discount, if any, including the rate or rates at which such original issue discount, if any, shall accrue; (xvii) the exchange or conversion of the Securities of that series, at the option of the Holders thereof, for or into new Securities of a different series or other securities or other property, including shares of capital stock of the Company or any subsidiary of the Company or securities directly or indirectly convertible into or exchangeable for any such shares; and (xviii) any other terms of such Debt Securities not inconsistent with the provisions of the Indenture. (Section 3.1) Unless otherwise indicated in the Prospectus Supplement, the Indenture does not afford the holder of any series of Debt Securities the right to tender such Debt Securities to the Company for repurchase, or provide for any increase in the rate or rates of interest per annum at which such Debt Securities will bear interest, in the event the Company should become involved in a highly leveraged transaction. The Debt Securities may be issued under the Indenture bearing no interest or interest at a rate below the prevailing market rate at the time of issuance, to be offered and sold at a discount below their stated principal amount. Federal income tax consequences and other special considerations applicable to any such discounted Debt Securities or to other Debt Securities offered and sold at par which are treated as having been issued at a discount for federal income tax purposes will be described in the Prospectus Supplement relating thereto. A substantial portion of the assets of the Company is held by subsidiaries. The Company's right and the rights of its creditors, including the holders of Debt Securities, to participate in the assets of any subsidiary upon its liquidation or recapitalization would be subject to the prior claims of such subsidiary's creditors, except to the extent that the Company may itself be a creditor with recognized claims against such subsidiary. There is no restriction in the Indenture against subsidiaries of the Company incurring unsecured indebtedness. Unless otherwise described in the Prospectus Supplement, the Debt Securities will be issued only in registered form without coupons, in denominations of $1,000 and multiples of $1,000, and will be payable only in United States dollars. (Section 3.2) In addition, all or a portion of the Debt Securities of any series may be issued as permanent registered Global Securities which will be exchangeable for definitive Debt Securities only under certain conditions. (Section 2.3) The Prospectus Supplement indicates the denominations to be issued, the procedures for payment of interest and principal thereon, and other matters. No service charge will be made for any registration of transfer or exchange of the Debt Securities, but the Company may, in certain instances, require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 3.5) The Company shall deliver Debt Securities of any series, duly executed by the Company, to the Trustee for authentication, together with an order for the authentication and delivery of such Debt Securities. The Trustee, in accordance with such order, shall authenticate and deliver such Debt Securities. No Debt Securities of any series shall be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless there appears thereon a certificate of authentication substantially in the form provided for in the Indenture and manually executed by the Trustee or an authenticating agent duly appointed by the Trustee. Such certificate shall be conclusive evidence, and the only evidence, that such Debt Securities have been duly authenticated and delivered under, and are entitled to the benefits of, the Indenture. (Section 3.3) GLOBAL SECURITIES The Debt Securities of a particular series may be issued in the form of one or more Global Securities which will be deposited with a depository (the "Depositary"), or its nominee, each of which will be identified in the 8 Prospectus Supplement relating to such series. Unless and until exchanged, in whole or in part, for Debt Securities in definitive registered form, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of such Depositary, by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. (Section 2.3) The specific terms of the depository arrangement with respect to any portion of a particular series of Debt Securities to be represented by a Global Security will be described in the Prospectus Supplement relating to such series. The Company anticipates that the following provisions will apply to all depository arrangements. Upon the issuance of a Global Security, the Depositary therefor or its nominee will credit, on its book entry and registration system, the respective principal amounts of the Debt Securities represented by such Global Security to the accounts of such persons having accounts with such Depositary ("participants") as shall be designated by the underwriters or agents participating in the distribution of such Debt Securities or by the Company if such Debt Securities are offered and sold directly by the Company. Ownership of beneficial interests in a Global Security will be limited to participants or persons that may hold beneficial interests through participants. Ownership of beneficial interests in a Global Security will be shown on, and the transfer of such ownership will be effected only through, records maintained by the Depositary therefor or its nominee (with respect to beneficial interests of participants) or by participants or persons that hold through participants (with respect to interests of persons other than participants). The laws of some states require certain purchasers of securities to take physical delivery thereof in definitive form. Such depository arrangements and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depositary for a Global Security or its nominee is the registered owner thereof, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the Indenture for any other purpose. Principal, premium, if any, and interest payments on a Global Security registered in the name of a Depositary or its nominee will be made to such Depositary or nominee, as the case may be, as the registered owner of such Global Security. None of the Company, the Trustee or any paying agent for Debt Securities of the series represented by such Global Security will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in such Global Security or for maintaining, supervising or reviewing any records relating to such beneficial interests. The Company expects that the Depositary for a Global Security or its nominee, upon receipt of any payment of principal, premium or interest, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of such Depositary or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street name," and will be the responsibility of such participants. If the Depositary for a Global Security representing Debt Securities of a particular series is at any time unwilling or unable to continue as Depositary and a successor Depositary is not appointed by the Company within 90 days, the Company will issue Debt Securities of such series in definitive form in exchange for such Global Security. In addition, the Company may at any time and in its sole discretion determine not to have the Debt Securities of a particular series represented by one or more Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for all of the Global Securities representing Debt Securities of such series. 9 CERTAIN COVENANTS OF THE COMPANY Limitation on Indebtedness Secured by a Mortgage. The Indenture provides that neither the Company nor any Restricted Subsidiary will create, assume, guarantee or suffer to exist any Indebtedness secured by any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance ("Mortgage") on any assets of the Company or a Restricted Subsidiary unless the Company secures or causes such Restricted Subsidiary to secure the Debt Securities equally and ratably with, or prior to, such secured Indebtedness. This restriction will not apply to Indebtedness secured by (i) Mortgages on the property of any corporation which Mortgages existed at the time such corporation became a Restricted Subsidiary; (ii) Mortgages in favor of the Company or a Restricted Subsidiary; (iii) Mortgages on property of the Company or a Restricted Subsidiary in favor of the United States of America or any state or political subdivision thereof, or in favor of any other country or any political subdivision thereof, to secure payment pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or part of the purchase price or the cost of construction or improvement of the property subject to such Mortgages; (iv) Mortgages on any property subsequently acquired by the Company or any Restricted Subsidiary, contemporaneously with such acquisition or within 120 days thereafter, to secure or provide for the payment of any part of the purchase price, construction or improvement of such property, or Mortgages assumed by the Company or any Restricted Subsidiary upon any property subsequently acquired by the Company or any Restricted Subsidiary which were existing at the time of such acquisition, provided that the amount of any Indebtedness secured by any such Mortgage created or assumed does not exceed the cost to the Company or Restricted Subsidiary, as the case may be, of the property covered by such Mortgage; (v) Mortgages on the property of the Company or a Restricted Subsidiary existing at the date of issuance of the first series of Debt Securities under the Indenture; (vi) Mortgages representing the extension, renewal or refunding of any Mortgage referred to in the foregoing clauses (i) through (v), inclusive, or of any Indebtedness secured thereby; and (vii) any other Mortgage, other than Mortgages referred to in the foregoing clauses (i) through (vi), inclusive, so long as the aggregate of all Indebtedness secured by Mortgages pursuant to this clause (vii) and the aggregate Value of the Sale and Lease-Back Transactions in existence at that time (not including those in connection with which the Company has voluntarily retired funded Indebtedness as provided in the Indenture) does not exceed 15% of Consolidated Net Tangible Assets. (Section 10.7) Limitation on Sale and Lease-Back Transactions. The Indenture provides that neither the Company nor any Restricted Subsidiary will enter into any Sale and Lease-Back Transaction with respect to any Principal Property unless either (i) the Company or such Restricted Subsidiary would be entitled, pursuant to the foregoing covenant relating to "Limitation on Indebtedness Secured by a Mortgage," to create, assume, guarantee or suffer Indebtedness in a principal amount equal to or exceeding the Value of such Sale and Lease-Back Transaction secured by a Mortgage on the property to be leased without equally and ratably securing the Debt Securities or (ii) the Company or such Restricted Subsidiary, within four months after the effective date of such transaction, applies an amount equal to the greater of (x) the net proceeds of the sale of the property subject to the Sale and Lease-Back Transaction and (y) the Value of such Sale and Lease-Back Transaction, to the voluntary retirement of the Debt Securities or other unsubordinated funded Indebtedness of the Company or such Restricted Subsidiary. (Section 10.8) Certain Definitions. "Consolidated Net Tangible Assets" is defined in the Indenture to mean total consolidated assets of the Company and its Restricted Subsidiaries, less (i) current liabilities of the Company and its Restricted Subsidiaries, and (ii) the net book amount of all intangible assets of the Company and its Restricted Subsidiaries. (Section 10.7) "Consolidated Subsidiary" is defined in the Indenture to mean a Subsidiary the accounts of which are consolidated with those of the Company for public financial reporting purposes. (Section 1.1) "Designated Subsidiaries" is defined in the Indenture to mean any Subsidiary of the Company (other than a Subsidiary holding any Station Licenses or the operating assets of any Stations) designated by the Company as a "Designated Subsidiary" for purposes of the Indenture, by delivery to the Trustee of a certificate of a senior 10 officer of the Company identifying such Subsidiary, stating that such Subsidiary shall be treated as a "Designated Subsidiary" for all purposes under the Indenture and certifying that, after giving effect to such designation, the Company will be in compliance with the provisions of the Indenture applicable to such Designated Subsidiary, and such designation will not result in an Event of Default under the Indenture; provided that the value of the capital stock, partnership or other ownership interest directly or indirectly held by the Company in all Designated Subsidiaries shall not exceed at any one time an aggregate amount in excess of $250,000,000. Any Subsidiary of a Designated Subsidiary is deemed to be a "Designated Subsidiary". (Section 10.11) "Indebtedness" is defined in the Indenture to mean (i) all items which in accordance with generally accepted accounting principles would be included in determining long-term liabilities representing borrowed money or purchase money obligations as shown on the liability side of a balance sheet (other than liabilities evidenced by obligations under leases and contracts payable for broadcast rights); (ii) to the extent not included in (i) above, indebtedness secured by any Mortgage existing on property owned subject to such Mortgage, whether or not such secured indebtedness has been assumed; and, (iii) to the extent not included in (i) or (ii) above, contingent obligations in respect of, or to purchase or otherwise acquire, any such indebtedness of others described in the foregoing clauses (i) or (ii) above, including guarantees and endorsements (other than for purposes of collection in the ordinary course of business of any such indebtedness). (Section 10.7) "Principal Property" is defined in the Indenture to mean any office building, television station or transmission facility owned by the Company or any Restricted Subsidiary or any other property or right owned by or granted to the Company or any Restricted Subsidiary and used or held for use in the television business conducted by the Company or any Restricted subsidiary, except for any such property or right which, in the opinion of the Board of Directors of the Company as set forth in a Board Resolution adopted in good faith, is not material to the total business conducted by the Company and its Restricted Subsidiaries considered as one enterprise. (Section 1.1) "Restricted Subsidiary" is defined in the Indenture to mean any Subsidiary of the Company other than a Designated Subsidiary. (Section 10.7) "Sale and Lease-Back Transaction" is defined in the Indenture as the leasing by the Company or a Subsidiary for a period of more than three years of any principal property which has been sold or is to be sold or transferred by the Company or any such subsidiary to any party (other than the Company or a Subsidiary). (Section 10.8) "Significant Subsidiary" is defined in the Indenture to mean any Subsidiary (i) which, as of the close of the fiscal year of the Company immediately preceding the date of determination, contributed more than 10% of the consolidated net operating revenues of the Company and its Consolidated Subsidiaries for such year or (ii) the total assets of which as of the close of such immediately preceding fiscal year exceeded 10% of the Consolidated Net Tangible Assets of the Company and its Consolidated Subsidiaries. (Section 5.1) "Stations" is defined in the Indenture to mean the television broadcasting stations from time to time owned by the Company or any of its Restricted Subsidiaries. (Section 10.11) "Station Licenses" is defined in the Indenture to mean all authorization, licenses or permits issued by the FCC and granted or assigned to the Company or any Restricted Subsidiary thereof, or under which the Company or any Restricted Subsidiary thereof has the right to operate any Station, together with any extensions or renewals thereof. (Section 10.11) "Subsidiary" is defined in the Indenture to mean (i) a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries and (ii) any partnership, association, joint venture or other entity in which the Company or one or more Subsidiaries of the Company has more than a 50% equity interest at the time or as to which the Company or one or more of its Subsidiaries has the power to direct or cause the direction 11 of the management and policies of such entity by contract or otherwise. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors or other governing body of such corporation, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. (Section 1.1) "Value" is defined in the Indenture to mean, with respect to any particular Sale and Lease-Back Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale or transfer of the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value in the opinion of the Board of Directors of the Company of such property at the time of the Company's entering into such Sale and Lease-Back Transaction, subject to adjustment at any particular time for the length of the remaining initial lease term. (Section 10.8) CONSOLIDATION, MERGER AND SALE OF ASSETS The Indenture provides that the Company may not consolidate with or merge into any other corporation, or convey, transfer or lease its properties and assets substantially as an entirety to any other party, unless, among other things, (i) the corporation formed by such consolidation or into which the Company is merged or the party which acquires by conveyance or transfer, or which leases the properties and assets of the Company substantially as an entirety, is organized and existing under the laws of the United States, any State thereof or the District of Columbia and expressly assumes the Company's obligations on the Debt Securities and under the Indenture by means of an indenture supplemental to the Indenture and (ii) immediately after giving effect to such transaction no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing. (Section 8.1) EVENTS OF DEFAULT, WAIVER AND NOTICE With respect to the Debt Securities of any series, an Event of Default is defined in the Indenture as being (i) default for 30 days in payment of any interest upon the Debt Securities of such series; (ii) default in payment of the principal of or premium, if any, on the Debt Securities of such series when due either at maturity or upon acceleration, redemption or otherwise; (iii) default by the Company in the performance of any other of the covenants or warranties in the Indenture for the benefit of such series applicable to the Company which shall not have been remedied for a period of 60 days after Notice of Default; (iv) the failure to pay when due any indebtedness for money borrowed (including indebtedness under Debt Securities other than that series) with a principal amount then outstanding in excess of $20,000,000 under any mortgage, indenture or instrument under which any such indebtedness is issued or secured (including the Indenture), or any other default which results in the acceleration of maturity of such indebtedness, unless such indebtedness or acceleration shall have been discharged or annulled within 10 days after due notice by the Trustee or by Holders of at least 10% in principal amount of the Outstanding Debt Securities of that series; (v) certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary; (vi) default in the deposit of any sinking fund payment when and as due by the terms of any Debt Securities of such series; and (vii) any other Event of Default provided in the supplemental indenture under which such series of Debt Securities is issued or in the form of security for such series. (Section 5.1) Within 90 days after the occurrence of any default under the Indenture with respect to Debt Securities of any series, the Trustee is required to notify the Holders of Debt Securities of any default unless, in the case of any default other than a default in the payment of principal of or premium, if any, or interest on any Debt Securities, a trust committee of the Board of Directors or Responsible Officers of the Trustee in good faith considers it in the interest of the Holders of Debt Securities not to do so. (Section 6.2) The Indenture provides that if an Event of Default, other than an Event of Default as described in clauses (iv) or (v) in the above paragraph with respect to Debt Securities of any series shall have occurred and be continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Debt Securities of that series then outstanding may declare the entire principal and accrued interest of all Debt Securities of such series (or, if any of the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Debt Securities as may be specified by the terms thereof) to be due and payable 12 immediately. If an Event of Default described in clauses (iv) or (v) in the above paragraph with respect to any series of Debt Securities Outstanding under the Indenture occurs and is continuing, the principal amount (or, if any of the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Debt Securities as may be specified by the terms thereof) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. Any time after acceleration with respect to the Debt Securities of any series has been made, but before a judgment or decree for the payment of money based on such acceleration has been obtained by the Trustee, the Holders of a majority in principal amount of the Outstanding Debt Securities of that series, may, under certain circumstances, rescind and annul such acceleration. The Holders of a majority in principal amount of the Outstanding Debt Securities of any series may waive any past defaults under the Indenture with respect to the Debt Securities of such series, except defaults in payment of principal of or premium, if any (other than by a declaration of acceleration), or interest on the Debt Securities or provisions of such series that may not be modified or amended without the consent of the Holders of all Outstanding Debt Securities of such series. (Sections 5.2 and 5.13) The Company will be required to furnish to the Trustee annually a statement as to the performance by the Company of its covenants and agreements under the Indenture. (Section 10.9) Subject to certain conditions set forth in the Indenture, the Holders of a majority in principal amount of the then Outstanding Debt Securities of any series with respect to which an Event of Default has occurred shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee under the Indenture in respect of such series. No Holder of any Debt Securities shall have any right to cause the Trustee to institute any proceedings, judicial or otherwise, with respect to the Indenture or any remedy thereunder unless, among other things, the Holder or Holders of Debt Securities shall have offered to the Trustee indemnity satisfactory to it against costs, expenses and liabilities relating to such proceedings. (Sections 5.12 and 5.7) The Indenture provides that, in determining whether the Holders of the requisite aggregate principal amount of the Outstanding Debt Securities have given, made or taken any request, demand, authorization, direction, notice, consent, waiver or other action thereunder as of any date, (a) the principal amount of an Original Issue Discount Security which shall be deemed to be Outstanding shall be the amount of the principal thereof which would be due and payable as of such date upon acceleration of the Maturity thereof to such date, (b) if, as of such date, the principal amount payable at the Stated Maturity of a Debt Security is not determinable, the principal amount of such Debt Security which shall be deemed to be Outstanding shall be the amount as established in or pursuant to a Board Resolution and set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more supplemental indentures, prior to the issuance of such Debt Securities, (c) the principal amount of a Debt Security denominated in one or more foreign currencies or currency units which shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of such date in the manner as described in clause (b) above, of the principal amount of such Debt Security (or, in the case of a Debt Security described in clause (a) or (b) above, of the amount determined as provided in such clause), and (d) Debt Securities owned by the Company or any other obligor upon the Debt Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Debt Securities which the Trustee knows to be so owned shall be so disregarded. Debt Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debt Securities and that the pledgee is not the Company or any other obligor upon the Debt Securities or any Affiliate of the Company or of such other obligor. (Section 1.1) MODIFICATION OF THE INDENTURE The Indenture provides that the Company and the Trustee may, without the consent of the Holders, modify or amend the Indenture in order to (i) evidence the succession of another corporation to the Company and the 13 assumption by any such successor corporation of the covenants of the Company in the Indenture and in the Debt Securities; (ii) add to the covenants, agreements and obligations of the Company for the benefit of the Holders of all or any series of Debt Securities; (iii) add any additional Events of Default to the Indenture; (iv) add to or change any of the provisions of the Indenture necessary to permit the issuance of Debt Securities in bearer form, registrable as to principal, and with or without interest coupons; (v) add to, change or eliminate any of the provisions of the Indenture, in respect of one or more series of Debt Securities, provided that any such addition, change or elimination may not apply to any Debt Security of any series created prior to such addition, change or elimination; (vi) establish the form or terms of Debt Securities of any series as permitted under the Indenture; (vii) evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee with respect to the Debt Securities of one or more series; or, (viii) cure any ambiguity, or correct or supplement any provision of the Indenture which may be inconsistent with any other provision of the Indenture, provided such action does not adversely affect the interest of the Holders of Debt Securities of any series. (Section 9.1) With respect to the Debt Securities of any series, modification or amendment of the Indenture may be made by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Debt Securities of such series, except that no such modification or amendment may, without the consent of the Holders of all then Outstanding Debt Securities of such series (i) change the due date of the principal of, or any installment of principal of or interest on, any Debt Securities of such series; (ii) reduce the principal amount of, or any installment of principal or interest or rate of interest on, or any premium payable on redemption of any Debt Securities of such series; (iii) reduce the principal amount of any Debt Securities of such series payable upon acceleration of the maturity thereof; (iv) change the place or the currency of payment of principal of, or any premium or interest on, any Debt Securities of such series; (v) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Securities of such series on or after the due date thereof (or, in the case of redemption, on or after the redemption date thereof); (vi) reduce the percentage in principal amount of Debt Securities of such series then outstanding, the consent of whose holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults; or, (vii) modify certain provisions of the Indenture regarding the amendment or modification of, or waiver with respect to, any provision of the Indenture or the Debt Securities. (Section 9.2) DISCHARGE OF THE INDENTURE The Indenture, with respect to the Debt Securities of any series (if all series issued under the Indenture are not to be affected), shall upon the written request or order of the Company cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Debt Securities therein expressly provided for), when (i) either (A) all Debt Securities theretofore authenticated and delivered (other than (1) Debt Securities which have been destroyed, lost or stolen and which have been replaced or paid and (2) Debt Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (B) all such Debt Securities not theretofore delivered to the Trustee for cancellation (1) have become due and payable, (2) will become due and payable at their stated maturity within one year or (3) if the Debt Securities of such series are denominated and payable only in United States dollars and such Debt Securities are to be called for redemption within one year, and the Company in the case of (1), (2) or (3) above, has deposited or caused to be deposited with the Trustee an amount in United States dollars sufficient to pay and discharge the entire indebtedness on such Debt Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Debt Securities which have become due and payable) or to the stated maturity or any redemption date, as the case may be; (ii) the Company has paid or caused to be paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for in the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. (Section 4.1) 14 DEFEASANCE AND COVENANT DEFEASANCE Unless otherwise specified in the Prospectus Supplement, the following provisions relating to defeasance and discharge of indebtedness, or relating to defeasance of certain covenants in the Indenture, will apply to the Debt Securities of any series, or to any specified part of a series. (Section 13.1) Defeasance and Discharge. The Indenture provides that the Company will be discharged from all its obligations with respect to such Debt Securities (except for certain obligations to exchange or register the transfer of Debt Securities, to replace stolen, lost or mutilated Debt Securities, to maintain paying agencies and to hold moneys for payment in trust) upon the deposit in trust for the benefit of the Holders of such Debt Securities of money or U.S. Government Obligations, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay any installment of principal of and any premium and interest on and any mandatory sinking fund payments in respect of such Debt Securities on the respective Stated Maturities in accordance with the terms of the Indenture and such Debt Securities. Such defeasance or discharge may occur only if, among other things, the Company has delivered to the Trustee an opinion of counsel to the effect that the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that Holders of such Debt Securities will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (Sections 13.1 and 13.2) Defeasance of Certain Covenants. The Indenture provides that the Company may omit to comply with certain restrictive covenants described under the captions "Certain Covenants of the Company--Limitation on Indebtedness Secured by a Mortgage" and "Certain Covenants of the Company--Limitation on Sale and Leaseback Transactions" above and any that may be described in the Prospectus Supplement, and that such omission will be deemed not to be or result in an Event of Default, in each case with respect to such Debt Securities. In order to do so, the Company will be required to deposit, in trust for the benefit of the Holders of such Debt Securities, money or U.S. Government Obligations, or both, which through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay any installment of the principal of and any premium and interest on and any mandatory sinking fund payments in respect of such Debt Securities on the respective Stated Maturities in accordance with the terms of the Indenture and such Debt Securities. The Company will also be required, among other things, to deliver to the Trustee an opinion of counsel to the effect that Holders of such Debt Securities will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. In the event the Company exercises this option with respect to any Debt Securities and such Debt Securities are declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations so deposited in trust will be sufficient to pay amounts due on such Debt Securities at the time of their respective Stated Maturities but may not be sufficient to pay amounts due on such Debt Securities upon any acceleration resulting from such Event of Default. In such case, the Company will remain liable for such payments. (Sections 13.1 and 13.2) THE DEBT TRUSTEE Prior to the offering of any Debt Securities, a trustee will be appointed by the Company to serve as Trustee under the Indenture. The Trustee may be a depository for funds of and perform other services for and transact other banking business with the Company in the normal course of business. The Trustee may serve as a trustee under other indentures entered into by the Company. Upon the occurrence of an Event of Default under the Indenture or an event which, after notice or lapse of time or both, would become such an Event of Default, or upon the occurrence of a default under any such other indenture, the Trustee may be deemed to have a conflicting interest with respect to the Debt Securities for purposes of the Trust 15 Indenture Act and, unless the Trustee is able to eliminate any such conflicting interest, the Trustee may be required to resign as Trustee under the Indenture. In that event, the Company would be required to appoint a successor Trustee for the Indenture. GOVERNING LAW The Indenture and the Debt Securities will be governed by, and construed in accordance with, the laws of the State of New York. (Section 1.12) 16 DESCRIPTION OF CAPITAL STOCK Set forth below is a description of the capital stock of the Company pursuant to the Company's Amended and Restated Certificate of Incorporation. Common Stock. The Company has 200 million shares of authorized common stock, par value $.01 per share, with 100 million shares designated as Series A Common Stock and 100 million shares designated as Series B Common Stock. Except as otherwise described below, the issued and outstanding shares of Series A Common Stock and Series B Common Stock will vote together as a single class on all matters submitted to a vote of stockholders, with each issued and outstanding share of Series A Common Stock and Series B Common Stock entitling the holder thereof to one vote on all such matters. With respect to any election of directors, (i) the holders of the shares of Series A Common Stock will be entitled to vote separately as a class to elect two members of the Company's Board of Directors (the Series A Directors) and (ii) the holders of the shares of Series B Common Stock will be entitled to vote separately as a class to elect the balance of the Company's Board of Directors (the Series B Directors); provided, however, that the number of Series B Directors shall not constitute less than a majority of the Company's Board of Directors. Any director may resign at any time upon giving written notice to the Company. The directors may only be removed for cause by a vote of the holders of a majority of the Company's Common Stock voting together as a class. Any Series A Director who resigns or is removed may be replaced only by the remaining Series A Director or, if there are no remaining Series A Directors, by a vote of the holders of a majority of the Series A Common Stock voting separately as a class. Similarly, any Series B Director who resigns or is removed may be replaced only by the remaining Series B Directors or, if there are no remaining Series B Directors, by a vote of the holders of a majority of the Series B Common Stock voting separately as a class. If no shares of Series A Common Stock are issued and outstanding at any given time, then the holders of shares of Series B Common Stock will elect all of the Company's directors. Conversely, if no shares of Series B Common Stock are issued and outstanding, then the holders of the shares of Series A Common Stock will elect all of the Company's directors. All of the outstanding shares of Series B Common Stock are required to be held by Hearst or a Permitted Transferee (as defined below). No holder of shares of Series B Common Stock may transfer any such shares to any person other than to (i) Hearst; (ii) any corporation into which Hearst is merged or consolidated or to which all or substantially all of Hearst's assets are transferred; or (iii) any entity controlled by Hearst (each a "Permitted Transferee"). Series B Common Stock, however, may be converted at any time into Series A Common Stock and freely transferred, subject to the terms and conditions of the Company's Amended and Restated Certificate of Incorporation and to applicable securities laws limitations. If at any time the Permitted Transferees first hold in the aggregate less than 20% of all shares of the Company's Common Stock that are then issued and outstanding, then each issued and outstanding share of Series B Common Stock automatically will be converted into one fully-paid and nonassessable share of Series A Common Stock, and the Company will not be authorized to issue any additional shares of Series B Common Stock. Notwithstanding any other provision to the contrary, no holder of Series B Common Stock shall (i) transfer any shares of Series B Common Stock; (ii) convert Series B Common Stock; or (iii) be entitled to receive any cash, stock, other securities or other property with respect to or in exchange for any shares of Series B Common Stock in connection with any merger or consolidation or sale or conveyance of all or substantially all of the property or business of the Company as an entity, unless all necessary approvals of the Federal Communications Commission ("FCC") as required by the Communications Act of 1934, as amended (the "Communications Act"), and the rules and regulations thereunder have been obtained or waived. Preferred Stock. The Company has one million shares of authorized preferred stock, par value $.01 per share. Under the Company's Amended and Restated Certificate of Incorporation, the Company has two issued and outstanding series of preferred stock, Series A Preferred Stock and Series B Preferred Stock (collectively, the "Preferred Stock"). Each series of Preferred Stock has 10,938 shares issued and outstanding. The Preferred Stock has a cash dividend feature whereby each share will accrue $65 per share annually, to be paid quarterly. The Series A Preferred Stock is convertible at the option of the holders, at any time, into Series A Common 17 Stock at a conversion price of (i) on or before December 31, 2000, $35; (ii) during the calendar year December 31, 2001, the product of 1.1 times $35; and (iii) during each calendar year after December 31, 2001, the product of 1.1 times the preceding year's conversion price. The Company has the option to redeem all or a portion of the Series A Preferred Stock at any time after June 11, 2001 at a price equal to $1,000 per share plus any accrued and unpaid dividends. The holders of Series B Preferred Stock have the option to convert such Series B Preferred Stock into shares of Series A Common Stock at any time after June 11, 2001 at the average of the closing prices for the Series A Common Stock for each of the 10 trading days prior to such conversion date. The Company has the option to redeem all or a portion of the Series B Preferred Stock at any time on or after June 11, 2001, at a price equal to $1,000 per share plus any accrued and unpaid dividends. The issued and outstanding shares of Series A Preferred Stock and Series B Preferred Stock are entitled to vote on all matters submitted to a vote of holders of Series A Common Stock, with such shares of Series A Preferred Stock and Series B Preferred Stock voting together as a single class with the shares of Series A Common Stock. Each share of Series A Preferred Stock is entitled to the number of votes (rounded up to the next whole number) equal to the number of shares of Series A Common Stock into which such share is convertible. Each share of Series B Preferred Stock is entitled to (i) 29 votes, if the record date for the stockholder meeting at which such votes are to be cast is before July 11, 2001 or (ii) thereafter, the number of votes (rounded up to the next whole number) equal to the number of shares of Series A Common Stock into which such share is convertible. Except with respect to any proposal to amend the Company's Amended and Restated Certificate of Incorporation that may adversely affect the rights of the respective series of Preferred Stock and except as may be required by Delaware General Corporation Law ("DGCL"), neither the Series A Preferred Stock nor the Series B Preferred Stock is entitled to vote separately as a class. FOREIGN OWNERSHIP Pursuant to the Company's Amended and Restated Certificate of Incorporation and in order to comply with FCC rules and regulations, the Company will not be permitted to issue any shares of capital stock of the Company to (i) a person who is a citizen of a country other than the U.S.; (ii) any entity organized under the laws of a government other than the government of the U.S. or any state, territory or possession of the U.S.; (iii) a government other than the government of the U.S. or any state, territory or possession of the U.S.; (iv) a representative of, or an individual or entity controlled by, any of the foregoing; or (v) any other person or entity whose alien status would be cognizable under the Communications Act (individually, an "Alien;" collectively, "Aliens"), any shares of capital stock of the Company if such issuance would result in the total number of shares of such capital stock held or voted by Aliens exceeding 25% of (x) the capital stock outstanding at any time and from time to time or (y) the total voting power of all shares of such capital stock outstanding and entitled to vote at any time and from time to time. In addition, the Company will not be permitted to transfer on the books of the Company any capital stock to any Alien that would result in the total number of shares of such capital stock held or voted by Aliens exceeding such 25% limits. The Company's Amended and Restated Certificate of Incorporation also provides that no Alien or Aliens, individually or collectively, will be entitled to vote or direct or control the vote of more than 25% of (i) the total number of all shares of capital stock of the Company outstanding at any time and from time to time or (ii) the total voting power of all shares of capital stock of the Company outstanding and entitled to vote at any time and from time to time (or such limits greater or lesser than 25% as may be subsequently imposed by statute or regulation). The Company's Board of Directors will have the right to redeem any shares determined to be owned by an Alien or Aliens, at the fair market value of the shares to be redeemed, if the Board of Directors determines such redemption is necessary to comply with these Alien ownership restrictions of the Communications Act and rules of the FCC. CERTAIN ANTI-TAKEOVER MATTERS General. Certain provisions of the Company's Amended and Restated Certificate of Incorporation and the DGCL may have the effect of impeding the acquisition of control of the Company by means of a tender offer, a 18 proxy fight, open market purchases or otherwise in a transaction not approved by the Company's Board of Directors. The provisions of the Company's Amended and Restated Certificate of Incorporation and the DGCL described below are designed to reduce, or have the effect of reducing, the vulnerability of the Company to an unsolicited proposal for the restructuring or sale of all or substantially all of the assets of the Company or an unsolicited takeover attempt that is unfair to the Company's stockholders. The summary of such provisions set forth below does not purport to be complete and is subject to and qualified in its entirety by reference to the Company's Amended and Restated Certificate of Incorporation, the Company's bylaws and the DGCL. The Company's Board of Directors has no present intention to introduce additional measures that might have an anti-takeover effect. The Company's Board of Directors, however, expressly reserves the right to introduce such measures in the future. Classified Board; Removal of Directors. The Company's Amended and Restated Certificate of Incorporation provides that the Company's Board of Directors shall consist of not less than seven directors, with the exact number of directors to be determined from time to time by the Company's Board of Directors and designated in the bylaws. The Company's bylaws provide that the number of directors will be 11 and thereafter the minimum number of directors will be seven and the maximum number of directors will be 15. The Company's Amended and Restated Certificate of Incorporation further provides that the Company's Board of Directors will be divided into two classes, as long as there are no more than two Series A Directors, and that, after an initial term, each director will be elected for a two-year term. The Company's Amended and Restated Certificate of Incorporation also provides that, in the event there are three or more Series A directors, the Company's Board of Directors will be divided into three classes, and that, after an initial term, each director will be elected for a three-year term. Whether there are two or three classes of directors, the Series A Directors are to be divided among the classes as equally as possible. A classified Board of Directors is intended to assure the continuity and stability of the Company's Board of Directors and the Company's business strategies and policies. The classified board provision could increase the likelihood that, in the event of a takeover of the Company, incumbent directors will retain their positions. In addition, the classified board provision helps ensure that the Company's Board of Directors, if confronted with an unsolicited proposal from a third party that has acquired a block of the voting stock of the Company, will have sufficient time to review the proposal and appropriate alternatives and to seek the best available result for all stockholders. The directors may only be removed for cause by a vote of the holders of a majority of the Company's Common Stock voting together as a class. Business Combinations. The Company, as a Delaware corporation, is subject to Section 203 ("Section 203") of the DGCL. In general, subject to certain exceptions, Section 203 prohibits a Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date that such stockholder became an interested stockholder, unless (i) prior to such date the Board approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding for purposes of determining the number of shares outstanding those shares owned by (x) persons who are directors and also officers and (y) employee stock plans in which employee participants do not have the right to determine confidentially whether or not shares held subject to the plan will be tendered in a tender or exchange offer); or (iii) at or subsequent to such time, the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66% of the outstanding voting stock that is not owned by the interested stockholder. Section 203 defines a "business combination" to include certain mergers, consolidations, asset sales and stock issuances and certain other transactions resulting in a financial benefit to an "interested stockholder." In addition, Section 203 defines an "interested stockholder" to include any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with such an entity or person. 19 Controlling Stockholder. Hearst currently owns 100% of the Company's issued and outstanding Series B Common Stock, initially constituting in excess of 80% of the outstanding shares of the Company's Common Stock. The holders of the shares of Series A Common Stock are entitled to vote to elect two members of the Company's Board of Directors. As the holder of all of the Company's outstanding shares of Series B Common Stock, Hearst is entitled to vote to elect the balance of the members of the Company's Board of Directors (the Series B Directors); provided, however, that the Series B Directors shall not constitute less than a majority of the Company's Board of Directors. Hearst's ownership of the Series B Common Stock may have the effect of impeding the acquisition of control of the Company. REGISTRATION RIGHTS The Company has executed a Registration Rights Agreement for the benefit of certain holders of Series A Common Stock that are former partners of Argyle Television Investors, L.P. (collectively, the "ATI Holders"). The Registration Rights Agreement provides that the ATI Holders will have the right, subject to certain limitations and conditions, to require the Company to register for distribution through a firm commitment underwriting all or any portion of Series A Common Stock issued to them in the Merger. In addition, the ATI Holders also will have piggyback registration rights with respect to any proposed offering of Series A Common Stock for cash through a firm commitment underwriting sought by the Company. LIMITATIONS ON DIRECTOR LIABILITY The Company's Amended and Restated Certificate of Incorporation provides that, to the fullest extent permitted by the DGCL, a director or former director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar of Series A Common Stock is Harris Trust and Savings Bank. 20 PLAN OF DISTRIBUTION The Company may sell the Securities in any one or more of the following three ways: (i) to or through underwriters or dealers; (ii) through agents; or (iii) directly to one or more purchasers. With respect to each series of Securities being offered hereby, the terms of the offering of the Securities of such series, including the name or names of any underwriters, dealers or agents, the purchase price of such Securities and the proceeds to the Company from such sale, any underwriting discounts, selling commissions and other items constituting underwriters', dealers' or agents' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers or agents, and any securities exchanges on which the Securities of such series may be listed, will be set forth in, or may be calculated from the information set forth in, the Prospectus Supplement. Only underwriters so named in the Prospectus Supplement will be deemed to be underwriters in connection with the Securities offered thereby. If underwriters are used to sell any of the Securities, the Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The Securities may be offered to the public either through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all the Securities offered by the Prospectus Supplement if any of such Securities are purchased. In connection with the sale of Securities, underwriters may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Securities for whom they may act as agent. Underwriters may sell Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions (which may be changed from time to time) from the purchasers for whom they may act as agent. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. The Company may grant an option to the underwriters named in the Prospectus Supplement, exercisable during a fixed period after the date of the Prospectus Supplement, to purchase in the aggregate up to a maximum of 1,500,000 additional shares of Series A Common Stock to cover overallotments, if any, at the same price per share as the initial shares to be purchased by the underwriters. The underwriters may purchase such shares only to cover the overallotments made in connection with an offering of Series A Common Stock. Securities may also be sold directly by the Company or through agents (which may also act as principals) designated by the Company from time to time. Any agent involved in the offer or sale of the Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent will be set forth in, or may be calculated from the information set forth in, the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. In the case of sales made directly by the Company, no commission will be payable. If so indicated in the Prospectus Supplement, the Company will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase Securities from the Company at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a future date specified in the Prospectus Supplement. Such contracts will be subject to the conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commissions payable for solicitation of such contracts. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments that the agents or underwriters may be required to make in respect 21 thereof. Agents and underwriters may be customers of, engage in transactions with, or perform services for the Company or its affiliates in the ordinary course of business. The Company's Series A Common Stock is currently quoted on the Nasdaq National Market under the symbol "HATV." The Debt Securities may or may not be listed on a national securities exchange or a foreign securities exchange. The Debt Securities will be a new issue of securities with no established trading market. In the event that the Debt Securities are not listed on a national securities exchange, certain broker-dealers may make a market in the Debt Securities, but will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given that any broker- dealer will make a market in the Debt Securities or as to the liquidity of the trading market for the Debt Securities. The Prospectus Supplement with respect to the Debt Securities of any series will state, if known, whether or not any broker-dealer intends to make a market in such Securities. If no such determination has been made, the Prospectus Supplement will so state. LEGAL MATTERS Certain legal matters relating to the Securities will be passed upon for the Company by Rogers & Wells, New York, New York. Certain legal matters relating to the Securities will be passed upon for any underwriters, dealers or agents by Dow, Lohnes & Albertson, PLLC, Washington, D.C. EXPERTS The consolidated financial statements of Argyle appearing in the Argyle's Form 10-K for the year ended December 31, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. The combined financial statements of the Selected Gannett Television Stations and the financial statements of Multimedia Entertainment, Inc. (d.b.a. WLWT-TV) a subsidiary of Multimedia, Inc., appearing in Argyle Television Inc.'s Proxy Statement/Prospectus filed on July 31, 1997 and appearing in the Argyle Television, Inc. Current Report on Form 8-K/A filed on April 15, 1997, and incorporated by reference in this Prospectus, have been so incorporated in reliance on the reports of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The combined financial statements as of December 31, 1995 and 1996 and for each of the three years in the period ended December 31, 1996 of the Hearst Broadcast Group of The Hearst Corporation appearing in the Company's Proxy Statement/Prospectus filed on July 31, 1997 and the related financial statement schedule included elsewhere therein have been audited by Deloitte & Touche LLP, independent auditors, as set forth in their reports thereon included therein and incorporated herein by reference. Such combined financial statements and financial statement schedule are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 22 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN- CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PRO- SPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE- SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITA- TION OF AN OFFER TO BUY, THE SERIES A COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRO- SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT The Common Stock Offering................................................ S-3 The Company.............................................................. S-5 Recent Developments...................................................... S-7 Risk Factors............................................................. S-9 Use of Proceeds.......................................................... S-15 Price Range of Common Stock and Dividend Policy......................................................... S-16 Capitalization........................................................... S-17 Selected Unaudited Pro Forma Financial Data.......................................................... S-18 Selected Financial Data of Argyle........................................ S-21 Selected Financial Data of the Hearst Broadcast Group.................... S-24 Principal Stockholders................................................... S-26 Shares Eligible for Future Sale.......................................... S-27 Underwriting............................................................. S-29 Certain United States Tax Consequences to Non-United States Holders of Series A Common Stock................................................... S-32 Cautionary Statement Concerning Forward-Looking Statements............... S-35 PROSPECTUS Available Information.................................................... 2 Incorporation of Certain Documents by Reference............................................................ 2 The Company.............................................................. 4 Use of Proceeds.......................................................... 5 Ratio of Earnings to Fixed Charges....................................... 6 General Description of Securities and Risk Factors............................................................ 7 Description of Debt Securities........................................... 7 Description of Capital Stock............................................. 17 Plan of Distribution..................................................... 21 Legal Matters............................................................ 22 Experts.................................................................. 22
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 4,000,000 SHARES HEARST- ARGYLE TELEVISION, INC SERIES A COMMON STOCK ---------------------- PROSPECTUS SUPPLEMENT ---------------------- MERRILL LYNCH & CO. CREDIT SUISSE FIRST BOSTON J.P. MORGAN & CO. MORGAN STANLEY DEAN WITTER NOVEMBER 5, 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- FILED UNDER RULE NO. 424(b)(5) TO THE REGISTRATION STATEMENT ON FORM S-3 (FILE NO.333-36659) PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED OCTOBER 17, 1997) 4,000,000 SHARES HEARST-ARGYLE TELEVISION, INC. SERIES A COMMON STOCK --------------- All of the 4,000,000 shares of Series A Common Stock, par value $.01 per share (the "Series A Common Stock"), of Hearst-Argyle Television, Inc., a Delaware corporation (the "Company"), offered hereby, are being offered by the Company. Of the 4,000,000 shares of Series A Common Stock offered hereby, 800,000 shares are being offered initially outside the United States and Canada by the International Underwriters (the "International Offering") and the remaining 3,200,000 shares of Series A Common Stock are being offered initially in a concurrent offering in the United States and Canada by the U.S. Underwriters (the "U.S. Offering" and, together with the International Offering, the "Common Stock Offering"). Shares of Series A Common Stock not exceeding in the aggregate 5% of the Series A Common Stock being offered in the U.S. Offering are being reserved for sale to certain directors, officers, employees and other persons associated with the Company or its majority stockholder, The Hearst Corporation ("Hearst"), at the public offering price. The Company is currently offering to sell up to $400,000,000 aggregate principal amount of Senior Notes Due 2007 and Debentures Due 2027 by a separate prospectus supplement (the "Debt Offering"). The Common Stock Offering is not conditioned upon the completion of the Debt Offering, and there can be no assurance that the Debt Offering will be consummated on favorable terms or at all, or that the Debt Offering will not be reduced in size. See "Recent Developments" and "Use of Proceeds." The Series A Common Stock is traded on the Nasdaq National Market under the symbol "HATV." On November 5, 1997, the last reported sale price of the Series A Common Stock as reported by Nasdaq was $27 7/8 per share. The Company's authorized and outstanding capital stock consists of Series A Common Stock, Series B Common Stock, Series A Preferred Stock and Series B Preferred Stock. Hearst owns all of the outstanding shares of Series B Common Stock, currently representing approximately 82% of the common stock of the Company. Upon consummation of the Common Stock Offering, Hearst will own approximately 76% of the Company's Common Stock (assuming the Underwriters' over-allotment option is not exercised.) See "The Company--The Hearst Transaction." The rights of the Series A Common Stock and the Series B Common Stock are substantially similar except that the holders of the Series A Common Stock as a class have the right to elect two members of the Company's Board of Directors and Hearst, as the holder of the Series B Common Stock, has the right to elect the remaining nine of the 11 members of the Company's Board of Directors. Each share of Series B Common Stock is convertible at any time, at the option of the holder, into a share of Series A Common Stock. Each share of Series A Preferred Stock is convertible at any time, at the option of the holder, into Series A Common Stock and each share of Series B Preferred Stock is convertible, at anytime after June 11, 2001, at the option of the holder, into Series A Common Stock. See "Description of Capital Stock" in the accompanying Prospectus. SEE "RISK FACTORS" BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SERIES A COMMON STOCK OFFERED HEREBY. --------------- 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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - -------------------------------------------------------------------------------- Per Share............................... $27.00 $1.21 $25.79 - -------------------------------------------------------------------------------- Total(3)................................ $108,000,000 $4,840,000 $103,160,000
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) The Company has agreed to indemnify the International Underwriters and the U.S. Underwriters (collectively, the "Underwriters") against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deduction of expenses payable by the Company estimated at $600,000. (3) The Company has granted the International Underwriters and the U.S. Underwriters options exercisable within 30 days after the date hereof to purchase up to an aggregate of 120,000 shares and 480,000 shares, respectively, of Series A Common Stock solely to cover over-allotments, if any. If all such 600,000 shares are purchased, the total Price to Public, Underwriting Discount, and Proceeds to the Company will be $124,200,000, $5,566,000 and $118,634,000, respectively. See "Underwriting." --------------- The shares of Series A Common Stock are being offered by the several Underwriters named herein, subject to prior sale, when, as and if accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Series A Common Stock will be made in New York, New York on or about November 12, 1997. --------------- MERRILL LYNCH INTERNATIONAL CREDIT SUISSE FIRST BOSTON J.P. MORGAN SECURITIES LTD. MORGAN STANLEY DEAN WITTER --------------- The date of this Prospectus Supplement is November 5, 1997. [INSERT ARTWORK/MAP] - -------- * WWWB-TV and WPBF-TV are managed by the Company under a management agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under the Missouri LMA (as defined below) with KCWB. * Hearst has a Program Services and Time Brokerage Agreement (the "Missouri LMA") with KCWB-TV, Inc., the permittee of KCWB. * WNAC-TV's (Providence, RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal. Under FCC rules, a single entity cannot own stations with overlapping signals. The Company will divest WNAC and WDTN, and the Company has entered into a letter of intent to divest WNAC. * WNAC is subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES A COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF SERIES A COMMON STOCK PRIOR TO THE PRICING OF THE SERIES A COMMON STOCK OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE SERIES A COMMON STOCK, THE PURCHASE OF SHARES OF SERIES A COMMON STOCK FOLLOWING THE PRICING OF THE COMMON STOCK OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE SERIES A COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE SERIES A COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN PASSIVE MARKET- MAKING TRANSACTIONS IN THE SERIES A COMMON STOCK ON THE NASDAQ STOCK MARKET'S SMALLCAP MARKET, THE NASDAQ NATIONAL MARKET, IN THE OVER-THE COUNTER MARKET OR OTHERWISE IN ACCORDANCE WITH REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING." S-2 THE COMMON STOCK OFFERING Series A Common Stock Offered: U.S. Offering............. 3,200,000 shares International Offering.... 800,000 shares ---------- Total Shares Offered ....... 4,000,000 shares(/1/) ========== Common Stock to be outstanding immediately after this Offering: Series A Common Stock, $.01 par value.................. 12,291,204 shares Series B Common Stock, $.01 par value.................. 38,611,002 shares(/2/) ---------- Total Common Stock......... 50,902,206 shares(/2/) ========== Nasdaq National Market Symbol...................... HATV
Use of Proceeds................. The Company expects to utilize the net proceeds from this Common Stock Offering and, if consummated, the Debt Offering described below, to repay outstanding indebtedness. All of the net proceeds initially will be used to repay borrowings under its Credit Facility (as defined herein). After such repayment, the Company may repurchase its Subordinated Notes (as defined herein). See "Use of Proceeds." Relative Rights of Series A Common Stock and Series B The Series A Common Stock and Series B Common Common Stock................... Stock (collectively, the "Common Stock") vote together as a single class on all matters submitted to a vote of stockholders, except that with respect to any election of directors, (i) the holders of the shares of Series A Common Stock are entitled to vote separately as a class to elect two members of the Company's Board of Directors (the "Series A Directors") and (ii) the holders of the shares of Series B Common Stock are entitled to vote separately as a class to elect the balance of the Company's Board of Directors (the "Series B Directors"); provided, however, that the number of Series B Directors shall not constitute less than a majority of the Company's Board of Directors. As the holder of all of the issued and outstanding shares of Series B Common Stock, Hearst has the right to elect nine of the 11 members of the Company's Board of Directors. All of the outstanding shares of Series B Common Stock are required to be held by Hearst or its permitted transferees. The shares of Series B Common Stock are convertible at any time at the option of the holder on a share-for-share basis into shares of Series A Common Stock. The shares of Series B Common Stock automatically convert into shares of Series A Common Stock at such time as Hearst and any permitted transferee hold less than 20% of all shares of the Common Stock that are then issued and outstanding. S-3 Debt Offering................. Up to $400,000,000 aggregate principal amount of Senior Notes Due 2007 and Debentures Due 2027. The terms of such Notes and Debentures have not yet been determined, and there can be no assurance that the Debt Offering will be consummated on favorable terms or at all, or that the Debt Offering will not be reduced in size. The sale of the shares of Series A Common Stock offered hereby is not contingent on the completion of the Debt Offering. See "Recent Developments--Concurrent Debt Offering." - -------- (1) Does not include 480,000 shares and 120,000 shares of Series A Common Stock that may be issued by the Company to the U.S. Underwriters and the International Underwriters, respectively, upon the exercise of the Underwriters' over-allotment option. (2) Does not include the Adjustment Shares (as defined herein). See "The Company--The Hearst Transaction." S-4 THE COMPANY General. The Company owns or manages 15 network-affiliated television stations reaching approximately 11.5% of U.S. Television households. The Company is the largest, "pure-play" publicly owned television broadcast group in the U.S., and is the third-largest, non-network owned television group in terms of audience delivered. The Hearst Transaction. The Company was formed in 1994 as a Delaware corporation under the name Argyle Television, Inc. ("Argyle"), and its business operations began in January 1995 with the consummation of its acquisition of three television stations. The Company is the successor to the combined operations of Argyle and the television broadcast group of The Hearst Corporation ("Hearst") pursuant to a merger transaction that was consummated on August 29, 1997 (the "Hearst Transaction"). In that transaction, Hearst contributed its television broadcast group and related broadcast operations (the "Hearst Broadcast Group") to Argyle and merged a wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the surviving corporation (renamed "Hearst-Argyle Television, Inc."). As a result of the Hearst Transaction, Hearst currently owns approximately 38.6 million shares of the Company's Series B Common Stock, comprising approximately 82% of the total outstanding common stock of the Company. In connection with the Hearst Transaction and related transactions, Hearst may receive up to an additional 2.7 million shares of Series B Common Stock (the "Adjustment Shares"), which would result in Hearst's ownership of approximately 83% of the Company's total outstanding Common Stock. Upon consummation of the Common Stock Offering, Hearst will own approximately 76% (and up to approximately 77% after giving effect to the issuance of the Adjustment Shares) of the Company's Common Stock (in each case assuming the Underwriters' over-allotment option is not exercised). Through its ownership of the Company's Series B Common Stock, Hearst has the right to elect nine of the 11 members of the Company's Board of Directors. The Hearst Corporation. Hearst, one of the nation's largest privately-held companies, is a diversified communications company engaged in a broad range of publishing, broadcasting, cable television networks and other communications activities. Hearst publishes 14 monthly consumer magazines that include Cosmopolitan, Harper's Bazaar, Town & Country, Red Book, Good Housekeeping, Country Living, Esquire and Popular Mechanics, among others. Hearst's 12 daily and seven weekly newspapers include The Houston Chronicle, The San Francisco Examiner, The Seattle Post-Intelligencer, The San Antonio Express-News and The Albany Times Union. Hearst was a founding partner in Lifetime, A&E and The History Channel cable networks. Hearst and The Walt Disney Company, through ABC, Inc., wholly own the Lifetime network as equal partners, and are equal partners in the A&E network, in which NBC owns a 25% interest. Hearst also owns 20% of ESPN, which includes ESPN2 and ESPNews. Hearst's book publishing businesses include William Morrow and Avon Books, and its entertainment activities include the production of made-for-television movies and television series, as well as the syndication and licensing of cartoon characters and features. The Stations. The Company owns 12 television stations, eight of which are in the top 50 of the 211 generally recognized geographic designated market areas ("DMAs") according to A.C. Nielsen Co. ("Nielsen"). In addition, the Company manages two television stations and two radio stations that are owned by Hearst: WWWB-TV in Tampa, Florida, WPBF-TV in West Palm Beach, Florida and WBAL(AM) and WIYY(FM) in Baltimore, Maryland. The Company also provides management services to Hearst in order to allow Hearst to fulfill its obligations under a program services and time brokerage agreement between Hearst and the permittee of KCWB-TV in Kansas City, Missouri (the "Missouri LMA"). For the year ended December 31, 1996, on a pro forma basis after giving effect to the consummation of the Hearst Transaction, the Company's total revenues and broadcast cash flow were $370.2 million and $160.0 million, respectively, of which approximately 28% and 26%, respectively, were attributable to WCVB-TV in Boston, Massachusetts, the nation's 6th largest DMA. Under the order of the Federal Communications Commission (the "FCC") approving the Hearst Transaction, because of signal overlaps the Company must divest two of its television stations (WNAC-TV in Providence, Rhode Island, and WDTN-TV in Dayton, Ohio) and file by February 28, 1998 an application with S-5 the FCC for the transfer of ownership of such stations. A letter of intent has been signed for the divestiture of WNAC, and the Company is negotiating with a third party for the divestiture of WDTN. The Company is seeking to complete these divestitures through a tax-deferred exchange of such stations for one or more television stations of a third party, although there can be no assurance that the Company will be able to accomplish such exchange on a fully tax- deferred basis, if at all. The following table sets forth certain information for each of the Company's owned and managed television stations:
PERCENTAGE OF MARKET NETWORK U.S. TELEVISION MARKET RANK(1) STATION AFFILIATION CHANNEL HOUSEHOLDS(2) ------ ------- --------- ----------- ------- --------------- *Boston, MA.............. 6 WCVB ABC 5 2.22% *Tampa, FL(3)............ 15 WWWB WB 32 1.47% *Pittsburgh, PA.......... 19 WTAE ABC 4 1.16% *Baltimore, MD........... 23 WBAL NBC 11 1.01% Cincinnati, OH.......... 30 WLWT NBC 5 0.81% *Kansas City, MO......... 31 KMBC ABC 9 0.81% *Kansas City, MO(3)...... 31 KCWB WB 29 *** *Milwaukee, WI........... 32 WISN ABC 12 0.81% *West Palm Beach, FL(3).. 43 WPBF ABC 25 0.61% Oklahoma City, OK....... 44 KOCO ABC 5 0.61% Providence, RI(4)(5).... 49 WNAC FOX 64 0.57% *Dayton, OH(4)........... 53 WDTN ABC 2 0.52% Honolulu, HI............ 71 KITV ABC 4 0.39% Jackson, MS............. 90 WAPT ABC 16 0.30% Fort Smith/Fayetteville, AR...................... 116 KHBS/KHOG ABC/ABC 40/29 0.22% ----- Total................. 11.51% =====
- -------- * Denotes a station owned or operated by the Company as a consequence of the Hearst Transaction. (1) Market rank is based on the relative size of the DMA among the 211 generally recognized DMAs in the U.S., based on Nielsen estimates for the 1997-98 season. (2) Based on Nielsen estimates for the 1997-98 season. (3) WWWB-TV and WPBF-TV are managed by the Company under a management agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under the Missouri LMA with KCWB. (4) WNAC-TV's (Providence, RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal. Under FCC rules, a single entity cannot own stations with overlapping signals. The Company will divest WNAC and WDTN, and has entered into a letter of intent to divest WNAC. (5) Subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. The Company has an option to acquire WWWB-TV and Hearst's interests and option with respect to KCWB-TV (together with WWWB-TV, the "Option Properties"), as well as a right of first refusal until approximately August 2000 with respect to WPBF-TV (if such station is proposed by Hearst to be sold to a third party). The option period for each Option Property commences in February 1999 and terminates in August 2000 and the purchase price is the fair market value of the station as determined by the parties, or an independent third-party appraisal, subject to certain specified parameters. If Hearst elects to sell an Option Property prior to the commencement of, or during, the option period, the Company will have a right of first refusal to acquire such Option Property. The exercise of the option and the right of first refusal will be by action of the independent directors of the Company, and any option exercise may be withdrawn by the Company after receipt of the third-party appraisal. Business Strategy. The Company's strategic objective is to maintain and build on its position as the largest, "pure-play" publicly owned television broadcast group in the United States. To facilitate this strategy, the Company focuses on the following key areas: S-6 . Size and Market Presence. The Company's newly-expanded station group provides the Company with the critical mass necessary to remain competitive with other station group owners. The Company intends to take advantage of the benefits of scale to obtain attractive programming pricing and terms, strengthen relationships with networks and national advertising sales representatives, attract and retain talent and obtain timely performance and satisfactory service from equipment suppliers. . Growth. As a consequence of the consolidation of ownership occurring in the television broadcast industry, the Company believes continued growth is necessary in order to achieve its strategic objective. The Company intends to generate growth both internally through continuous improvement of existing operations, as well as externally through acquisitions of television station groups and individual stations. The Company intends to finance such acquisitions through a combination of debt and equity in a manner that will permit continued growth in the Company's business and provide flexibility in its capital structure. In combination with such financing, the Company will seek to complete acquisitions at price levels that will increase after-tax cash flow per share. . Geographic and Network Diversity. Ten of the Company's existing stations are affiliated with ABC, two with NBC, two with the WB Network and one with Fox. The stations are located in several distinct regions of the United States, mitigating any potential adverse effect on the Company of any regional economic fluctuations. In pursuing external growth opportunities, the Company intends to focus on network-affiliated television stations in the top 100 markets, with a view to enhancing the geographic and network diversity of its stations. . Strong News and Local Station Identities. The Company positions each of its stations within the station's market to create and enhance a local "brand" with which viewers and advertisers can identify, thereby seeking to build the franchise value of the station and attain the number one or strong number two position in the market in terms of audience delivery, revenue share and profitability. The Company considers strong news and local events programming to be critical in station branding. . Cost Control. The Company closely monitors costs and implements cost controls at each station it operates in a manner consistent with building each station's market position. The Company also intends to capitalize on its newly-expanded station group to generate cost savings through the group acquisition of programming, equipment and services. Principal Offices. The principal executive offices of the Company are located at 888 Seventh Avenue, New York, New York 10106; its telephone number is 212-649-2300. RECENT DEVELOPMENTS Debt Offering. The Company is currently offering to sell up to $400,000,000 aggregate principal amount of Senior Notes Due 2007 and Debentures Due 2027 by a separate prospectus supplement (collectively, the "Senior Notes"). The terms of the Senior Notes have not yet been determined, and there can be no assurance that the Debt Offering will be consummated on favorable terms or at all, or that the Debt Offering will not be reduced in size. The aggregate principal amount of Senior Notes to be offered by the Company also may be reduced to the extent the Company does not refinance the entire amount of the $275 million principal amount of private placement debt that was assumed by the Company as part of the Hearst Transaction (the "Private Placement Debt") and related make-whole premium as described under "Use of Proceeds." The Senior Notes will be redeemable in whole or in part, at the option of the Company at any time at the prices described in the Prospectus Supplement pursuant to which the Senior Notes are being offered. The sale of the shares of Series A Common Stock pursuant to this Prospectus Supplement is not contingent on the completion of the Debt Offering. See "Use of Proceeds." Recent Financial Results. The information set forth below is based on preliminary, unaudited data prepared by the Company and is subject to adjustments and the completion by the Company of its financial S-7 statements with respect to the quarter ended September 30, 1997. There can be no assurance that actual results, when finalized, will not vary from the financial data set forth below. The following financial data gives effect to the Hearst Transaction as if it occurred at the beginning of the periods presented. For the nine months ended September 30, 1997, total revenues on a pro forma basis are estimated to have increased by approximately $7.4 million, or 2.8%, to approximately $274.9 million from $267.5 million for the comparable period ended September 30, 1996. Broadcast cash flow (station operating income, plus depreciation and amortization and write down of intangible assets, plus amortization of program rights, minus program payments) on a pro forma basis for the nine months ended September 30, 1997 is estimated to have increased by approximately $12.4 million, or 11.5%, to approximately $120.2 million from $107.8 million for the comparable period ended September 30, 1996. For the three months ended September 30, 1997, total revenues on a pro forma basis are estimated to have increased by approximately $3.7 million, or 4.3%, to approximately $89.6 million from $85.9 million for the comparable period ended September 30, 1996. Broadcast cash flow on a pro forma basis for the three months ended September 30, 1997 is estimated to have increased by approximately $4.9 million, or 15.2%, to $37.1 million from $32.2 million for the comparable period ended September 30, 1996. The Company is currently reviewing whether or not the Hearst Transaction will result in a one-time restructuring charge to the Company, which could amount to approximately $10.0 million. S-8 RISK FACTORS The shares of Series A Common Stock offered hereby involve a substantial degree of risk. In addition to the other information contained or incorporated by reference in this Prospectus Supplement or the accompanying Prospectus, prospective investors should carefully consider the following risks and investment considerations before purchasing shares of Series A Common Stock. RELIANCE ON ABC TELEVISION NETWORK; BOSTON STATION Nine of the 12 television stations owned by the Company as of the date of this Prospectus are ABC affiliates. On a pro forma basis, these nine stations would have accounted for approximately 73% of the combined revenues and approximately 76% of the broadcast cash flow from the Company's 12 owned stations for the year ended December 31, 1996. The television viewership levels for each of these stations are materially dependent upon network programming. There can be no assurance that such programming will achieve or maintain satisfactory viewership levels in the future. Each of these stations is a party to a network affiliation agreement giving such station the right to rebroadcast programs transmitted by the network. Five of the six television stations contributed to the Company by Hearst are affiliated with the ABC network. The term of each of the Hearst Broadcast Group's affiliation agreements with ABC is two years, renewable for successive two-year periods, and each affiliation agreement is subject to cancellation by either party upon six months notice to the other party, except with respect to WTAE-TV in Pittsburgh, Pennsylvania. In WTAE's case, the affiliation agreement is not subject to cancellation on six months notice, and the term of the affiliation agreement will be successively renewed unless either party gives the other notice of non-renewal six months prior to the end of the then current term. The Company's current affiliation agreements between ABC and KOCO, KITV, WAPT and KHBS expire on January 2, 2000, January 2, 2005, March 6, 2005 and July 1, 1998, respectively. ABC has the right to terminate its affiliation agreement in the event of a material breach of such agreement by a station and in certain other circumstances. In 1994, negotiations commenced to revise Hearst's ABC affiliation agreements to provide, among other things, for 10- year terms and increased compensation. Such agreements are still in the process of negotiation and documentation and have not been finalized, although the Company is receiving its increased compensation. Although the Company expects to continue to be able to renew its network affiliation agreements, no assurance can be given that such renewals will be obtained on as favorable terms or at all. As a result, a material decline in ABC's ratings or the termination or non-renewal of the network affiliation agreements with ABC could have a material adverse effect on the Company. For the year ended December 31, 1996, on a pro forma basis, after giving effect to the Hearst Transaction, approximately 26% and 28% of the Company's broadcast cash flow and total revenues, respectively, were attributable to WCVB-TV in Boston, Massachusetts. A significant decline in net revenues from WCVB-TV, as a result of a ratings decline or otherwise, could have a material adverse effect on the Company's financial position and results of operations. DEPENDENCE ON ADVERTISING; EFFECT OF ECONOMIC CONDITIONS Since the Company is significantly dependent upon sales of advertising for its revenues (on a pro forma basis, giving effect to the Hearst Transaction, approximately 92% of the Company's revenues for each of the year ended December 31, 1996 and the six months ended June 30, 1997), operating results of the Company are and will be affected by the relative popularity of its programming, the activities of competitors, the availability of alternative advertising media and cyclical changes in the national economy, as well as by regional economic conditions in each of the markets in which its stations operate, particularly as such conditions may affect advertising expenditures. In addition, the advertising revenues of the stations generally are highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. Additionally, advertising revenues in even-numbered years benefit from advertising placed by candidates for political offices and demand for S-9 advertising time in Olympic broadcasts. Proposals have been advanced in Congress to require television broadcast stations to provide advertising time to political candidates at no charge, which would eliminate in whole or in part advertising revenues from political candidates. Such political advertising revenues comprised 5.1% of the Company's 1996 pro forma total revenues. CONTROL BY MAJORITY STOCKHOLDER; CONFLICTS OF INTEREST Hearst currently owns in excess of 80% of the outstanding shares of all series of common stock of the Company and, by virtue of its ownership of 100% of the Series B Common Stock, is entitled to elect as a class all but two members of the Board of Directors of the Company. As a result, Hearst is able to control substantially all actions to be taken by the Company's stockholders, and also is able to maintain control over the operations and business of the Company. This control, as well as certain provisions of the Company's Amended and Restated Certificate of Incorporation and Delaware law, may make the Company a less attractive target for a takeover than it otherwise might be, or render more difficult or discourage a merger proposal, tender offer or other transaction involving an actual or potential change of control of the Company. In addition, the interests of Hearst, which owns or has significant investments in other businesses, including cable television networks, newspapers, magazines and electronic media, may from time to time be competitive with, or otherwise diverge from, the interests of the Company, particularly with respect to new business opportunities and future acquisitions. Under the Amended and Restated Merger Agreement dated as of March 26, 1997, among Hearst, Argyle and certain wholly-owned subsidiaries of Hearst (the "Merger Agreement") entered into in connection with the Hearst Transaction, Hearst and the Company have agreed that, without the prior written consent of the other, neither the Company, on the one hand, nor Hearst, on the other hand, will make any acquisition or purchase any assets if such an acquisition or purchase by one party would require the other party to divest or otherwise dispose of any of its assets because of regulatory or other legal prohibitions. As a result, under current law and given the newspaper properties that Hearst currently owns, the Company would be precluded, without Hearst's agreement to sell newspapers in the corresponding markets and from acquiring television broadcast stations in Albany, New York; Flint-Saginaw-Bay City, Michigan; Beaumont, Texas; Houston, Texas; Laredo, Texas; Lubbock, Texas; Midland-Odessa, Texas; San Antonio, Texas; San Francisco, California; Seattle, Washington; and St. Louis, Missouri. A proposal to eliminate the rule banning newspaper-television cross-ownership in the same market has been introduced in Congress. The FCC separately has been asked to consider altering the cross-ownership rule. Whether these proposals will be enacted into law is unknown at this time. Additionally, Hearst is not precluded from purchasing television stations, newspapers or other assets in other markets, the ownership of which assets by Hearst could preclude, under FCC rules, the Company from owning television stations in such markets in the future. Hearst and the Company also have ongoing relationships that may create situations where the interests of the two parties could conflict. Hearst and the Company are parties to a series of agreements with each other, including a Management Agreement (whereby the Company provides certain management services, such as sales, news, programming and financial and accounting management services, with respect to certain Hearst owned or operated television and radio stations); an Option Agreement (whereby Hearst has granted the Company an option to acquire certain Hearst owned or operated television stations, as well as a right of first refusal with respect to another television station if Hearst proposes to sell such station within 36 months of its acquisition); a Studio Lease Agreement (whereby Hearst leases from the Company certain premises for Hearst's radio broadcast stations); a Tax Sharing Agreement (whereby Hearst and the Company have established the sharing of federal, state and local taxes after the Company became part of the consolidated tax return of Hearst); a Name License Agreement (whereby Hearst permits the Company to use the Hearst name in connection with the Hearst- Argyle name and operation of its business); and a Services Agreement (whereby Hearst provides the Company certain administrative services such as accounting, financial, legal, tax, insurance, data processing and employee benefits). The Company believes that the terms of all these agreements are reasonable to both sides; there can be no assurance, however, that more favorable terms would not be available from third parties where applicable. S-10 TELEVISION INDUSTRY COMPETITION AND TECHNOLOGY The television broadcast industry is highly competitive. Some of the stations that compete with the Company's stations are owned and operated by large national or regional companies that have greater resources, including financial resources, than the Company. Technological innovation, and the resulting proliferation of programming alternatives such as cable, direct satellite-to-home services and home video rentals, have fractionalized television viewing audiences and subjected television broadcast stations to new types of competition. Over the past decade, cable television has captured an increasing market share, while the aggregate viewership of the major networks has declined. In addition, the expansion of cable television and other industry changes have increased, and may continue to increase, competitive demand for programming. Such increased demand, together with rising production costs, may in the future increase the Company's programming costs or impair its ability to acquire programming. In addition, new television networks such as United Paramount Network ("UPN") and the WB Network have created additional competition. The FCC has adopted rules for implementing digital (including high-definition) television ("DTV") service in the United States. Implementation of DTV is expected to improve the technical quality of television. Under certain circumstances, however, conversion to DTV operations may reduce a station's geographical coverage area or provide a competitive advantage to one or more competing stations in the market. Implementation of DTV is expected to impose additional costs that are higher than normal on television stations providing the new service, due to increased equipment costs and possible spectrum-related fees. While the Company cannot predict the implementation costs of DTV, these costs are expected to be significant. The Company cannot predict the effect the authorization of DTV service will have on the business of the Company. In addition to competing with other media outlets for audience share, the Company's stations also compete for advertising revenues, their primary source of revenues. The stations compete for such advertising revenues with other television stations in their respective markets, as well as with other advertising media, such as newspapers, radio stations, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail, the Internet and local cable systems. The stations are located in highly competitive markets. Accordingly, the Company's results of operations will be dependent upon the ability of each of its stations to compete successfully for advertising revenues in its market, and there can be no assurance that any one of these stations will be able to maintain or increase its current audience share or revenue share. To the extent that certain of the Company's competitors have, or may in the future obtain, greater resources than the Company, the Company's ability to compete successfully in its broadcasting markets may be impeded. REGULATORY MATTERS FCC Licenses. The television operations of the Company are subject to significant regulation by the FCC under the Communications Act of 1934, as amended (the "Communications Act"), most recently amended further by the Telecommunications Act of 1996 (the "Telecommunications Act"). Approval of the FCC is required for the issuance, renewal and transfer or assignment of television station operating licenses. In particular, the Company is dependent upon its continuing ability to maintain broadcasting licenses from the FCC. License renewals filed after 1996 customarily will be granted for terms of eight years. While broadcast licenses are typically renewed by the FCC, there can be no assurance that the licenses for the Company's stations will be renewed at their expiration dates or, if renewed, that the renewal terms will be for eight-year periods. The non-renewal or revocation of one or more of the FCC licenses held by the Company could have a material adverse effect on the operations of the Company. Common Ownership. The rules of the FCC include restrictions on the common ownership or control of interests in television stations and certain other media interests in the same market, including television and radio broadcast stations, as well as cable television systems and English language daily newspapers. In addition, no person is permitted to hold an attributable interest in television stations collectively reaching more than 35% of all U.S. television households, subject to a 50% discount for UHF television stations. If an acquisition results in an acquiror having holdings that conflict with the common ownership rules, divestiture of one of the common interests is generally required. The FCC, in certain cases, may grant permanent waivers of such common S-11 ownership. The FCC, however, generally only grants temporary waivers of common ownership in order to afford the acquiror a reasonable period of time following the consummation of the acquisition to comply with the applicable law and regulations through disposition of one of the common interests. The Hearst Transaction resulted in the following combinations prohibited by the FCC's "television duopoly rule" (which generally proscribes the common ownership of two or more stations with overlapping signal contours): (i) Argyle's WNAC-TV (Providence, Rhode Island) and Hearst's WCVB-TV (Boston, Massachusetts) and (ii) Argyle's WLWT-TV (Cincinnati, Ohio) and Hearst's WDTN- TV (Dayton, Ohio). On July 15, 1997, the FCC approved the Hearst Transaction and granted a six-month temporary waiver of its television duopoly rule, permitting the Company during the waiver period to own television stations with overlapping signals. Under this waiver, the Company is required to file applications with the FCC for consent to divest WNAC and WDTN by February 28, 1998. A letter of intent has been signed to divest WNAC, and the Company currently is negotiating with a third party to divest WDTN. There can be no assurance that the WNAC divestiture will be completed, or that the current WDTN negotiations will result in an agreement to divest WDTN. If such divestitures do not occur within the near future, subsequently obtaining a buyer for each of the stations to be divested within the six-month waiver period granted by the FCC could result in the receipt of a price that is less than could be obtained for such stations if the Company were not forced to sell the stations within that time frame. Restrictions on Broadcast Advertising. Advertising of cigarettes and certain other tobacco products on broadcast stations has been banned for many years. Various states restrict the advertising of alcoholic beverages. Congress and the FCC are currently examining proposals that, if adopted, would eliminate or severely restrict the advertising of hard liquor, as well as beer and wine. The adoption of such proposals could have an adverse impact on the revenues of the Company. No prediction can be made as to whether any or all of the present proposals will be enacted into law. Proposed Regulations. Among the proposed regulations under consideration by the FCC in determining whether impermissible cross-ownership exists under its television duopoly rule (described above) is a proposal to deem as attributable certain television local marketing agreements ("LMAs") and, if deemed attributable, the extent to which currently effective agreements of this type should be exempted from any new FCC rules. Such attribution under the television duopoly rule, as such rule may be modified, could have a material adverse effect on the Joint Marketing and Programming Agreement between the Company and Clear Channel Communications, Inc. relating to WNAC (Providence, Rhode Island) and the Missouri LMA between Hearst and the licensee of KCWB-TV (Kansas City, Missouri), as well as on the Company's ability to divest WNAC on favorable terms, if at all. If the FCC's ultimate decision were to disfavor the continued validity of such joint operating agreements or LMAs, then these agreements, in the worst case scenario, might be required to be terminated. The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, materially adversely affect the operation and ownership of the Company. The FCC has not yet fully implemented the Telecommunications Act. The Company is unable to predict the outcome of future federal legislation or the impact of any such laws or regulations on the Company's operations. RISKS ASSOCIATED WITH INTEGRATION OF THE COMBINED OPERATIONS As a result of the Hearst Transaction, the Company has experienced significant expansion, including expansion into new markets in which neither Argyle nor the Hearst Broadcast Group had previously operated prior to the Hearst Transaction. As a result, the Company's management will be required to manage a substantially larger number of television stations than historically has been the case. There can be no assurance that the Company will be able to implement effectively the organizational and operational systems necessary for optimal management and integration of its newly expanded group of television stations or any television stations to be acquired in the future, or that the Company will be able to manage its growth successfully. In addition, the management of the Company is evaluating, and will continue to evaluate, the nature and scope of its operations and various short-term and long-term strategic considerations, and will assess to what extent integration, S-12 consolidation or other modification of the two separate businesses is appropriate following the Hearst Transaction. Many operational and strategic decisions with respect to the Company have not yet been made. Significant uncertainties and risks relating to the integration of the combined operations may exist and, therefore, it is difficult to predict or quantify the impact of such decisions on the results of operations and financial condition of the Company. RISKS ASSOCIATED WITH POSSIBLE EXPANSION As part of its business strategy, the Company intends to pursue possible further expansion through the acquisition of additional television stations or television station groups, and intends to continue to evaluate acquisition opportunities. Such acquisition opportunities, however, may become more limited as a consequence of the consolidation of ownership occurring in the television broadcast industry. The Company competes and will continue to compete for the acquisition of television stations with other prospective purchasers, some of whom have greater financial resources than the Company. In addition, any such acquisitions will be subject to FCC approval and limitations on the number and location of broadcasting properties that any one person or entity may own, and FCC rules restricting the ownership of television stations and newspapers in the same market. As a result of these and other factors, there can be no assurance that future acquisitions will be available on attractive terms, if at all. While management expects to realize certain operating synergies and cost savings as a result of any future acquisition, there can be no assurance that such synergies and savings will be achieved, that the integration of the Company and new stations can be accomplished successfully or on a timely basis or that the Company's business strategy can be implemented. As a result, any future acquisition may have an adverse effect on the Company's financial position and results of operations. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Common Stock Offering (assuming the Underwriter's over-allotment option is not exercised), the Company will have outstanding 12,291,204 shares of Series A Common Stock and 38,611,002 shares of Series B Common Stock (excluding any Adjustment Shares). The Company also has shares of Series A Preferred Stock and Series B Preferred Stock outstanding. The Series A Preferred Stock is convertible at any time, into an aggregate of 312,514 shares of Series A Common Stock. The Series B Preferred Stock is convertible at any time after June 11, 2001 into shares of Series A Common Stock at a conversion rate equal to the then current market price of the Series A Common Stock. In addition, the Company has outstanding options to purchase 1,794,125 shares of Series A Common Stock, of which options are currently exercisable for 216,125 shares. All of the shares of Series A Common Stock (including the shares offered hereby) generally will be freely tradeable without restriction or further registration under the Securities Act, except that any shares held by persons who are "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act, or who were at the time of the Company's shareholder vote on the Hearst Transaction "affiliates" of the Company pursuant to Rule 145 under the Securities Act, may be generally sold subject to certain restrictions as to timing, manner and volume. In this regard, the Company has in effect a registration statement covering the resale from time to time of 4,599,260 shares of Series A Common Stock received in the Hearst Transaction by certain former limited partners of a partnership that prior to the Hearst Transaction owned shares of the Company's common stock in order to permit such persons to sell their shares without regard to the restrictions discussed in the preceding sentence. The holders of approximately 4,443,406 shares covered by such registration statement have additional rights under that certain Registration Rights Agreement dated as of August 29, 1997. The Series B Common Stock held by Hearst and the Series A Common Stock into which the Series B Common Stock is convertible may not be sold in the absence of registration under the Securities Act or unless an exemption from registration is available, including the exemption afforded by Rule 144 under the Securities Act. The Company, its directors and executive officers, Hearst and certain holders of the outstanding Series A Common Stock, who will directly or indirectly own 3,610,690 shares of Series A Common Stock and currently S-13 exercisable options to purchase 40,000 shares of Series A Common Stock, and, in the case of Hearst, all of the shares of Series B Common Stock, upon completion of the Common Stock Offering, have, subject to certain exceptions, agreed not to directly or indirectly offer for sale, sell or otherwise dispose of, or announce the offering of, any shares of Series A Common Stock or any securities convertible into or exercisable or exchangeable for Series A Common Stock for a period of 90 days after the date of this Prospectus Supplement without the prior consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Company can make no prediction as to the effect, if any, that sales of shares of its Series A Common Stock, or the availability of shares for future sale, will have on the market price of the Series A Common Stock prevailing from time to time. Sales of substantial amounts of Series A Common Stock (including shares owned upon the exercise of options) in the public market, or the perception that such sales could occur, could depress the prevailing market price for the Series A Common Stock. Such sales may also make it more difficult for the Company to sell equity securities or equity-related securities in the future at a time and price that it deems appropriate. See "Shares Eligible for Future Sale." LIMITATIONS ON DIVIDENDS The Company does not anticipate that it will pay any dividends on its Series A Common Stock in the foreseeable future. The terms of the Credit Facility and the indenture pursuant to which the Subordinated Notes (as defined herein) were issued limit the ability of the Company to pay dividends on the Series A Common Stock under certain conditions. S-14 USE OF PROCEEDS The net proceeds to the Company from the Common Stock Offering are estimated to be approximately $103 million ($118 million if the Underwriters' over- allotment option is exercised in full), after giving effect to underwriting discounts and commissions and expenses payable by the Company. The Company is conducting the Debt Offering (together with the Common Stock Offering, the "Offerings"), the net proceeds of which are estimated to be approximately $396 million (assuming that $400 million aggregate principal amount of Senior Notes are offered and sold) after giving effect to underwriting discounts and commissions and expenses payable by the Company. The Company expects to utilize the net proceeds from the Offerings to repay outstanding indebtedness as follows:
APPROXIMATE PERCENTAGE OF INDEBTEDNESS DOLLAR AMOUNT NET PROCEEDS ------------ ------------- ------------- Credit Facility............. $329 million(/1/)(/2/)(/3/) 65.9%(/1/)(/2/) Subordinated Notes.......... 170 million(/2/) 34.1%(/2/) ------------ ----- Total..................... $499 million 100.0% ============ =====
- -------- (1) If only the Common Stock Offering is completed, the approximate dollar amount of indebtedness the Company expects to repay under the Credit Facility will be $103 million, or 100% of the net proceeds. (2) All of the net proceeds initially will be used to repay a portion of outstanding indebtedness under the Credit Facility. After such repayment, the Company may make additional borrowings under the Credit Facility to redeem all or a portion of the Subordinated Notes. The amount indicated assumes all of the Subordinated Notes will be repurchased. See "-- Subordinated Notes." Morgan Guaranty Trust Company, an affiliate of J.P. Morgan Securities Inc., is an agent and a lender under the Company's Credit Facility and is expected to receive approximately $47.6 million of repayment under the Credit Facility from the net proceeds of the Offerings. See "Underwriting." (3) Assumes that the entire $275 million principal amount of private placement debt that was assumed by the Company as part of the Hearst Transaction (the "Private Placement Debt") and related make-whole premium of approximately $16 million will be refinanced using borrowings under the Credit Facility. The Company expects to refinance the Private Placement Debt after the consummation of the Common Stock Offering. If the Company refinances a portion rather than the entire amount of Private Placement Debt, the Company may reduce the size of the Debt Offering (and, consequently the proceeds therefrom) by an amount approximately equal to the Private Placement Debt and related make-whole premium not refinanced. Credit Facility. Upon consummation of the Hearst Transaction, the Company entered into a $1 billion credit facility with the Chase Manhattan Bank, which matures on December 31, 2004 (the "Credit Facility"). At October 15, 1997, outstanding indebtedness under the Credit Facility was approximately $140 million as a result of borrowings made to (i) finance the cash consideration of approximately $100 million payable in connection with the Hearst Transaction: (ii) refinance the Company's previous credit facility of approximately $40 million, net of repayments; and, (iii) pay certain fees and expenses associated with the Hearst Transaction. Such borrowings bear interest at an applicable margin that varies based on the Company's ratio of total debt to operating cash flow, plus, at the Company's option, LIBOR or an alternate base rate (such interest being approximately 6% at October 15, 1997). The Company expects to use the net proceeds from the Offerings to repay a portion of borrowings under the Credit Facility. Subordinated Notes. The Company currently has outstanding $150 million principal amount of senior subordinated notes, which it issued in October 1995 (the "Subordinated Notes"). The Subordinated Notes are due in 2005 and bear interest at 9 3/4% payable semiannually. Under the indenture governing the Subordinated Notes, the consummation of the Hearst Transaction constituted a "change of control" of Argyle, which required the Company to commence an offer to repurchase the Subordinated Notes for cash at 101% of their principal amount plus accrued and unpaid interest to the date of repurchase (the "Change of Control Offer"). The Change of Control Offer expired on October 27, 1997, and none of the Subordinated Notes were tendered into the Change of Control Offer. Within 180 days after the completion of the Change of Control Offer, the Company is permitted under the indenture governing the Subordinated Notes to redeem Subordinated Notes that are not repurchased in the Change of Control Offer. After using the net proceeds from the Offerings initially to repay a portion of outstanding indebtedness under the Credit Facility, the Company may make additional borrowings under the Credit Facility in such requisite amounts to repurchase all or a portion of the Subordinated Notes and to pay any applicable redemption premium and accrued and unpaid interest. S-15 PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Series A Common Stock is quoted on the Nasdaq National Market under the symbol "HATV." Prior to the consummation of the Hearst Transaction, shares of the Series A Common Stock of Argyle were traded on the Nasdaq National Market under the symbol "ARGL." The Company's Series B Common Stock, 100% of which is held by Hearst, is not publicly traded. The table below sets forth, for the calendar quarters indicated, the high and the low sales prices of the Series A Common Stock of Argyle prior to the consummation of the Hearst Transaction on August 29, 1997, and of the Company's Series A Common Stock subsequent to the consummation of the Hearst Transaction, in each case as reported by the Nasdaq National Market:
PRICE RANGE OF COMMON STOCK ------------------- HIGH LOW ------- ------- 1995 Fourth Quarter (beginning October 24, 1995)........... 18 1/4 15 1/2 1996 First Quarter......................................... 23 17 Second Quarter........................................ 27 19 1/2 Third Quarter......................................... 29 1/4 22 Fourth Quarter........................................ 28 3/4 23 3/4 1997 First Quarter......................................... 29 1/8 23 7/8 Second Quarter........................................ 25 1/2 22 1/2 Third Quarter......................................... 30 5/8 24 7/8 Fourth Quarter (through November 5, 1997)............. 32 5/8 26 1/2
On August 9, 1996, the last full trading day prior to the public announcement of Argyle's exploration of strategic alternatives, the closing price of Argyle's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $23.00 per share. On March 26, 1997, the last full trading day prior to the public announcement of the Hearst Transaction, the closing price of Argyle's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $27.50 per share. On August 28, 1997, the last full trading day prior to the consummation of the Hearst Transaction, the closing price of Argyle's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $27.625 per share. On November 5, 1997, the closing price of the Company's Series A Common Stock on the Nasdaq National Market (as reported in The Wall Street Journal) was $27.875 per share. The Company has not paid any dividends on its Series A Common Stock since inception and does not expect to pay any dividends on its Series A Common Stock in the immediate future. The Credit Facility and the indenture pursuant to which the Subordinated Notes were issued limit the ability of the Company to pay dividends on the Series A Common Stock under certain conditions. S-16 CAPITALIZATION The following table sets forth the capitalization of the Company as of June 30, 1997; (i) on a pro forma basis giving effect to the Hearst Transaction; (ii) on a pro forma basis as adjusted to give effect to the consummation of the Common Stock Offering and the application of the net proceeds therefrom as described under "Use of Proceeds;" and, (iii) on a pro forma basis as adjusted to give effect to the consummation of the Offerings and the application of the net proceeds therefrom as described under "Use of Proceeds." This table should be read in conjunction with and is qualified by reference to the selected historical and pro forma financial data contained in this Prospectus Supplement and the unaudited pro forma combined condensed financial statements and notes thereto included in documents incorporated by reference in the accompanying Prospectus.
JUNE 30, 1997 --------------------------------------------------- PRO FORMA PRO FORMA AS ADJUSTED FOR PRO FORMA AS HEARST COMMON ADJUSTED FOR TRANSACTION (1)(2) STOCK OFFERING (3) OFFERINGS (4) ------------------ ------------------ ------------- (DOLLARS IN THOUSANDS) Long-term debt: Notes.................... $ -- $ -- $400,000 Credit Facility (2)...... 454,000 521,480 125,480 Subordinated Notes....... 150,000 -- -- -------- -------- -------- Total long-term debt... 604,000 521,480 525,480 -------- -------- -------- Shareholders' equity: Preferred Stock, $.01 par value; 1,000,000 shares authorized: Series A preferred stock, 10,938 shares issued and outstanding........... 1 1 1 Series B preferred stock, 10,938 shares issued and outstanding........... 1 1 1 Series A common stock, $.01 par value; 100,000,000 shares authorized; 8,277,054 shares issued and outstanding prior to Common Stock Offering; 12,277,054 shares to be issued and outstanding after Common Stock Offering (5)............ 82 122 122 Series B common stock, $.01 par value; 100,000,000 shares authorized; 39,611,002 shares issued and outstanding (6)......... 396 396 396 Additional paid-in capital................. 183,531 286,011 286,011 Retained earnings (deficit)............... (17,672) (17,672) (17,672) -------- -------- -------- Total shareholders' equity................ 166,339 268,859 268,859 -------- -------- -------- Total capitalization... $770,339 $790,339 $794,339 ======== ======== ========
- -------- (1) The pro forma information gives effect to the Hearst Transaction, does not give effect to the divestiture of WDTN and WNAC and does not give effect to the issuance of 1.7 million of the total 2.7 million Adjustment Shares. For a description of pro forma adjustments, see the Company's unaudited pro forma combined condensed financial statements incorporated by reference in the accompanying Prospectus. (2) Assumes that the entire amount of Private Placement Debt assumed by the Company in the Hearst Transaction and related make-whole premium will have been refinanced from the proceeds of additional borrowings made under the Credit Facility. If the Company instead refinances a portion of the Private Placement Debt, the size of the Debt Offering (and consequently the proceeds therefrom) may be reduced by an amount approximately equal to the Private Placement Debt and related make-whole premium not refinanced. (3) The pro forma, as adjusted for the Common Stock Offering, information gives effect to (i) the Hearst Transaction; (ii) the Common Stock Offering (assuming the Underwriters' over-allotment option is not exercised); and, (iii) the application of the net proceeds from the Common Stock Offering. See "Use of Proceeds." (4) The pro forma, as adjusted for the Offerings, information gives effect to (i) the Hearst Transaction; (ii) the Common Stock Offering; (iii) the Debt Offering; and, (iv) the application of the net proceeds from the Offerings. See "Use of Proceeds." (5) Excludes 1,794,125 shares of Series A Common Stock issuable upon exercise of stock options. Options for 216,125 shares of Series A Common Stock are currently exercisable. (6) Includes 1.0 million shares of the total 2.7 million Adjustment Shares to be issued to Hearst in connection with the working capital adjustment and pension-related matters associated with the Hearst Transaction. S-17 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA The selected unaudited pro forma financial data for the year ended December 31, 1996 have been derived from the unaudited pro forma combined condensed financial statements of Argyle and the audited historical financial statements of the assets and properties of Hearst's six network-affiliated television broadcast stations and Hearst Broadcast Productions contributed by Hearst to Argyle prior to consummation of the Hearst Transaction (the "Hearst Broadcast Group"), in each case included in documents incorporated by reference in the accompanying Prospectus. The selected unaudited pro forma financial data for the six months ended June 30, 1996 and 1997 have been derived from the unaudited pro forma combined condensed financial statements of Argyle and the unaudited historical financial statements of the Hearst Broadcast Group, in each case included in documents incorporated by reference in the accompanying Prospectus. The following data should be read in conjunction with the Company's consolidated financial statements and related notes thereto included in Argyle's Annual Report on Form 10-K for the year ended December 31, 1996, Argyle's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, and June 30, 1997, Argyle's Current Report on Form 8-K dated January 31, 1997, filed on February 14, 1997, as amended by Current Report on Form 8-K/A dated January 31, 1997, filed on April 15, 1997, Argyle's Proxy Statement/Prospectus filed on July 31, 1997, the Company's Form 8-K/A filed on September 4, 1997, the Company's Current Report on Form 8-K dated August 29, 1997, filed on September 15, 1997, as amended by Current Report on Form 8-K/A dated August 29, 1997, filed on September 26, 1997 and, the Company's Current Report on Form 8-K dated August 29, 1997, filed on October 16, 1997, each of which is incorporated by reference in the accompanying Prospectus. S-18 HEARST-ARGYLE TELEVISION, INC. SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
HEARST-ARGYLE PRO FORMA(A) -------------------------------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, ------------ ------------------- 1996(A) 1996(A) 1997(A) ------------ -------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Total revenues.............................. $370,249 $181,571 $ 185,332 Station operating expenses.................. 161,103 79,990 80,947 Amortization of program rights.............. 45,522 23,765 21,187 Depreciation and amortization............... 31,848 16,119 15,725 -------- -------- --------- Station operating income.................... 131,776 61,697 67,473 Corporate expenses.......................... 11,000 5,500 5,500 -------- -------- --------- Operating income............................ 120,776 56,197 61,973 Interest expense, net....................... 44,650 22,325 22,325 -------- -------- --------- Income from continuing operations before income taxes............................... 76,126 33,872 39,648 Income taxes................................ 33,027 14,799 17,162 -------- -------- --------- Income from continuing operations........... 43,099 19,073 22,486 Less preferred stock dividends.............. (1,422) (712) (712) -------- -------- --------- Earnings applicable to common stock......... $ 41,677 $ 18,361 $ 21,774 ======== ======== ========= Earnings per common share................... $ 0.87 $ 0.38 $ 0.45 ======== ======== ========= Number of shares used in per share calculation(b)............................. 47,888 47,888 47,888 OTHER DATA: Broadcast cash flow, as defined(c).......... $159,952 $ 75,576 $ 83,062 Broadcast cash flow margin(d)............... 43.2% 41.6% 44.8% Operating cash flow, as defined(e).......... $148,952 $ 70,076 $ 77,562 Operating cash flow margin(f)............... 40.2% 38.6% 41.8% After tax cash flow (g)..................... $ 74,947 $ 35,192 $ 38,211 Program payments(h)......................... 49,194 26,005 21,323 PRO FORMA AS OF JUNE 30, BALANCE SHEET DATA: 1997 --------- Cash and cash equivalents......................................... $ 7,210 Total assets...................................................... 910,522 Total debt........................................................ 604,000 Stockholders' equity.............................................. 166,339
See notes on the following page. S-19 NOTES TO SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF HEARST-ARGYLE (DOLLARS IN THOUSANDS) (a) Includes the unaudited pro forma combined results of operations of Argyle and the historical results of operations of the Hearst Broadcast Group on a combined pro forma basis as if the Hearst Transaction had occurred at the beginning of the periods presented. The data does not include the required divestiture of WNAC and WDTN. See The Company's unaudited pro forma combined condensed financial statements incorporated by reference in the accompanying Prospectus. (b) Excludes any effect of preferred stock conversion and the effect of any Company options. (c) Broadcast cash flow is defined as station operating income, plus depreciation and amortization and write down of intangible assets, plus amortization of program rights, minus program payments. Pro forma broadcast cash flow would be $162,452 for the year ended December 31, 1996 and $77,076 for the six months ended June 30, 1996 using normalized program payments for each respective period. (See note (h) below.) Broadcast cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. Broadcast cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (d) Broadcast cash flow margin is broadcast cash flow divided by total revenues, expressed as a percentage. (e) Operating cash flow is defined as operating income, plus depreciation and amortization, and amortization of program rights, minus program payments and adjusted for any non-cash compensation expense. Pro forma operating cash flow would be $151,452 for the year ended December 31, 1996 and $71,576 for the six months ended June 30, 1996 using normalized program payments for each respective period. (See note (h) below.) Operating cash flow is presented here not as a measure of operating results, but rather as a measure of debt service ability. Operating cash flow does not purport to represent cash provided by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (f) Operating cash flow margin is operating cash flow divided by total revenues, expressed as a percentage. (g) After tax cash flow is defined as net income plus depreciation and amortization. After tax cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. After tax cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (h) Program payments for the year ended December 31, 1996 and the six months ended June 30, 1996 include $2.5 million and $1.5 million, respectively, of the last year of Hearst Broadcast Group scheduled program payments for a program that was replaced during the end of 1995. Without these amounts, program payments are normalized period to period. S-20 SELECTED FINANCIAL DATA OF ARGYLE The historical financial data for the years ended December 31, 1992, 1993 and 1994 have been derived from the audited combined financial statements consisting of Northstar Television of Grand Rapids Inc., Northstar Television of Jackson, Inc. and Northstar Television of Providence, Inc., collectively the "Northstar Stations," the accounting predecessor to Argyle, included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the years ended December 31, 1995 and 1996 have been derived from the audited consolidated financial statements of Argyle included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the six months ended June 30, 1996 and 1997 have been derived from the unaudited condensed consolidated financial statements of Argyle, included in documents incorporated by reference in the accompanying Prospectus. The pro forma consolidated financial data for the year ended December 31, 1996 and for the six months ended June 30, 1996 and 1997 have been prepared as if the acquisition of KHBS and KHOG (the "Arkansas Stations"), which occurred effective June 1, 1996; the Company's Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. relating to WNAC (the "Clear Channel Venture"), which occurred effective July 1, 1996; and the exchange of two television stations owned by the Company with two television stations owned by Gannett, Inc. (the "Gannett Swap"), which occurred effective January 31, 1997, had been completed at the beginning of the periods presented. Such pro forma data is not necessarily indicative of the actual results that would have occurred or of results that may occur. The historical financial data for the six months ended June 30, 1996 and 1997 are unaudited but, in the opinion of the Company's management, have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for those periods. Results for the six month periods ended June 30, 1996 and 1997 are not necessarily indicative of the results for a full year. S-21 SELECTED FINANCIAL DATA OF ARGYLE
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, ---------------------------------------------------------- ------------------------------------ ARGYLE ARGYLE PREDECESSOR HISTORICAL ARGYLE HISTORICAL PRO FORMA ARGYLE HISTORICAL PRO FORMA -------------------------- ------------------- --------- ------------------ ---------------- 1992 1993 1994 1995(A) 1996(B) 1996(C) 1996(B) 1997(D) 1996(C) 1997(C) -------- ------- ------- --------- -------- --------- -------- -------- ------- ------- STATEMENT OF (IN THOUSANDS) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATIONS DATA: Total revenues....... $ 27,103 $28,440 $34,538 $ 46,944 $ 73,294 $ 84,243 $ 34,057 $ 39,765 $41,049 $40,740 Station operating expenses............ 13,209 14,295 16,430 23,603 37,639 41,772 18,372 21,367 22,497 21,641 Write-down of intangible assets .. 25,500 -- -- -- -- -- -- -- -- -- Amortization of program rights...... 4,670 3,876 3,600 3,961 4,725 5,225 2,571 2,119 2,289 2,135 Depreciation and amortization........ 3,511 2,884 3,126 12,294 23,965 26,075 10,724 12,760 12,378 12,898 -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Station operating income (loss)....... (19,787) 7,385 11,382 7,086 6,965 11,171 2,390 3,519 3,885 4,066 Corporate expenses... 786 1,174 1,103 2,324 4,285 4,285 1,867 1,904 1,867 1,904 Non-cash compensation expense............. -- -- -- 675 675 675 337 503 337 504 -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Operating income (loss).............. (20,573) 6,211 10,279 4,087 2,005 6,211 186 1,112 1,681 1,658 Interest expense, net................. 7,849 5,885 4,745 12,052 16,566 18,119 7,304 9,407 8,376 9,407 -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Income (loss) from continuing operations before income taxes........ (28,422) 326 5,534 (7,965) (14,561) (11,908) (7,118) (8,295) (6,695) (7,749) Income taxes......... -- 301 170 -- -- -- -- -- -- -- -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Income (loss) from continuing operations.......... (28,422) 25 5,364 (7,965) (14,561) (11,908) (7,118) (8,295) (6,695) (7,749) Cumulative effect of a change in accounting principle (e)................. -- (213) -- -- -- -- -- -- -- -- Extraordinary item(f)............. -- -- (774) (7,842) -- -- -- -- -- -- -------- ------- ------- --------- -------- -------- -------- -------- ------- ------- Net income (loss) ... $(28,422) $ (188) $ 4,590 (15,807) (14,561) (11,908) (7,118) (8,295) (6,695) (7,749) ======== ======= ======= Less preferred stock dividends (g)....... -- (829) (1,422) (118) (711) (712) (712) --------- -------- -------- -------- -------- ------- ------- Loss applicable to common stock........ $ (15,807) $(15,390) $(13,330) $ (7,236) $ (9,006) $(7,407) $(8,461) ========= ======== ======== ======== ======== ======= ======= Loss per common share............... $ (1.25) $ (1.37) $ (1.17) $ (0.65) $ (0.79) $ (0.65) $ (0.75) Number of shares used in per share calculation......... 6,388 11,246 11,347 11,144 11,347 11,347 11,347 OTHER DATA: Broadcast cash flow, as defined(h)....... $ 9,577 $ 9,868 $14,223 $ 20,440 $ 31,889 $ 37,800 $ 13,776 $ 16,060 $16,458 $16,884 Broadcast cash flow margin(i)........... 35.3% 34.7% 41.2% 43.5% 43.5% 44.8% 40.4% 40.4% 40.1% 41.4% Operating cash flow, as defined(j)....... $ 8,791 $ 8,694 $13,120 $ 18,116 $ 27,604 $ 33,515 $ 11,909 $ 14,156 $14,591 $14,980 Operating cash flow margin(k)........... 32.4% 30.6% 38.0% 38.6% 37.7% 39.7% 35.0% 35.6% 35.5% 36.8% Cash flow from (used in) operating activities.......... $ 9,681 $ 9,734 $12,774 $ 6,859 $ 6,943 N/A $ (260) $ 1,601 N/A N/A Cash flow used in investing activities.......... (666) (1,103) (668) (237,501) (28,745) N/A (10,450) (27,179) N/A N/A Cash flow from (used in) financing activities.......... (9,727) (8,734) (10,887) 232,846 20,545 N/A 11,382 26,789 N/A N/A Capital expenditures........ 669 1,136 701 3,767 6,633 3,590 4,091 N/A N/A Program payments .... 4,317 4,277 3,885 2,901 3,766 $ 4,671 1,909 2,338 $ 2,094 $ 2,215 BALANCE SHEET DATA (AT PERIOD END): Cash and cash equivalents......... 196 93 1,313 2,206 949 736 2,878 2,160 N/A N/A Total assets......... 79,079 76,015 78,575 291,141 328,608 356,974 322,886 338,468 N/A N/A Total debt (including current portion).... 66,635 63,235 42,670 150,000 171,500 191,500 161,500 199,000 N/A N/A Stockholders' equity (deficit)(l)........ (3,078) (3,440) 24,513 116,293 129,152 144,082 136,969 120,650 N/A N/A
See notes on the following page. S-22 NOTES TO SELECTED FINANCIAL DATA OF ARGYLE (a) Includes the results of operations of Argyle, the results of operations of the acquired WZZM (Grand Rapids, MI), WAPT (Jackson, MS) and WNAC (Providence, RI) for the full period, the results of operations of the acquired KITV (Honolulu, HI) from June 13, 1995 and the results of operations of the acquired WGRZ (Buffalo, NY) from December 5, 1995. (b) Includes the results of operations of Argyle, the results of operations of the acquired Arkansas Stations from June 1, 1996 and the Clear Channel Venture from July 1, 1996. (c) As to 1996, gives effect to the acquisition of the Arkansas Stations, the Clear Channel Venture and the Gannett Swap as if all such transactions had occurred at the beginning of 1996. As to 1997, gives effect to the Gannett Swap as if such had occurred at the beginning of 1997. The acquisitions have been accounted for using the purchase method of accounting. (d) Includes the results of operations of Argyle and the effect on the Gannett Swap, which occurred effective January 31, 1997. (e) Represents the cumulative effect of the adoption of SFAS No. 109, "Accounting for Income Taxes." (f) Represents the write-offs of unamortized financing costs due to early extinguishment of bank debt. (g) Dividends associated with preferred stock related to the acquisition of the Arkansas Stations. (h) Broadcast cash flow is defined as station operating income (loss), plus depreciation and amortization and write down of intangible assets, plus amortization of program rights, minus program payments. Broadcast cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. Broadcast cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (i) Broadcast cash flow margin is broadcast cash flow divided by total revenues, expressed as a percentage. (j) Operating cash flow is defined as operating income (loss), plus depreciation and amortization, write down of intangible assets and amortization of program rights, minus program payments, plus non-cash compensation expense. Operating cash flow is presented here not as a measure of operating results, but rather as a measure of debt service ability. Operating cash flow does not purport to represent cash provided by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (k) Operating cash flow margin is operating cash flow divided by total revenues, expressed as a percentage. (l) Argyle has not paid any dividends on its common stock since inception. (See note (g) above.) S-23 SELECTED FINANCIAL DATA OF THE HEARST BROADCAST GROUP The historical financial data for the six months ended June 30, 1996 and 1997 and for the years ended December 31, 1992 and 1993 have been derived from the unaudited combined financial statements of the Hearst Broadcast Group, included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the years ended December 31, 1994, 1995 and 1996 have been derived from the audited combined financial statements of the Hearst Broadcast Group, included in documents incorporated by reference in the accompanying Prospectus. The historical financial data for the years ended December 31, 1992 and 1993 and for the six months ended June 30, 1996 and 1997 are unaudited but, in the opinion of management of the Hearst Broadcast Group, have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for those periods. Results for the six month periods ended June 30, 1996 and 1997 are not necessarily indicative of the results for a full year.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------ ------------------ 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Total revenues.......... $221,159 $224,067 $259,459 $279,340 $283,971 $139,616 $143,566 Station operating expenses............... 106,430 103,880 106,281 117,535 121,501 58,594 60,596 Amortization of program rights................. 36,768 37,087 40,266 38,619 40,297 21,476 19,052 Depreciation and amortization........... 26,107 26,008 23,071 22,134 16,971 8,584 8,190 -------- -------- -------- -------- -------- -------- -------- Station operating income................. 51,854 57,092 89,841 101,052 105,202 50,962 55,728 Corporate expenses...... 5,657 5,924 8,007 7,857 7,658 3,965 4,467 -------- -------- -------- -------- -------- -------- -------- Operating income........ 46,197 51,168 81,834 93,195 97,544 46,997 51,261 Interest expense, net... 22,510 22,773 22,678 22,218 21,235 12,823 12,485 -------- -------- -------- -------- -------- -------- -------- Income from continuing operations before income taxes........... 23,687 28,395 59,156 70,977 76,309 34,174 38,776 Income taxes............ 10,658 17,123 25,265 30,182 31,907 14,244 16,054 -------- -------- -------- -------- -------- -------- -------- Net income.............. $ 13,029 $ 11,272 $ 33,891 $ 40,795 $ 44,402 $ 19,930 $ 22,722 ======== ======== ======== ======== ======== ======== ======== OTHER DATA: Broadcast cash flow, as defined(a)............. $ 82,077 $ 82,626 $113,999 $123,038 $117,947 $ 57,111 $ 63,862 Broadcast cash flow margin(b).............. 37.1% 36.9% 43.9% 44.0% 41.5% 40.9% 44.5% Operating cash flow, as defined(c)............. $ 77,891 $ 79,147 $108,749 $117,087 $109,457 $ 50,637 $ 56,017 Operating cash flow margin(d).............. 35.2% 35.3% 41.9% 41.9% 38.5% 36.3% 39.0% Cash flows from Operating Activities... N/A N/A $ 44,460 $ 61,185 $ 65,802 $ 29,116 $ 22,122 Cash flows used in Investing Activities... N/A N/A (8,430) (8,621) (7,764) (3,185) (1,683) Cash flows used in Financing Activities... N/A N/A (33,584) (52,020) (58,145) (24,991) (18,271) Capital expenditures.... $ 6,398 $ 4,879 8,430 8,621 7,764 3,185 1,683 Program payments ....... 32,652 37,561 39,179 38,767 44,523 23,911 19,108 BALANCE SHEET DATA: Cash and cash equivalents............ N/A N/A 2,446 2,990 2,882 3,930 5,050 Total assets............ N/A N/A 387,984 385,406 366,956 355,990 349,836 Due to Parent Company and Affiliates......... N/A N/A 283,988 272,762 259,020 267,700 263,471
See notes on the following page. S-24 NOTES TO SELECTED FINANCIAL DATA OF THE HEARST BROADCAST GROUP (a) Broadcast cash flow is defined as station operating income, plus depreciation and amortization, plus amortization of program rights, minus program payments. Broadcast cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. Broadcast cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (b) Broadcast cash flow margin is broadcast cash flow divided by total revenues, expressed as a percentage. (c) Operating cash flow is defined as operating income, plus depreciation and amortization, plus amortization of program rights, minus program payments, and adjusted for non-cash compensation expense. Operating cash flow is presented here not as a measure of operating results, but rather as a measure of debt service ability. Operating cash flow does not purport to represent cash provided by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (d) Operating cash flow margin is operating cash flow divided by total revenues, expressed as a percentage. S-25 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding beneficial ownership of the Company's Series A Common Stock as of November 1, 1997 and as adjusted to reflect the sale of the shares offered hereby (assuming no exercise of the Underwriters' over-allotment option) by (i) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock; (ii) each director and executive officer of the Company; and (iii) all directors and executive officers of the Company as a group. Unless otherwise indicated below, to the knowledge of the Company, all persons listed below have sole voting and investment power with respect to their shares of Common Stock.
SERIES A COMMON STOCK SERIES A COMMON STOCK BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP PRIOR TO OFFERING(1) AFTER OFFERING(1) ------------------------ --------------------- PERCENT OF PERCENT OF NAME (2) NUMBER SERIES NUMBER SERIES - -------- ---------- ---------- ---------- ---------- Bob Marbut(3).................. 955,361 11.5% 955,361 7.8% John Conomikes................. -- -- -- -- David J. Barrett............... -- -- -- -- Anthony J. Vinciquerra......... 11,403 * 11,403 * Dean H. Blythe................. 12,036(4) * 12,036 * Harry T. Hawks(3).............. 104,649 1.3% 104,649 * Ibra Morales(3)................ 198,300 2.4% 198,300 1.6% Frank A. Bennack, Jr........... -- -- -- -- Victor F. Ganzi................ -- -- -- -- George R. Hearst, Jr........... -- -- -- -- William R. Hearst III.......... -- -- -- -- Gilbert C. Maurer.............. -- -- -- -- David Pulver(3)................ 81,656(5) 1.0% 81,656 * Virginia H. Randt.............. -- -- -- -- Caroline L. Williams........... 37,646(5) * 37,646 * All Hearst-Argyle directors and executive officers as a group (15 persons).................. 1,401,051(6) 16.8% 1,401,051 11.4% The Hearst Corporation(7)...... 38,611,002(8) 82.3% 38,611,002 75.9% Chase Manhattan Investment Holdings, L.P.(3)(9).......... 1,157,302 14.0% 1,157,302 9.4% Blake Byrne(3)(10)............. 600,632 7.2% 600,632 4.9%
- -------- * Represents beneficial ownership of less than 1% of the issued and outstanding shares of Series A Common Stock. (1) Number and percent of outstanding Series A Common Stock prior to and after the Common Stock Offering does not include any shares of Series A Common Stock issuable upon the conversion of the Series B Common Stock, Series A Preferred Stock or Series B Preferred Stock into Series A Common Stock or the issuance of any Adjustment Shares. (2) Unless otherwise indicated, the address of each person or entity named in the table is c/o Hearst-Argyle Television, Inc., 888 Seventh Avenue, New York, New York 10106. (3) Indicates that such person or entity is a party to a Registration Rights Agreement with the Company dated as of August 29, 1997. See "Shares Eligible for Future Sale." (4) Includes 10,000 shares of Series A Common Stock issuable pursuant to presently exercisable stock options. (5) Includes 15,000 shares of Series A Common Stock issuable pursuant to presently exercisable stock options. (6) Includes 40,000 shares of Series A Common Stock issuable pursuant to presently exercisable stock options. (7) The Hearst Family Trust is the sole common stockholder of Hearst. The address of The Hearst Family Trust is 888 Seventh Avenue, New York, New York 10106. The address of Hearst is 959 Eighth Avenue, New York, New York 10019. (8) Indicates the number of shares of Series B Common Stock held by Hearst (excluding the Adjustment Shares). The shares of Series B Common Stock are convertible at any time at the option of the holder on a share-for- share basis into shares of Series A Common Stock. (9) Chase Manhattan Bank, an affiliate of Chase Manhattan Investment Holdings, L.P., is the lead bank under the Company's existing Credit Facility and was the lead bank under the Company's prior credit facility. Frank A. Bennack, Jr., a director of the Company, is a director of Chase Manhattan Bank. The address of Chase Manhattan Investment Holdings, L.P. is 380 Madison Avenue, New York, New York 10017. (10) Mr. Byrne is a former director and executive officer of Argyle. His address is 9220 Sunset Boulevard, Suite 210, Los Angeles, California 10017. S-26 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Common Stock Offering (assuming the Underwriters' over-allotment option is not exercised), the Company will have outstanding 12,291,204 shares of Series A Common Stock and 38,611,002 shares of Series B Common Stock (excluding any Adjustment Shares). The Company also has shares of Series A Preferred Stock and Series B Preferred Stock outstanding. The Series A Preferred Stock is convertible at any time into an aggregate of 312,514 shares of Series A Common Stock. The Series B Preferred Stock is convertible at any time after June 11, 2001 into shares of Series A Common Stock at a conversion rate equal to the then current market price of the Series A Common Stock. In addition, the Company has outstanding options to purchase 1,794,125 shares of Series A Common Stock, of which options are currently exercisable for 216,125 shares. All of the shares of Series A Common Stock (including the shares offered hereby) generally will be freely tradeable without restriction or further registration under the Securities Act, except that the sale of any shares held by persons who are "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act, or who were at the time of the Company's shareholder vote on the Hearst Transaction "affiliates" of the Company pursuant to Rule 145 under the Securities Act, may be generally sold subject to certain restrictions as to timing, manner and volume. In this regard, the Company has in effect a registration statement covering the resale from time to time of 4,599,260 shares of Series A Common Stock received in the Hearst Transaction by certain former limited partners of a partnership that prior to the Hearst Transaction owned shares of the Company's common stock in order to permit such persons to sell their shares without regard to the restrictions discussed in the preceding sentence. The holders of approximately 4,443,406 shares covered by such registration statement have additional rights under that certain Registration Rights Agreement with the Company dated as of August 29, 1997. Pursuant to the Registration Rights Agreement such holders of the Company's Series A Common Stock (the "Holders") have the right, subject to certain limitations and conditions, to require the Company to register for distribution through a firm commitment underwriting all or any portion of the Company's Series A Common Stock issued to such Holders in the Hearst Transaction. Such Holders also have piggyback registration rights pursuant to the Registration Rights Agreement with respect to any proposed offering of the Company's Series A Common Stock for cash through a firm commitment underwriting sought by the Company. The Series B Common Stock held by Hearst and the Series A Common Stock into which the Series B Common Stock is convertible may not be sold without registration under the Securities Act or unless an exemption from registration is available, including the exemption afforded by Rule 144 under the Securities Act. In general, under Rule 144 under the Securities Act as currently in effect a person (or persons whose shares are aggregated) who has beneficially owned restricted securities within the meaning of Rule 144 ("Restricted Securities") for at least one year, and including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then- outstanding shares of Series A Common Stock or the average weekly trading volume of the Series A Common Stock on the Nasdaq National Market during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. Any person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of the Company at any time during the three months preceding a sale, and who has beneficially owned shares for at least two years (including any period of ownership of preceding non-affiliated holders), would be entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements. An "affiliate" is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or under common control with, such issuer. Rule 144A under the Securities Act as currently in effect generally permits unlimited resales of certain Restricted Securities of any issuer provided that the purchaser is a qualified institution that owns and invests on a discretionary basis at least $100 million in securities (and, in the case of a bank or savings and loan association has a net worth of at least $25 million) or is a registered broker-dealer that owns and invests on a discretionary basis at least $10 million in securities. Rule 144A allows certain existing shareholders of the Company to sell their shares of Series A Common Stock held prior to this Common Stock Offering to such institutions and registered broker-dealers without regard to any volume or other restrictions. S-27 The Company, its directors and executive officers, Hearst and certain holders of the Series A Common Stock, (collectively, the "Restricted Holders") have agreed not to offer to sell, sell, distribute, grant any option to purchase or otherwise dispose of directly or indirectly, any shares of Series A Common Stock or securities convertible into, or exercisable or exchangeable for, shares of Series A Common Stock owned by them prior to the expiration of 90 days from the date of this Prospectus Supplement, except (i) with the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated; (ii) in the case of the Company, (A) for the issuance of shares of Series B Common Stock, (B) for the issuance of shares of Series A Common Stock in connection with acquisition transactions in which the recipients of such shares are restricted from selling such shares until after expiration of 90 days from the date of this Prospectus Supplement, (C) upon the exercise of outstanding options or the grant of options under the Company's stock option plans or compensation arrangements, and (D) upon the conversion of the Company's Series A Preferred Stock; and, (iii) in the case of the directors and executive officers of the Company, for the exercise by such individuals of outstanding options. The Company can make no prediction as to the effect, if any, that sales of shares of its Series A Common Stock, or the availability of shares for future sale, will have on the market price of the Series A Common Stock prevailing from time to time. Sales of substantial amounts of Series A Common Stock (including shares owned upon the exercise of options) in the public market, or the perception that such sales could occur, could depress the prevailing market price for the Series A Common Stock. Such sales may also make it more difficult for the Company to sell equity securities or equity-related securities in the future at a time and price that it deems appropriate. S-28 UNDERWRITING Subject to the terms and conditions set forth in a purchase agreement (the "International Purchase Agreement") among the Company and each of the underwriters named below (the "International Underwriters"), each of the International Underwriters has severally agreed to purchase from the Company, the aggregate number of shares of Series A Common Stock set forth opposite its name below (the "International Offering").
NUMBER INTERNATIONAL UNDERWRITERS OF SHARES -------------------------- --------- Merrill Lynch International....................................... 180,000 Credit Suisse First Boston (Europe) Limited....................... 180,000 J.P. Morgan Securities Ltd........................................ 180,000 Morgan Stanley & Co. International Limited........................ 180,000 Nesbitt Burns Securities Inc...................................... 80,000 ------- Total........................................................ 800,000 =======
The Company also has entered into a purchase agreement (the "U.S. Purchase Agreement") with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated in the United States (the "U.S. Underwriters"), providing for the concurrent offer and sale of 3,200,000 shares of Series A Common Stock in the United States and Canada. The closings with respect to the U.S. Offering and the International Offering are conditioned upon one another. The International Purchase Agreement provides that the obligation of the International Underwriters to pay for and accept delivery of the shares is subject to the approval of certain legal matters by their counsel and to certain other conditions. The International Underwriters are obligated to take and pay for all of the shares if any are purchased. The International Underwriters have advised the Company that the International Underwriters propose to offer the shares of Series A Common Stock offered hereby to the public initially at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not to exceed $.71 per share below the public offering price. The International Underwriters may allow, and such dealers may reallow, a discount not in excess of $.10 per share below the public offering price on sales to certain dealers. After the initial offering, the offering price and other selling terms may from time to time be varied by the International Underwriters. The public offering concession and discount per share of Series A Common Stock are identical under the International Purchase Agreement and the U.S. Purchase Agreement. The U.S. Underwriters and the International Underwriters have entered into an Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for the coordination of their activities. Pursuant to the Intersyndicate Agreement, the International Underwriters and any dealer to whom they sell shares of Series A Common Stock will not offer to sell or sell shares of Series A Common Stock to United States or Canadian persons or to persons they believe intend to resell to United States or Canadian persons, and the U.S. Underwriters and any dealer to whom they sell shares of Series A Common Stock will not offer to sell or sell shares of Series A Common Stock to non-United States or non-Canadian persons, except, in each case, for transactions pursuant to the Intersyndicate Agreement. The Intersyndicate Agreement also provides, among other things, that sales may be made between the International Underwriters and the U.S. Underwriters of such number of shares of Series A Common Stock as may be mutually agreed. The price of any shares of Series A Common Stock so sold shall be the public offering price, less an amount not greater than the selling concession. S-29 The Company has granted to the International Underwriters an option to purchase up to an aggregate of 120,000 additional shares of Series A Common Stock, to cover over-allotments, if any, at the public offering price set forth on the cover page of this Prospectus Supplement less the underwriting discount and commissions. Such option, which will expire 30 days after the date of this Prospectus Supplement, may be exercised solely to cover over- allotments. To the extent such option is exercised, each International Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number of shares set forth opposite each International Underwriter's name in the preceding table bears to the total number of shares of Series A Common Stock offered by the International Underwriters hereby. The Company has granted to the U.S. Underwriters an option to purchase up to an aggregate of 480,000 additional shares of Series A Common Stock, exercisable in whole or in part for 30 days after the date of this Prospectus Supplement, solely to cover over-allotments, if any, on terms similar to those granted to the International Underwriters. All or a portion of an over-allotment option in either the U.S. Offering or the International Offering may be allocated to cover an over-allotment in the other Offering, in each case in the sole discretion of the U.S. Underwriters and the International Underwriters. Each International Manager agrees that (a) it has not offered or sold and, for a period of six months following the consummation of the Common Stock Offering, will not offer or sell any shares of Series A Common Stock to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which do not constitute an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (b) it has complied with and will comply with all applicable provisions of the Public Offers of Securities Regulations 1995 and the Financial Services Act 1986 with respect to anything done by it in relation to the shares of Series A Common Stock in, from, or otherwise involving the United Kingdom and (c) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue or sale of shares of Series A Common Stock to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or to a person on to whom the document may otherwise lawfully be issued or passed. At the request of the Company, the U.S. Underwriters have reserved for sale, at the initial public offering price, up to 200,000 of the shares of Series A Common Stock offered hereby to be sold to certain directors, officers, employees and other persons associated with the Company or Hearst. The number of shares of Series A Common Stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares which are not orally confirmed for purchase within one day of the pricing of the Offering will be offered by the U.S. Underwriters to the general public on the same terms as the other shares offered hereby. The Company agreed to indemnify the International Underwriters against certain liabilities, including liabilities under the Securities Act and other applicable securities laws, or to contribute to payments the U.S. Underwriters may be required to make in respect thereof. Under certain circumstances, the Company will reimburse the International Underwriters for certain of their expenses. The Company, its directors and executive officers, Hearst and certain other holders of Series A Common Stock (the "Restricted Holders") have agreed not to offer to sell, sell, distribute, grant any option to purchase or otherwise dispose of directly or indirectly, any shares of Series A Common Stock or securities convertible into, or exercisable or exchangeable for, shares of Series A Common Stock owned by them prior to the expiration of 90 days from the date of this Prospectus Supplement, except (i) with the prior written consent of Merrill Lynch; (ii) in the case of the Company, (A) for the issuance of shares of Series B Common Stock, (B) for the issuance of shares of Series A Common Stock in connection with acquisition transactions in which the recipients of such shares are restricted from selling such shares until after expiration of 90 days from the date of this Prospectus Supplement, (C) upon the exercise of outstanding options or the grant of options under the Company's stock S-30 option plans or compensation arrangements and (D) upon the conversion of the Company's Series A Preferred Stock; and, (iii) in the case of the directors and executive officers of the Company, for the exercise by such individuals of outstanding options. Until the distribution of Series A Common Stock is completed, rules of the Securities and Exchange Commission (the "Commission") may limit the ability of the International Underwriters to bid for and purchase the Series A Common Stock. As an exception to these rules, the International Underwriters are permitted to engage in certain transactions that stabilize the price of the Series A Common Stock. Such transactions consist of bids or purchases for the purposes of pegging, fixing or maintaining the price of the Series A Common Stock. In connection with the U.S. Offering and the International Offering, the U.S. Underwriters and the International Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the shares of Series A Common Stock. Specifically, the U.S. Underwriters and the International Underwriters may over-allot the offering, creating a short position. In addition, the U.S. Underwriters and the International Underwriters may bid for and purchase shares of Series A Common Stock in the open market to cover short sales or to stabilize the price of the shares of Series A Common Stock. Finally, the underwriting syndicate may reclaim selling concessions allowed for distributing the shares of Series A Common Stock in the U.S. Offering and the International Offering if the syndicate repurchases previously distributed shares of Series A Common Stock in syndicate covering transactions, stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the shares of Series A Common Stock above independent market levels. The U.S. Underwriters and the International Underwriters are not required to engage in these activities and may end any of these activities at any time. The U.S. Underwriters and the International Underwriters may engage in passive market making transactions in the Series A Common Stock in accordance with Rule 103 of Regulation M promulgated by the Commission. In general, a passive market maker may not bid or purchase the Series A Common Stock at a price that exceeds the highest independent bid. In addition, the net daily purchases made by any passive market maker generally may not exceed 30% of its average daily trading volume in the Series A Common Stock during a specified two month prior period, or 200 shares, whichever is greater. A passive market maker must identify passive market making bids on the Nasdaq electronic inter- dealer reporting system. Passive market making may stabilize or maintain the market price of the Series A Common Stock above independent market levels. Underwriters and selling group members are not required to engage in passive market making and may end passive market making activities at any time. From time to time certain of the Underwriters or their affiliates engage in transactions, including commercial banking and investment banking transactions, with and perform services for the Company and its affiliates in the ordinary course of business, from which they have received and will continue to receive customary fees. In addition, in the ordinary course of business the Underwriters may actively trade securities of the Company for such Underwriter's own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. For its advisory services to the Company in connection with the Hearst Transaction, the Company paid Merrill Lynch a fee of $2.1 million, reimbursed Merrill Lynch for its out-of-pocket expenses and agreed to indemnify Merrill Lynch and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. For its advisory services to Argyle Television Investors, L.P., the Company's largest stockholder prior to the Hearst Transaction, the Company paid Credit Suisse First Boston Corporation a fee of $800,000, reimbursed Credit Suisse First Boston Corporation for its out-of-pocket expenses and agreed to indemnify Credit Suisse First Boston Corporation and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. For its advisory services to Hearst in connection with the Hearst Transaction, Hearst paid J.P. Morgan Securities Inc. a fee of $1.5 million, reimbursed J.P. Morgan Securities Inc. for its out-of-pocket expenses and agreed to indemnify J.P. Morgan Securities Inc. and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. The Company reimbursed Hearst for amounts paid to J.P. Morgan Securities Inc. S-31 Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities Inc., acts as the documentation agent and a lender under the Company's Credit Facility, for which it has received and will continue to receive customary fees. It is expected that Morgan Guaranty Trust Company will receive approximately $47.6 million of repayment under the Credit Facility from the net proceeds of the Offerings. Under the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"), special considerations apply to a public offering of securities where more than 10% of the net proceeds thereof will be paid to a participating underwriter or any of its affiliates. Therefore, this offering is being conducted pursuant to Rule 2710 (c)(8) of the NASD Conduct Rules which establishes certain procedural safeguards in connection with offerings in such circumstances in which NASD member firms intend to participate and where more than 10% of the offering proceeds are to be paid to them or their affiliates. See "Use of Proceeds." Merchant GP, Inc., Credit Suisse First Boston Fund Investments 1995, L.P. and Credit Suisse First Boston Fund Investments 1994, L.P., each an affiliate of Credit Suisse First Boston Corporation (collectively, the "CSFB Funds"), beneficially own 4.2% of the Company's Series A Common Stock and are parties to a Registration Rights Agreement with the Company and certain other holders of the Company's Series A Common Stock providing the CSFB Funds and such other holders with piggyback registration rights with respect to any proposed offering of the Company's Series A Common Stock for cash through a firm commitment underwriting sought by the Company, and, subject to certain limitations and conditions, with the right to require the Company to register for distribution through a firm commitment underwriting of all or any portion of the Company's Series A Common Stock issued to them in the Hearst Transaction. CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS OF SERIES A COMMON STOCK The following is a general discussion of certain United States federal income and estate and gift tax consequences of the ownership and sale or other disposition of Series A Common Stock by a holder that, for United States federal income tax purposes, is not a "United States person" (a "Non-United States Holder"). For purposes of this discussion, a "United States person" means a citizen or resident (as determined for U.S. federal income tax purposes) of the United States; a corporation, partnership or other entity created or organized in the United States or under the laws of the United States or of any political subdivision thereof; an estate the income of which is includible in gross income for U.S. federal income tax purposes, regardless of its source; or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Resident alien individuals will be subject to United States federal income tax with respect to the Series A Common Stock as if they were United States citizens. THIS DISCUSSION IS BASED ON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AND THE ADMINISTRATIVE INTERPRETATIONS THEREOF AS OF THE DATE HEREOF, ALL OF WHICH MAY BE CHANGED EITHER RETROACTIVELY OR PROSPECTIVELY. THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY, DOES NOT CONSIDER ANY SPECIFIC FACTS OR CIRCUMSTANCES THAT MAY APPLY TO A PARTICULAR NON-UNITED STATES HOLDER AND DOES NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF OWNING AND DISPOSING OF SERIES A COMMON STOCK (INCLUDING THE INVESTOR'S STATUS AS A UNITED STATES PERSON OR NON-UNITED STATES HOLDER), AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. S-32 DIVIDENDS Dividends, if any, paid to a Non-United States Holder will generally be subject to the withholding of United States federal income tax at the rate of 30%, unless the dividend is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined herein) within the United States of the Non-United States Holder, in which case the dividend will be subject to the rules described in the next paragraph. Non-United States Holders should consult any applicable income tax treaties, which may provide for a reduced withholding rate or other rules different from those described above. For purposes of determining whether tax is to be withheld at a 30% rate or a reduced rate as specified by an income tax treaty, current law permits the Company to presume that dividends paid to an address in a foreign country are paid to a resident of such country absent definite knowledge that such presumption was not warranted (the "address rule"). However, on October 6, 1997, the U.S. Treasury Department issued final regulations on withholding of income tax on payments to foreign persons, effective January 1, 1999, which will abolish the address rule. Under these regulations, a Non-United States Holder seeking a reduced rate of withholding under an income tax treaty for dividends paid after December 31, 1998 would be required to provide to the Company a valid Internal Revenue Service Form W-8, certifying that such Non- United States Holder is entitled to benefits under an income tax treaty. The final regulations also provide special rules for determining whether, for purposes of assessing the applicability of an income tax treaty, dividends paid to a Non-United States Holder that is an entity should be treated as being paid to the entity itself or to the persons holding an interest in that entity. A Non-United States Holder who is eligible for a reduced withholding rate may obtain a refund of any excess amounts withheld by filing an appropriate claim for a refund with the Internal Revenue Service (the "Service"). The Company will not withhold federal income tax upon dividends paid to a Non-United States Holder if the Company receives the appropriate form of the Service (currently Form 4224) from that Non-United States Holder, certifying that such income is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder, unless the Company has knowledge to the contrary. Dividends paid to a Non-United States Holder of Series A Common Stock that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder will generally be taxed on a net income basis (that is, after allowance for applicable deductions) at the graduated rates that are applicable to United States persons. In the case of a Non-United States Holder that is a corporation, such income may also be subject to the United States federal branch profits tax (which is generally imposed on a foreign corporation upon the deemed repatriation from the United States of effectively connected earnings and profits) at a 30% rate, unless the rate is reduced or eliminated by an applicable income tax treaty and the Non-United States Holder is a qualified resident of the treaty country. GAIN ON SALE OR OTHER DISPOSITION Subject to special rules applicable to individuals as described below, a Non-United States Holder will generally not be subject to regular United States federal income or withholding tax on gain recognized on a sale or other disposition of Series A Common Stock, unless (i) the gain is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder or of a partnership, trust or estate in which such Non-United States Holder is a partner or beneficiary, or (ii) the Company has been, is or becomes a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code at any time within the shorter of the five-year period preceding such sale or other disposition or such Non-United States Holder's holding period for the Series A Common Stock and certain other conditions are satisfied. The Company believes that it has not been, is not currently and is not likely to become a United States real property holding corporation. Gains realized by a Non-United States Holder of Series A Common Stock that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent S-33 establishment," as defined therein) within the United States of the Non-United States Holder will generally be taxed on a net income basis (that is, after allowance for applicable deductions) at the graduated rates that are applicable to United States persons. In the case of a Non-United States Holder that is a corporation, such income may also be subject to the United States federal branch profits tax (which is generally imposed on a foreign corporation upon the deemed repatriation from the United States of effectively connected earnings and profits) at a 30% rate, unless the rate is reduced or eliminated by an applicable income tax treaty and the Non-United States Holder is a qualified resident of the treaty county. In addition to being subject to the rules described above, an individual Non-United States Holder who holds Series A Common Stock as a capital asset will generally be subject to tax at a 30% rate on any gain recognized on the sale or other disposition of such stock if (i) such gain is not effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is not attributable to a "permanent establishment," as defined therein) within the United States of the Non-United States Holder, and (ii) such individual is present in the United States for 183 days or more in the taxable year of the sale or other disposition and either (A) has a "tax home" in the United States (as specially defined for purposes of the United States federal income tax), or (B) maintains an office or other fixed place of business in the United States and the income from the sale of the stock is attributable to such office or other fixed place of business. Individual Non- United States Holders may also be subject to tax pursuant to provisions of United States federal income tax law applicable to certain United States expatriates (including former long-term residents of the United States). In the past years, legislation has been proposed, but never enacted, that would under certain circumstances have imposed United States federal income tax on gain realized from the sale or other disposition of Series A Common Stock by certain Non-United States Holders who owned at or prior to the time of sale or other disposition 10% or more of the Series A Common Stock. There can be no assurance that similar legislation will not again be proposed and, if proposed, enacted. FEDERAL ESTATE AND GIFT TAXES Series A Common Stock owned or treated as owned by an individual (regardless of whether such an individual is a citizen or a resident of the United States) at the date of death will be included in such individual's estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. A Non-United States Holder will not be subject to United States federal gift tax on a transfer of Series A Common Stock, unless such person is a domiciliary of the United States or such person is an individual subject to provisions of United States federal gift tax law applicable to certain United States expatriates (including former long-term residents of the United States). INFORMATION REPORTING AND BACKUP WITHHOLDING The Company must report annually to the Service and to each Non-United States Holder the amount of dividends paid to, and the tax withheld with respect to, such Non-United States Holder, regardless of whether tax was actually withheld and whether withholding was reduced by an applicable income tax treaty. Pursuant to certain income tax treaties and other agreements, that information may also be made available to the tax authorities of the country in which the Non-United States Holder resides. United States federal backup withholding (which generally is withholding tax imposed at the rate of 31% on certain payments to persons not otherwise exempt who fail to furnish certain identifying information) will generally not apply to (i) dividends paid to a Non-United States Holder that is subject to withholding at the 30% rate (or that is subject to withholding at a reduced rate under an applicable income tax treaty), or (ii) under S-34 current law, dividends paid to a Non-United States Holder at an address outside of the United States (unless the payor has knowledge that the payee is a United States person). However, under final U.S. Treasury Department regulations, effective as of January 1, 1999, a Non-United States Holder will generally be subject to United States withholding tax at a 31% rate, unless certain certification procedures (or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures) are satisfied, directly or through a foreign intermediary. The backup withholding and information reporting requirements also apply to the gross proceeds paid to a Non-United States Holder upon the sale or other disposition of Series A Common Stock by or through a United States office of a United States or foreign broker, unless the Non-United States Holder certifies to the broker under penalties of perjury as to, among other things, its name, address and status as a Non-United States Holder by filing the Service's Form W-8 with the broker, or unless the Non-United States Holder otherwise establishes an exemption. Information reporting requirements (but not backup withholding) will generally apply to a payment of the proceeds of a sale or other disposition of Class A Common Stock effected at a foreign office of (i) a United States broker, (ii) a foreign broker 50% or more of whose gross income for certain periods is effectively connected with the conduct of a trade or business within the United States, (iii) a foreign broker that is a "controlled foreign corporation" for United States federal income tax purposes, or (iv) effective January 1, 1999, a foreign broker that is (A) a foreign partnership, one or more of whose partners are U.S. persons, that in the aggregate hold more than 50% of the income or capital interest in the partnership at any time during its tax year, or (B) a foreign partnership engaged at any time during its tax year in the conduct of a trade or business in the United States, unless the broker has documentary evidence in its records that the Non-United States Holder is a Non-United States Holder (and the broker has no knowledge to the contrary) and certain other conditions are met, or unless the Non-United States Holder otherwise establishes an exemption. Neither backup withholding nor information reporting will generally apply to a payment of the proceeds of a sale or other disposition of Series A Common Stock effected at a foreign office of a foreign broker not subject to the preceding sentence. Any amounts withheld under the backup withholding rules will be refunded or credited against the Non-United States Holder's United States federal income tax liability, provided that the Non-United States Holder files an appropriate claim for a refund with the Service. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This Prospectus Supplement contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under "The Company," "Recent Developments," "Risk Factors," and those preceded by, followed by or that include the words "believes," "expects," "anticipates" or similar expressions. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Prospective purchasers should understand that the following important factors, in addition to those discussed elsewhere in this Prospectus Supplement and accompanying Prospectus and in the documents that are incorporated by reference, could affect the future results of the Company and could cause those results to differ materially from those expressed in each forward- looking statement: material adverse changes in economic conditions in the markets served by the Company; future regulatory actions and conditions in the television stations operating areas; the possibility that currently unanticipated difficulties may arise in integrating the operations of the Company's predecessors; and, competition from others in the broadcast television markets served by the businesses. S-35 PROSPECTUS HEARST-ARGYLE TELEVISION, INC. $600,000,000 DEBT SECURITIES --------------- 10,000,000 SHARES SERIES A COMMON STOCK --------------- Hearst-Argyle Television, Inc., a Delaware corporation (the "Company"), may issue, from time to time, together or separately, (i) up to an initial aggregate offering price or purchase price of $600,000,000 (or the equivalent thereof if any of the Debt Securities are denominated in a foreign currency or composite currency such as the European Currency Unit ("ECU")) of its unsecured debt securities ("Debt Securities"), in one or more series, consisting of debentures, notes or other evidences of indebtedness and having such prices and terms as are determined at the time of sale and (ii) shares of Series A Common Stock, par value $.01 per share ("Series A Common Stock"). The Debt Securities and the Series A Common Stock are collectively referred to herein as "Securities." The Securities may be issued as units and in any combination. Specific terms of the Securities ("Offered Securities") in respect of which this Prospectus is being delivered will be set forth in an applicable Prospectus Supplement ("Prospectus Supplement"), together with the terms of the offering of the Offered Securities and the initial price and net proceeds to the Company from the sale thereof. The Prospectus Supplement will set forth with regard to the particular Offered Securities, without limitation, the following: (i) in the case of Debt Securities, the specific designation, aggregate principal amount, purchase price, authorized denomination, maturity, rate or rates of interest (or method of calculation thereof) and dates for payment thereof, dates from which interest shall accrue, any exchangeability, conversion, redemption, prepayment or sinking fund provisions, the currency or currencies or currency unit or currency units in which principal, premium, if any, or interest, if any, is payable, and any listing on a national securities exchange; and (ii) in the case of the Series A Common Stock, the number of shares of Series A Common Stock and the terms of the offering and sale thereof and any listing on a national securities exchange. The Series A Common Stock is quoted on the Nasdaq National Market. The Company contemplates making an application for the quotation of any additional issuances of Series A Common Stock on the Nasdaq National Market or on any other national securities exchange on which the Series A Common Stock may then be listed. --------------- 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. The Securities may be sold by the Company directly to purchasers, through agents designated from time to time, or to or through underwriters or dealers. If underwriters or agents are involved in the offering of Securities, the names of the underwriters or agents will be set forth in the Prospectus Supplement. If an underwriter, agent or dealer is involved in the offering of any Securities, the underwriter's discount, agent's commission or dealer's purchase price will be set forth in, or may be calculated from the information set forth in, the Prospectus Supplement, and the net proceeds to the Company from such offering will be the public offering price of the Securities less such discount, in the case of an offering through an underwriter, or the purchase price of the Securities less such commission, in the case of an offering through an agent, and less, in each case, the other expenses of the Company associated with the issuance and distribution of the Securities. See "Plan of Distribution." --------------- Prior to issuance there will have been no market for the Debt Securities, and there can be no assurance that a secondary market for any such Debt Securities will develop. This Prospectus may not be used to consummate sales of any Offered Securities unless accompanied by a Prospectus Supplement. --------------- The date of this Prospectus is October 17, 1997. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, New York, New York 10048. Copies of such materials can be obtained upon written request from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Series A Common Stock is listed on the Nasdaq National Market. In addition, such materials may also be inspected and copied at the offices of the Nasdaq Stock Market, Inc. Listing Section, 1735 K Street, N.W., Washington, DC 20006, where copies may be obtained at prescribed rates. Copies of reports, proxy statements and other information electronically filed with the Commission by the Company may be inspected by accessing the Commission's World Wide Web site at http://www.sec.gov. The Company has filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. Such additional information may be obtained from the Commission's principal office in Washington, D.C. Statements contained in this Prospectus as to the contents of any contract or other document referred to herein or therein are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or such other document. A copy of the Registration Statement and the exhibits and schedules thereto may be examined without charge at the Commission's principal offices at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and copies of such materials can be obtained from the Public Reference Section of the Commission at prescribed rates. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission (File No. 0-27000) pursuant to the Exchange Act are incorporated herein by reference: (i) Annual Report on Form 10-K for the year ended December 31, 1996; (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; (iv) Current Report on Form 8-K dated January 31, 1997, filed on February 14, 1997, as amended by Current Report on Form 8-K/A dated January 31, 1997, filed on April 15, 1997; (v) Proxy Statement/Prospectus filed on July 31, 1997; (vi) Form 8-A/A filed on September 4, 1997; (vii) Current Report on Form 8-K dated August 29, 1997, filed on September 15, 1997, as amended by Current Report on Form 8-K/A dated August 29, 1997, filed on September 26, 1997; (viii) Current Report on Form 8-K dated August 29, 1997, filed on October 16, 1997; and (ix) all documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents which are incorporated 2 herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to Hearst-Argyle Television, Inc., 888 Seventh Avenue, New York, New York 10106, Attention: Corporate Secretary (tel. (212) 649-2300). Any statement contained in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified shall not be deemed to constitute a part of this Prospectus except as so modified, and any statement so superseded shall not be deemed to constitute part of this Prospectus. This Prospectus may not be used to consummate sales of Offered Securities unless accompanied by a Prospectus Supplement. The delivery of this Prospectus together with a Prospectus Supplement relating to particular Offered Securities in any jurisdiction shall not constitute an offer in the jurisdiction of any other securities covered by this Prospectus. 3 THE COMPANY The Company owns or manages 15 television stations reaching approximately 11.5% of U.S. television households. The Company is the largest "pure-play" publicly owned television broadcast company in the U.S. and is the third- largest, non-network owned television group in terms of audience delivered. Formed as a Delaware corporation in 1994 under the name Argyle Television, Inc. ("Argyle"), the Company is the successor to the combined operations of Argyle and the television broadcast group of The Hearst Corporation ("Hearst") pursuant to a merger transaction that was consummated on August 29, 1997 (the "Hearst Transaction"). In that transaction, Hearst contributed its television broadcast group and related broadcast operations (the "Hearst Broadcast Group") to Argyle and merged a wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the surviving corporation (renamed "Hearst-Argyle Television, Inc."). The Company owns 12 television stations, and manages three additional television stations and two radio stations that are owned or operated by Hearst. The Company has an option to acquire one of the managed television stations and Hearst's interests in another of the managed television stations, and has a right of first refusal with respect to the third managed television station. Under Federal Communications Commission ("FCC") regulations, the Company must divest two of its television stations (WNAC in Providence, Rhode Island; and WDTN-TV in Dayton, Ohio). A letter of intent has been signed for the divestiture of WNAC-TV and the Company is negotiating with a third party for the divestiture of WDTN. The following table sets forth certain information for each of the Company's owned and managed television stations:
PERCENTAGE OF MARKET NETWORK U.S. TELEVISION MARKET RANK(1) STATION AFFILIATION CHANNEL HOUSEHOLDS(2) ------ ------- --------- ----------- ------- --------------- *Boston, MA.............. 6 WCVB ABC 5 2.22% *Tampa, FL(3)............ 15 WWWB WB 32 1.47% *Pittsburgh, PA.......... 19 WTAE ABC 4 1.16% *Baltimore, MD........... 23 WBAL NBC 11 1.01% Cincinnati, OH.......... 30 WLWT NBC 5 0.81% *Kansas City, MO......... 31 KMBC ABC 9 0.81% *Kansas City, MO(3)...... 31 KCWB WB 29 *** *Milwaukee, WI........... 32 WISN ABC 12 0.81% *West Palm Beach, FL(3).. 43 WPBF ABC 25 0.61% Oklahoma City, OK....... 44 KOCO ABC 5 0.61% Providence, RI(4)(5).... 49 WNAC FOX 64 0.57% *Dayton, OH(4)........... 53 WDTN ABC 2 0.52% Honolulu, HI............ 71 KITV ABC 4 0.39% Jackson, MS............. 90 WAPT ABC 16 0.30% Fort Smith/Fayetteville, AR...................... 116 KHBS/KHOG ABC/ABC 40/29 0.22% ----- Total................ 11.51% =====
- -------- * Denotes a station owned or operated by the Company as a consequence of the Hearst Transaction. (1) Market rank is based on the relative size of the Designated Market Area defined by A.C. Nielsen Co. ("Nielsen") as geographic markets for the sale of national "spot" and local advertising time ("DMA") among the 211 generally recognized DMAs in the U.S., based on Nielsen estimates for the 1997-98 season. (2) Based on Nielsen estimates for the 1997-98 season. (3) WWWB-TV and WPBF-TV are managed by the Company under a management agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under a Program Services and Time Brokerage Agreement with KCWB-TV, Inc., the permittee of KCWB. (4) WNAC-TV's (Providence, RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal. Under FCC rules, a single entity cannot own stations with overlapping signals. The Company will divest WNAC and WDTN, and has entered into a letter of intent to divest WNAC. (5) Subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. 4 As a result of the Hearst Transaction, Hearst currently owns approximately 38.6 million shares of the Company's Series B Common Stock, comprising approximately 82% of the total outstanding common stock of the Company. In connection with the Hearst Transaction and related transactions, Hearst may receive up to an additional 2.7 million shares of Series B Common Stock which would result in Hearst's ownership of approximately 83% of the Company's total outstanding common stock. Through its ownership of the Company's Series B Common Stock, Hearst has the right to elect nine of the 11 members of the Company's Board of Directors. The remaining common stock of the Company is in the form of Series A Common Stock, which is quoted on the Nasdaq National Market under the symbol "HATV." The principal executive offices of the Company are located at 888 Seventh Avenue, New York, New York 10106; its telephone number is 212-649-2300. USE OF PROCEEDS Except as may be set forth in an accompanying Prospectus Supplement, the Company expects to add substantially all of the net proceeds from the sale of the Securities to its funds to be used for general corporate purposes, which may include repayment of long-term and short-term debt, capital expenditures, working capital and the financing of acquisitions. Funds not required immediately may be invested in short-term marketable securities. 5 RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges for (i) the Company and its consolidated subsidiaries on a pro forma basis (Hearst-Argyle) giving effect to the consummation of the Hearst Transaction for each of the periods indicated, (ii) the Hearst Broadcast Group (the accounting acquiror in the Hearst Transaction) on a historical basis for each of the periods indicated and (iii) Argyle and its consolidated subsidiaries on a historical basis. The ratios for the Company on a pro forma basis giving effect to the Hearst Transaction for the periods indicated were derived from the unaudited pro forma combined condensed financial statements of the Company. The ratios for the Hearst Broadcast Group were derived from the audited historical combined financial statements of the Hearst Broadcast group for the years ended December 31, 1994, 1995 and 1996, and from the unaudited combined financial statements for the years ended December 31, 1992 and 1993 and the six months ended June 30, 1996 and 1997. The ratios for Argyle on a historical basis for the periods indicated were derived from Argyle's audited and unaudited historical financial statements.
PRO FORMA ----------------------- SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------- The Company Pro Forma Ratio of Earnings to Fixed Charges.............................................. 2.66x 2.73x
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------- ------------ 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- ----- ----- Hearst Broadcast Group Ratio of Earnings to Fixed Charges........ 2.01x 2.21x 3.51x 4.06x 4.43x 3.56x 3.98x
SIX MONTHS YEARS ENDED ENDED DECEMBER 31, JUNE 30, ------------ ------------ 1995(1) 1996 1996 1997 ------- ---- ----- ----- Argyle Ratio of Earnings to Fixed Charges............ (2) (2) (2) (2)
- -------- (1) Argyle was formed in August 1994. (2) Argyle's earnings are inadequate to cover fixed charges by $7,965 and $14,560 for the years ended December 31, 1995 and 1996, respectively and by $7,118 and $8,295 for six months ended June 30, 1996 and 1997, respectively. For purposes of computing the foregoing ratios: (i) Earnings consist of income from continuing operations before income tax expense plus Fixed Charges (excluding capitalized interest); and (ii) Fixed Charges consist of interest, whether expended or capitalized, and the portion of operating rental expenses estimated to represent an interest component. 6 GENERAL DESCRIPTION OF SECURITIES AND RISK FACTORS The Company may offer shares of Series A Common Stock or Debt Securities individually or as units consisting of one or more Securities under this Prospectus. CERTAIN OF THE SECURITIES TO BE OFFERED HEREBY THEMSELVES MAY INVOLVE A SIGNIFICANT DEGREE OF RISK. SUCH RISKS WILL BE SET FORTH IN THE PROSPECTUS SUPPLEMENT RELATING TO SUCH SECURITY, IF APPLICABLE. DESCRIPTION OF DEBT SECURITIES GENERAL The Debt Securities will be issued under an Indenture, as supplemented from time to time in accordance with its terms (the "Indenture"), to be entered into between the Company and a trustee to be appointed (the "Trustee"). The following brief summary of the Indenture and the Debt Securities is subject to the detailed provisions of the Indenture, a copy of which is an exhibit to the Registration Statement. Wherever references are made to particular provisions of the Indenture, such provisions are incorporated by reference as a part of the statements made herein and such statements are qualified in their entirety by such reference. Certain defined terms in the Indenture are capitalized herein. Italicized references appearing in parenthesis are to section numbers of the Indenture. The Indenture does not limit the amount of Debt Securities that may be issued thereunder. It provides that Debt Securities may be issued from time to time in series. The Debt Securities will be unsecured obligations of the Company and will rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. Reference is made to the Prospectus Supplement for a description of the following additional terms of the Debt Securities in respect of which this Prospectus is being delivered: (i) the title of such Debt Securities; (ii) the limit, if any, upon the aggregate principal amount of such Debt Securities; (iii) the dates on which or periods during which such Debt Securities may be issued and the date or dates on which the principal of (and premium, if any, on) such Debt Securities will be payable; (iv) the rate or rates, if any, or the method of determination thereof, at which such Debt Securities will bear interest, if any; the date or dates from which such interest will accrue; the dates on which such interest will be payable; and the regular record dates for the interest payable on such interest payment dates; (v) the obligation, if any, of the Company to redeem, repay or purchase such Debt Securities pursuant to any sinking fund or analogous provisions or at the option of a holder and the periods within which or the dates on which, the prices at which and the terms and conditions upon which such Debt Securities will be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (vi) the periods within which or the dates on which, the prices, if any, at which and the terms and conditions upon which such Debt Securities may be redeemed, in whole or in part, at the option of the Company; (vii) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which such Debt Securities will be issuable; (viii) whether such Debt Securities are to be issued at less than the principal amount thereof and the amount of discount with which such Debt Securities will be issued; (ix) provisions, if any, for the defeasance of such Debt Securities; (x) if other than United States dollars, the currency or composite currency in which such Debt Securities are to be denominated, or in which payment of the principal of (and premium, if any) and interest on such Debt Securities will be made and the circumstances, if any, when such currency of payment may be changed; (xi) if the principal of (and premium, if any) or interest on such Debt Securities are to be payable, at the election of the Company or a holder, in a currency or composite currency other than that in which such Debt Securities are denominated or stated to be payable, the periods within which, and the terms and conditions upon which, such election may be made and the time and the manner of determining the exchange rate between the currency or composite currency in which such Debt Securities are denominated or stated to be payable and the currency in which such Debt Securities are to be paid pursuant to such election; (xii) if the amount of payments of principal of (and premium, if any) or interest on the Debt Securities may be determined with reference to an index including, but not limited to an index based on a currency or currencies other than that in which such Debt 7 Securities are stated to be payable, the manner in which such amounts shall be determined; (xiii) whether such Debt Securities will be issued in the form of one or more Global Securities and, if so, the identity of the depository for such Global Securities; (xiv) any additions to or changes in the Events of Default or covenants relating solely to such Debt Securities or any Events of Default or covenants generally applicable to Debt Securities which are not to apply to the particular series of Debt Securities in respect of which the Prospectus Supplement is being delivered; (xv) if the Company will pay additional amounts on any of the Debt Securities of any series to any Holder who is a United States Alien, in respect of any tax or assessment withheld, under what circumstances and with what procedures the Company will pay such amounts; (xvi) any terms applicable to original issue discount, if any, including the rate or rates at which such original issue discount, if any, shall accrue; (xvii) the exchange or conversion of the Securities of that series, at the option of the Holders thereof, for or into new Securities of a different series or other securities or other property, including shares of capital stock of the Company or any subsidiary of the Company or securities directly or indirectly convertible into or exchangeable for any such shares; and (xviii) any other terms of such Debt Securities not inconsistent with the provisions of the Indenture. (Section 3.1) Unless otherwise indicated in the Prospectus Supplement, the Indenture does not afford the holder of any series of Debt Securities the right to tender such Debt Securities to the Company for repurchase, or provide for any increase in the rate or rates of interest per annum at which such Debt Securities will bear interest, in the event the Company should become involved in a highly leveraged transaction. The Debt Securities may be issued under the Indenture bearing no interest or interest at a rate below the prevailing market rate at the time of issuance, to be offered and sold at a discount below their stated principal amount. Federal income tax consequences and other special considerations applicable to any such discounted Debt Securities or to other Debt Securities offered and sold at par which are treated as having been issued at a discount for federal income tax purposes will be described in the Prospectus Supplement relating thereto. A substantial portion of the assets of the Company is held by subsidiaries. The Company's right and the rights of its creditors, including the holders of Debt Securities, to participate in the assets of any subsidiary upon its liquidation or recapitalization would be subject to the prior claims of such subsidiary's creditors, except to the extent that the Company may itself be a creditor with recognized claims against such subsidiary. There is no restriction in the Indenture against subsidiaries of the Company incurring unsecured indebtedness. Unless otherwise described in the Prospectus Supplement, the Debt Securities will be issued only in registered form without coupons, in denominations of $1,000 and multiples of $1,000, and will be payable only in United States dollars. (Section 3.2) In addition, all or a portion of the Debt Securities of any series may be issued as permanent registered Global Securities which will be exchangeable for definitive Debt Securities only under certain conditions. (Section 2.3) The Prospectus Supplement indicates the denominations to be issued, the procedures for payment of interest and principal thereon, and other matters. No service charge will be made for any registration of transfer or exchange of the Debt Securities, but the Company may, in certain instances, require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 3.5) The Company shall deliver Debt Securities of any series, duly executed by the Company, to the Trustee for authentication, together with an order for the authentication and delivery of such Debt Securities. The Trustee, in accordance with such order, shall authenticate and deliver such Debt Securities. No Debt Securities of any series shall be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless there appears thereon a certificate of authentication substantially in the form provided for in the Indenture and manually executed by the Trustee or an authenticating agent duly appointed by the Trustee. Such certificate shall be conclusive evidence, and the only evidence, that such Debt Securities have been duly authenticated and delivered under, and are entitled to the benefits of, the Indenture. (Section 3.3) GLOBAL SECURITIES The Debt Securities of a particular series may be issued in the form of one or more Global Securities which will be deposited with a depository (the "Depositary"), or its nominee, each of which will be identified in the 8 Prospectus Supplement relating to such series. Unless and until exchanged, in whole or in part, for Debt Securities in definitive registered form, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of such Depositary, by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. (Section 2.3) The specific terms of the depository arrangement with respect to any portion of a particular series of Debt Securities to be represented by a Global Security will be described in the Prospectus Supplement relating to such series. The Company anticipates that the following provisions will apply to all depository arrangements. Upon the issuance of a Global Security, the Depositary therefor or its nominee will credit, on its book entry and registration system, the respective principal amounts of the Debt Securities represented by such Global Security to the accounts of such persons having accounts with such Depositary ("participants") as shall be designated by the underwriters or agents participating in the distribution of such Debt Securities or by the Company if such Debt Securities are offered and sold directly by the Company. Ownership of beneficial interests in a Global Security will be limited to participants or persons that may hold beneficial interests through participants. Ownership of beneficial interests in a Global Security will be shown on, and the transfer of such ownership will be effected only through, records maintained by the Depositary therefor or its nominee (with respect to beneficial interests of participants) or by participants or persons that hold through participants (with respect to interests of persons other than participants). The laws of some states require certain purchasers of securities to take physical delivery thereof in definitive form. Such depository arrangements and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depositary for a Global Security or its nominee is the registered owner thereof, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the Indenture for any other purpose. Principal, premium, if any, and interest payments on a Global Security registered in the name of a Depositary or its nominee will be made to such Depositary or nominee, as the case may be, as the registered owner of such Global Security. None of the Company, the Trustee or any paying agent for Debt Securities of the series represented by such Global Security will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in such Global Security or for maintaining, supervising or reviewing any records relating to such beneficial interests. The Company expects that the Depositary for a Global Security or its nominee, upon receipt of any payment of principal, premium or interest, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of such Depositary or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street name," and will be the responsibility of such participants. If the Depositary for a Global Security representing Debt Securities of a particular series is at any time unwilling or unable to continue as Depositary and a successor Depositary is not appointed by the Company within 90 days, the Company will issue Debt Securities of such series in definitive form in exchange for such Global Security. In addition, the Company may at any time and in its sole discretion determine not to have the Debt Securities of a particular series represented by one or more Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for all of the Global Securities representing Debt Securities of such series. 9 CERTAIN COVENANTS OF THE COMPANY Limitation on Indebtedness Secured by a Mortgage. The Indenture provides that neither the Company nor any Restricted Subsidiary will create, assume, guarantee or suffer to exist any Indebtedness secured by any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance ("Mortgage") on any assets of the Company or a Restricted Subsidiary unless the Company secures or causes such Restricted Subsidiary to secure the Debt Securities equally and ratably with, or prior to, such secured Indebtedness. This restriction will not apply to Indebtedness secured by (i) Mortgages on the property of any corporation which Mortgages existed at the time such corporation became a Restricted Subsidiary; (ii) Mortgages in favor of the Company or a Restricted Subsidiary; (iii) Mortgages on property of the Company or a Restricted Subsidiary in favor of the United States of America or any state or political subdivision thereof, or in favor of any other country or any political subdivision thereof, to secure payment pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or part of the purchase price or the cost of construction or improvement of the property subject to such Mortgages; (iv) Mortgages on any property subsequently acquired by the Company or any Restricted Subsidiary, contemporaneously with such acquisition or within 120 days thereafter, to secure or provide for the payment of any part of the purchase price, construction or improvement of such property, or Mortgages assumed by the Company or any Restricted Subsidiary upon any property subsequently acquired by the Company or any Restricted Subsidiary which were existing at the time of such acquisition, provided that the amount of any Indebtedness secured by any such Mortgage created or assumed does not exceed the cost to the Company or Restricted Subsidiary, as the case may be, of the property covered by such Mortgage; (v) Mortgages on the property of the Company or a Restricted Subsidiary existing at the date of issuance of the first series of Debt Securities under the Indenture; (vi) Mortgages representing the extension, renewal or refunding of any Mortgage referred to in the foregoing clauses (i) through (v), inclusive, or of any Indebtedness secured thereby; and (vii) any other Mortgage, other than Mortgages referred to in the foregoing clauses (i) through (vi), inclusive, so long as the aggregate of all Indebtedness secured by Mortgages pursuant to this clause (vii) and the aggregate Value of the Sale and Lease-Back Transactions in existence at that time (not including those in connection with which the Company has voluntarily retired funded Indebtedness as provided in the Indenture) does not exceed 15% of Consolidated Net Tangible Assets. (Section 10.7) Limitation on Sale and Lease-Back Transactions. The Indenture provides that neither the Company nor any Restricted Subsidiary will enter into any Sale and Lease-Back Transaction with respect to any Principal Property unless either (i) the Company or such Restricted Subsidiary would be entitled, pursuant to the foregoing covenant relating to "Limitation on Indebtedness Secured by a Mortgage," to create, assume, guarantee or suffer Indebtedness in a principal amount equal to or exceeding the Value of such Sale and Lease-Back Transaction secured by a Mortgage on the property to be leased without equally and ratably securing the Debt Securities or (ii) the Company or such Restricted Subsidiary, within four months after the effective date of such transaction, applies an amount equal to the greater of (x) the net proceeds of the sale of the property subject to the Sale and Lease-Back Transaction and (y) the Value of such Sale and Lease-Back Transaction, to the voluntary retirement of the Debt Securities or other unsubordinated funded Indebtedness of the Company or such Restricted Subsidiary. (Section 10.8) Certain Definitions. "Consolidated Net Tangible Assets" is defined in the Indenture to mean total consolidated assets of the Company and its Restricted Subsidiaries, less (i) current liabilities of the Company and its Restricted Subsidiaries, and (ii) the net book amount of all intangible assets of the Company and its Restricted Subsidiaries. (Section 10.7) "Consolidated Subsidiary" is defined in the Indenture to mean a Subsidiary the accounts of which are consolidated with those of the Company for public financial reporting purposes. (Section 1.1) "Designated Subsidiaries" is defined in the Indenture to mean any Subsidiary of the Company (other than a Subsidiary holding any Station Licenses or the operating assets of any Stations) designated by the Company as a "Designated Subsidiary" for purposes of the Indenture, by delivery to the Trustee of a certificate of a senior 10 officer of the Company identifying such Subsidiary, stating that such Subsidiary shall be treated as a "Designated Subsidiary" for all purposes under the Indenture and certifying that, after giving effect to such designation, the Company will be in compliance with the provisions of the Indenture applicable to such Designated Subsidiary, and such designation will not result in an Event of Default under the Indenture; provided that the value of the capital stock, partnership or other ownership interest directly or indirectly held by the Company in all Designated Subsidiaries shall not exceed at any one time an aggregate amount in excess of $250,000,000. Any Subsidiary of a Designated Subsidiary is deemed to be a "Designated Subsidiary". (Section 10.11) "Indebtedness" is defined in the Indenture to mean (i) all items which in accordance with generally accepted accounting principles would be included in determining long-term liabilities representing borrowed money or purchase money obligations as shown on the liability side of a balance sheet (other than liabilities evidenced by obligations under leases and contracts payable for broadcast rights); (ii) to the extent not included in (i) above, indebtedness secured by any Mortgage existing on property owned subject to such Mortgage, whether or not such secured indebtedness has been assumed; and, (iii) to the extent not included in (i) or (ii) above, contingent obligations in respect of, or to purchase or otherwise acquire, any such indebtedness of others described in the foregoing clauses (i) or (ii) above, including guarantees and endorsements (other than for purposes of collection in the ordinary course of business of any such indebtedness). (Section 10.7) "Principal Property" is defined in the Indenture to mean any office building, television station or transmission facility owned by the Company or any Restricted Subsidiary or any other property or right owned by or granted to the Company or any Restricted Subsidiary and used or held for use in the television business conducted by the Company or any Restricted subsidiary, except for any such property or right which, in the opinion of the Board of Directors of the Company as set forth in a Board Resolution adopted in good faith, is not material to the total business conducted by the Company and its Restricted Subsidiaries considered as one enterprise. (Section 1.1) "Restricted Subsidiary" is defined in the Indenture to mean any Subsidiary of the Company other than a Designated Subsidiary. (Section 10.7) "Sale and Lease-Back Transaction" is defined in the Indenture as the leasing by the Company or a Subsidiary for a period of more than three years of any principal property which has been sold or is to be sold or transferred by the Company or any such subsidiary to any party (other than the Company or a Subsidiary). (Section 10.8) "Significant Subsidiary" is defined in the Indenture to mean any Subsidiary (i) which, as of the close of the fiscal year of the Company immediately preceding the date of determination, contributed more than 10% of the consolidated net operating revenues of the Company and its Consolidated Subsidiaries for such year or (ii) the total assets of which as of the close of such immediately preceding fiscal year exceeded 10% of the Consolidated Net Tangible Assets of the Company and its Consolidated Subsidiaries. (Section 5.1) "Stations" is defined in the Indenture to mean the television broadcasting stations from time to time owned by the Company or any of its Restricted Subsidiaries. (Section 10.11) "Station Licenses" is defined in the Indenture to mean all authorization, licenses or permits issued by the FCC and granted or assigned to the Company or any Restricted Subsidiary thereof, or under which the Company or any Restricted Subsidiary thereof has the right to operate any Station, together with any extensions or renewals thereof. (Section 10.11) "Subsidiary" is defined in the Indenture to mean (i) a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries and (ii) any partnership, association, joint venture or other entity in which the Company or one or more Subsidiaries of the Company has more than a 50% equity interest at the time or as to which the Company or one or more of its Subsidiaries has the power to direct or cause the direction 11 of the management and policies of such entity by contract or otherwise. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors or other governing body of such corporation, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. (Section 1.1) "Value" is defined in the Indenture to mean, with respect to any particular Sale and Lease-Back Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale or transfer of the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value in the opinion of the Board of Directors of the Company of such property at the time of the Company's entering into such Sale and Lease-Back Transaction, subject to adjustment at any particular time for the length of the remaining initial lease term. (Section 10.8) CONSOLIDATION, MERGER AND SALE OF ASSETS The Indenture provides that the Company may not consolidate with or merge into any other corporation, or convey, transfer or lease its properties and assets substantially as an entirety to any other party, unless, among other things, (i) the corporation formed by such consolidation or into which the Company is merged or the party which acquires by conveyance or transfer, or which leases the properties and assets of the Company substantially as an entirety, is organized and existing under the laws of the United States, any State thereof or the District of Columbia and expressly assumes the Company's obligations on the Debt Securities and under the Indenture by means of an indenture supplemental to the Indenture and (ii) immediately after giving effect to such transaction no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing. (Section 8.1) EVENTS OF DEFAULT, WAIVER AND NOTICE With respect to the Debt Securities of any series, an Event of Default is defined in the Indenture as being (i) default for 30 days in payment of any interest upon the Debt Securities of such series; (ii) default in payment of the principal of or premium, if any, on the Debt Securities of such series when due either at maturity or upon acceleration, redemption or otherwise; (iii) default by the Company in the performance of any other of the covenants or warranties in the Indenture for the benefit of such series applicable to the Company which shall not have been remedied for a period of 60 days after Notice of Default; (iv) the failure to pay when due any indebtedness for money borrowed (including indebtedness under Debt Securities other than that series) with a principal amount then outstanding in excess of $20,000,000 under any mortgage, indenture or instrument under which any such indebtedness is issued or secured (including the Indenture), or any other default which results in the acceleration of maturity of such indebtedness, unless such indebtedness or acceleration shall have been discharged or annulled within 10 days after due notice by the Trustee or by Holders of at least 10% in principal amount of the Outstanding Debt Securities of that series; (v) certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary; (vi) default in the deposit of any sinking fund payment when and as due by the terms of any Debt Securities of such series; and (vii) any other Event of Default provided in the supplemental indenture under which such series of Debt Securities is issued or in the form of security for such series. (Section 5.1) Within 90 days after the occurrence of any default under the Indenture with respect to Debt Securities of any series, the Trustee is required to notify the Holders of Debt Securities of any default unless, in the case of any default other than a default in the payment of principal of or premium, if any, or interest on any Debt Securities, a trust committee of the Board of Directors or Responsible Officers of the Trustee in good faith considers it in the interest of the Holders of Debt Securities not to do so. (Section 6.2) The Indenture provides that if an Event of Default, other than an Event of Default as described in clauses (iv) or (v) in the above paragraph with respect to Debt Securities of any series shall have occurred and be continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Debt Securities of that series then outstanding may declare the entire principal and accrued interest of all Debt Securities of such series (or, if any of the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Debt Securities as may be specified by the terms thereof) to be due and payable 12 immediately. If an Event of Default described in clauses (iv) or (v) in the above paragraph with respect to any series of Debt Securities Outstanding under the Indenture occurs and is continuing, the principal amount (or, if any of the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Debt Securities as may be specified by the terms thereof) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. Any time after acceleration with respect to the Debt Securities of any series has been made, but before a judgment or decree for the payment of money based on such acceleration has been obtained by the Trustee, the Holders of a majority in principal amount of the Outstanding Debt Securities of that series, may, under certain circumstances, rescind and annul such acceleration. The Holders of a majority in principal amount of the Outstanding Debt Securities of any series may waive any past defaults under the Indenture with respect to the Debt Securities of such series, except defaults in payment of principal of or premium, if any (other than by a declaration of acceleration), or interest on the Debt Securities or provisions of such series that may not be modified or amended without the consent of the Holders of all Outstanding Debt Securities of such series. (Sections 5.2 and 5.13) The Company will be required to furnish to the Trustee annually a statement as to the performance by the Company of its covenants and agreements under the Indenture. (Section 10.9) Subject to certain conditions set forth in the Indenture, the Holders of a majority in principal amount of the then Outstanding Debt Securities of any series with respect to which an Event of Default has occurred shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee under the Indenture in respect of such series. No Holder of any Debt Securities shall have any right to cause the Trustee to institute any proceedings, judicial or otherwise, with respect to the Indenture or any remedy thereunder unless, among other things, the Holder or Holders of Debt Securities shall have offered to the Trustee indemnity satisfactory to it against costs, expenses and liabilities relating to such proceedings. (Sections 5.12 and 5.7) The Indenture provides that, in determining whether the Holders of the requisite aggregate principal amount of the Outstanding Debt Securities have given, made or taken any request, demand, authorization, direction, notice, consent, waiver or other action thereunder as of any date, (a) the principal amount of an Original Issue Discount Security which shall be deemed to be Outstanding shall be the amount of the principal thereof which would be due and payable as of such date upon acceleration of the Maturity thereof to such date, (b) if, as of such date, the principal amount payable at the Stated Maturity of a Debt Security is not determinable, the principal amount of such Debt Security which shall be deemed to be Outstanding shall be the amount as established in or pursuant to a Board Resolution and set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more supplemental indentures, prior to the issuance of such Debt Securities, (c) the principal amount of a Debt Security denominated in one or more foreign currencies or currency units which shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of such date in the manner as described in clause (b) above, of the principal amount of such Debt Security (or, in the case of a Debt Security described in clause (a) or (b) above, of the amount determined as provided in such clause), and (d) Debt Securities owned by the Company or any other obligor upon the Debt Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Debt Securities which the Trustee knows to be so owned shall be so disregarded. Debt Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debt Securities and that the pledgee is not the Company or any other obligor upon the Debt Securities or any Affiliate of the Company or of such other obligor. (Section 1.1) MODIFICATION OF THE INDENTURE The Indenture provides that the Company and the Trustee may, without the consent of the Holders, modify or amend the Indenture in order to (i) evidence the succession of another corporation to the Company and the 13 assumption by any such successor corporation of the covenants of the Company in the Indenture and in the Debt Securities; (ii) add to the covenants, agreements and obligations of the Company for the benefit of the Holders of all or any series of Debt Securities; (iii) add any additional Events of Default to the Indenture; (iv) add to or change any of the provisions of the Indenture necessary to permit the issuance of Debt Securities in bearer form, registrable as to principal, and with or without interest coupons; (v) add to, change or eliminate any of the provisions of the Indenture, in respect of one or more series of Debt Securities, provided that any such addition, change or elimination may not apply to any Debt Security of any series created prior to such addition, change or elimination; (vi) establish the form or terms of Debt Securities of any series as permitted under the Indenture; (vii) evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee with respect to the Debt Securities of one or more series; or, (viii) cure any ambiguity, or correct or supplement any provision of the Indenture which may be inconsistent with any other provision of the Indenture, provided such action does not adversely affect the interest of the Holders of Debt Securities of any series. (Section 9.1) With respect to the Debt Securities of any series, modification or amendment of the Indenture may be made by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Debt Securities of such series, except that no such modification or amendment may, without the consent of the Holders of all then Outstanding Debt Securities of such series (i) change the due date of the principal of, or any installment of principal of or interest on, any Debt Securities of such series; (ii) reduce the principal amount of, or any installment of principal or interest or rate of interest on, or any premium payable on redemption of any Debt Securities of such series; (iii) reduce the principal amount of any Debt Securities of such series payable upon acceleration of the maturity thereof; (iv) change the place or the currency of payment of principal of, or any premium or interest on, any Debt Securities of such series; (v) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Securities of such series on or after the due date thereof (or, in the case of redemption, on or after the redemption date thereof); (vi) reduce the percentage in principal amount of Debt Securities of such series then outstanding, the consent of whose holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults; or, (vii) modify certain provisions of the Indenture regarding the amendment or modification of, or waiver with respect to, any provision of the Indenture or the Debt Securities. (Section 9.2) DISCHARGE OF THE INDENTURE The Indenture, with respect to the Debt Securities of any series (if all series issued under the Indenture are not to be affected), shall upon the written request or order of the Company cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Debt Securities therein expressly provided for), when (i) either (A) all Debt Securities theretofore authenticated and delivered (other than (1) Debt Securities which have been destroyed, lost or stolen and which have been replaced or paid and (2) Debt Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (B) all such Debt Securities not theretofore delivered to the Trustee for cancellation (1) have become due and payable, (2) will become due and payable at their stated maturity within one year or (3) if the Debt Securities of such series are denominated and payable only in United States dollars and such Debt Securities are to be called for redemption within one year, and the Company in the case of (1), (2) or (3) above, has deposited or caused to be deposited with the Trustee an amount in United States dollars sufficient to pay and discharge the entire indebtedness on such Debt Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Debt Securities which have become due and payable) or to the stated maturity or any redemption date, as the case may be; (ii) the Company has paid or caused to be paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for in the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. (Section 4.1) 14 DEFEASANCE AND COVENANT DEFEASANCE Unless otherwise specified in the Prospectus Supplement, the following provisions relating to defeasance and discharge of indebtedness, or relating to defeasance of certain covenants in the Indenture, will apply to the Debt Securities of any series, or to any specified part of a series. (Section 13.1) Defeasance and Discharge. The Indenture provides that the Company will be discharged from all its obligations with respect to such Debt Securities (except for certain obligations to exchange or register the transfer of Debt Securities, to replace stolen, lost or mutilated Debt Securities, to maintain paying agencies and to hold moneys for payment in trust) upon the deposit in trust for the benefit of the Holders of such Debt Securities of money or U.S. Government Obligations, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay any installment of principal of and any premium and interest on and any mandatory sinking fund payments in respect of such Debt Securities on the respective Stated Maturities in accordance with the terms of the Indenture and such Debt Securities. Such defeasance or discharge may occur only if, among other things, the Company has delivered to the Trustee an opinion of counsel to the effect that the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that Holders of such Debt Securities will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (Sections 13.1 and 13.2) Defeasance of Certain Covenants. The Indenture provides that the Company may omit to comply with certain restrictive covenants described under the captions "Certain Covenants of the Company--Limitation on Indebtedness Secured by a Mortgage" and "Certain Covenants of the Company--Limitation on Sale and Leaseback Transactions" above and any that may be described in the Prospectus Supplement, and that such omission will be deemed not to be or result in an Event of Default, in each case with respect to such Debt Securities. In order to do so, the Company will be required to deposit, in trust for the benefit of the Holders of such Debt Securities, money or U.S. Government Obligations, or both, which through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay any installment of the principal of and any premium and interest on and any mandatory sinking fund payments in respect of such Debt Securities on the respective Stated Maturities in accordance with the terms of the Indenture and such Debt Securities. The Company will also be required, among other things, to deliver to the Trustee an opinion of counsel to the effect that Holders of such Debt Securities will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. In the event the Company exercises this option with respect to any Debt Securities and such Debt Securities are declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations so deposited in trust will be sufficient to pay amounts due on such Debt Securities at the time of their respective Stated Maturities but may not be sufficient to pay amounts due on such Debt Securities upon any acceleration resulting from such Event of Default. In such case, the Company will remain liable for such payments. (Sections 13.1 and 13.2) THE DEBT TRUSTEE Prior to the offering of any Debt Securities, a trustee will be appointed by the Company to serve as Trustee under the Indenture. The Trustee may be a depository for funds of and perform other services for and transact other banking business with the Company in the normal course of business. The Trustee may serve as a trustee under other indentures entered into by the Company. Upon the occurrence of an Event of Default under the Indenture or an event which, after notice or lapse of time or both, would become such an Event of Default, or upon the occurrence of a default under any such other indenture, the Trustee may be deemed to have a conflicting interest with respect to the Debt Securities for purposes of the Trust 15 Indenture Act and, unless the Trustee is able to eliminate any such conflicting interest, the Trustee may be required to resign as Trustee under the Indenture. In that event, the Company would be required to appoint a successor Trustee for the Indenture. GOVERNING LAW The Indenture and the Debt Securities will be governed by, and construed in accordance with, the laws of the State of New York. (Section 1.12) 16 DESCRIPTION OF CAPITAL STOCK Set forth below is a description of the capital stock of the Company pursuant to the Company's Amended and Restated Certificate of Incorporation. Common Stock. The Company has 200 million shares of authorized common stock, par value $.01 per share, with 100 million shares designated as Series A Common Stock and 100 million shares designated as Series B Common Stock. Except as otherwise described below, the issued and outstanding shares of Series A Common Stock and Series B Common Stock will vote together as a single class on all matters submitted to a vote of stockholders, with each issued and outstanding share of Series A Common Stock and Series B Common Stock entitling the holder thereof to one vote on all such matters. With respect to any election of directors, (i) the holders of the shares of Series A Common Stock will be entitled to vote separately as a class to elect two members of the Company's Board of Directors (the Series A Directors) and (ii) the holders of the shares of Series B Common Stock will be entitled to vote separately as a class to elect the balance of the Company's Board of Directors (the Series B Directors); provided, however, that the number of Series B Directors shall not constitute less than a majority of the Company's Board of Directors. Any director may resign at any time upon giving written notice to the Company. The directors may only be removed for cause by a vote of the holders of a majority of the Company's Common Stock voting together as a class. Any Series A Director who resigns or is removed may be replaced only by the remaining Series A Director or, if there are no remaining Series A Directors, by a vote of the holders of a majority of the Series A Common Stock voting separately as a class. Similarly, any Series B Director who resigns or is removed may be replaced only by the remaining Series B Directors or, if there are no remaining Series B Directors, by a vote of the holders of a majority of the Series B Common Stock voting separately as a class. If no shares of Series A Common Stock are issued and outstanding at any given time, then the holders of shares of Series B Common Stock will elect all of the Company's directors. Conversely, if no shares of Series B Common Stock are issued and outstanding, then the holders of the shares of Series A Common Stock will elect all of the Company's directors. All of the outstanding shares of Series B Common Stock are required to be held by Hearst or a Permitted Transferee (as defined below). No holder of shares of Series B Common Stock may transfer any such shares to any person other than to (i) Hearst; (ii) any corporation into which Hearst is merged or consolidated or to which all or substantially all of Hearst's assets are transferred; or (iii) any entity controlled by Hearst (each a "Permitted Transferee"). Series B Common Stock, however, may be converted at any time into Series A Common Stock and freely transferred, subject to the terms and conditions of the Company's Amended and Restated Certificate of Incorporation and to applicable securities laws limitations. If at any time the Permitted Transferees first hold in the aggregate less than 20% of all shares of the Company's Common Stock that are then issued and outstanding, then each issued and outstanding share of Series B Common Stock automatically will be converted into one fully-paid and nonassessable share of Series A Common Stock, and the Company will not be authorized to issue any additional shares of Series B Common Stock. Notwithstanding any other provision to the contrary, no holder of Series B Common Stock shall (i) transfer any shares of Series B Common Stock; (ii) convert Series B Common Stock; or (iii) be entitled to receive any cash, stock, other securities or other property with respect to or in exchange for any shares of Series B Common Stock in connection with any merger or consolidation or sale or conveyance of all or substantially all of the property or business of the Company as an entity, unless all necessary approvals of the Federal Communications Commission ("FCC") as required by the Communications Act of 1934, as amended (the "Communications Act"), and the rules and regulations thereunder have been obtained or waived. Preferred Stock. The Company has one million shares of authorized preferred stock, par value $.01 per share. Under the Company's Amended and Restated Certificate of Incorporation, the Company has two issued and outstanding series of preferred stock, Series A Preferred Stock and Series B Preferred Stock (collectively, the "Preferred Stock"). Each series of Preferred Stock has 10,938 shares issued and outstanding. The Preferred Stock has a cash dividend feature whereby each share will accrue $65 per share annually, to be paid quarterly. The Series A Preferred Stock is convertible at the option of the holders, at any time, into Series A Common 17 Stock at a conversion price of (i) on or before December 31, 2000, $35; (ii) during the calendar year December 31, 2001, the product of 1.1 times $35; and (iii) during each calendar year after December 31, 2001, the product of 1.1 times the preceding year's conversion price. The Company has the option to redeem all or a portion of the Series A Preferred Stock at any time after June 11, 2001 at a price equal to $1,000 per share plus any accrued and unpaid dividends. The holders of Series B Preferred Stock have the option to convert such Series B Preferred Stock into shares of Series A Common Stock at any time after June 11, 2001 at the average of the closing prices for the Series A Common Stock for each of the 10 trading days prior to such conversion date. The Company has the option to redeem all or a portion of the Series B Preferred Stock at any time on or after June 11, 2001, at a price equal to $1,000 per share plus any accrued and unpaid dividends. The issued and outstanding shares of Series A Preferred Stock and Series B Preferred Stock are entitled to vote on all matters submitted to a vote of holders of Series A Common Stock, with such shares of Series A Preferred Stock and Series B Preferred Stock voting together as a single class with the shares of Series A Common Stock. Each share of Series A Preferred Stock is entitled to the number of votes (rounded up to the next whole number) equal to the number of shares of Series A Common Stock into which such share is convertible. Each share of Series B Preferred Stock is entitled to (i) 29 votes, if the record date for the stockholder meeting at which such votes are to be cast is before July 11, 2001 or (ii) thereafter, the number of votes (rounded up to the next whole number) equal to the number of shares of Series A Common Stock into which such share is convertible. Except with respect to any proposal to amend the Company's Amended and Restated Certificate of Incorporation that may adversely affect the rights of the respective series of Preferred Stock and except as may be required by Delaware General Corporation Law ("DGCL"), neither the Series A Preferred Stock nor the Series B Preferred Stock is entitled to vote separately as a class. FOREIGN OWNERSHIP Pursuant to the Company's Amended and Restated Certificate of Incorporation and in order to comply with FCC rules and regulations, the Company will not be permitted to issue any shares of capital stock of the Company to (i) a person who is a citizen of a country other than the U.S.; (ii) any entity organized under the laws of a government other than the government of the U.S. or any state, territory or possession of the U.S.; (iii) a government other than the government of the U.S. or any state, territory or possession of the U.S.; (iv) a representative of, or an individual or entity controlled by, any of the foregoing; or (v) any other person or entity whose alien status would be cognizable under the Communications Act (individually, an "Alien;" collectively, "Aliens"), any shares of capital stock of the Company if such issuance would result in the total number of shares of such capital stock held or voted by Aliens exceeding 25% of (x) the capital stock outstanding at any time and from time to time or (y) the total voting power of all shares of such capital stock outstanding and entitled to vote at any time and from time to time. In addition, the Company will not be permitted to transfer on the books of the Company any capital stock to any Alien that would result in the total number of shares of such capital stock held or voted by Aliens exceeding such 25% limits. The Company's Amended and Restated Certificate of Incorporation also provides that no Alien or Aliens, individually or collectively, will be entitled to vote or direct or control the vote of more than 25% of (i) the total number of all shares of capital stock of the Company outstanding at any time and from time to time or (ii) the total voting power of all shares of capital stock of the Company outstanding and entitled to vote at any time and from time to time (or such limits greater or lesser than 25% as may be subsequently imposed by statute or regulation). The Company's Board of Directors will have the right to redeem any shares determined to be owned by an Alien or Aliens, at the fair market value of the shares to be redeemed, if the Board of Directors determines such redemption is necessary to comply with these Alien ownership restrictions of the Communications Act and rules of the FCC. CERTAIN ANTI-TAKEOVER MATTERS General. Certain provisions of the Company's Amended and Restated Certificate of Incorporation and the DGCL may have the effect of impeding the acquisition of control of the Company by means of a tender offer, a 18 proxy fight, open market purchases or otherwise in a transaction not approved by the Company's Board of Directors. The provisions of the Company's Amended and Restated Certificate of Incorporation and the DGCL described below are designed to reduce, or have the effect of reducing, the vulnerability of the Company to an unsolicited proposal for the restructuring or sale of all or substantially all of the assets of the Company or an unsolicited takeover attempt that is unfair to the Company's stockholders. The summary of such provisions set forth below does not purport to be complete and is subject to and qualified in its entirety by reference to the Company's Amended and Restated Certificate of Incorporation, the Company's bylaws and the DGCL. The Company's Board of Directors has no present intention to introduce additional measures that might have an anti-takeover effect. The Company's Board of Directors, however, expressly reserves the right to introduce such measures in the future. Classified Board; Removal of Directors. The Company's Amended and Restated Certificate of Incorporation provides that the Company's Board of Directors shall consist of not less than seven directors, with the exact number of directors to be determined from time to time by the Company's Board of Directors and designated in the bylaws. The Company's bylaws provide that the number of directors will be 11 and thereafter the minimum number of directors will be seven and the maximum number of directors will be 15. The Company's Amended and Restated Certificate of Incorporation further provides that the Company's Board of Directors will be divided into two classes, as long as there are no more than two Series A Directors, and that, after an initial term, each director will be elected for a two-year term. The Company's Amended and Restated Certificate of Incorporation also provides that, in the event there are three or more Series A directors, the Company's Board of Directors will be divided into three classes, and that, after an initial term, each director will be elected for a three-year term. Whether there are two or three classes of directors, the Series A Directors are to be divided among the classes as equally as possible. A classified Board of Directors is intended to assure the continuity and stability of the Company's Board of Directors and the Company's business strategies and policies. The classified board provision could increase the likelihood that, in the event of a takeover of the Company, incumbent directors will retain their positions. In addition, the classified board provision helps ensure that the Company's Board of Directors, if confronted with an unsolicited proposal from a third party that has acquired a block of the voting stock of the Company, will have sufficient time to review the proposal and appropriate alternatives and to seek the best available result for all stockholders. The directors may only be removed for cause by a vote of the holders of a majority of the Company's Common Stock voting together as a class. Business Combinations. The Company, as a Delaware corporation, is subject to Section 203 ("Section 203") of the DGCL. In general, subject to certain exceptions, Section 203 prohibits a Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date that such stockholder became an interested stockholder, unless (i) prior to such date the Board approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding for purposes of determining the number of shares outstanding those shares owned by (x) persons who are directors and also officers and (y) employee stock plans in which employee participants do not have the right to determine confidentially whether or not shares held subject to the plan will be tendered in a tender or exchange offer); or (iii) at or subsequent to such time, the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66% of the outstanding voting stock that is not owned by the interested stockholder. Section 203 defines a "business combination" to include certain mergers, consolidations, asset sales and stock issuances and certain other transactions resulting in a financial benefit to an "interested stockholder." In addition, Section 203 defines an "interested stockholder" to include any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with such an entity or person. 19 Controlling Stockholder. Hearst currently owns 100% of the Company's issued and outstanding Series B Common Stock, initially constituting in excess of 80% of the outstanding shares of the Company's Common Stock. The holders of the shares of Series A Common Stock are entitled to vote to elect two members of the Company's Board of Directors. As the holder of all of the Company's outstanding shares of Series B Common Stock, Hearst is entitled to vote to elect the balance of the members of the Company's Board of Directors (the Series B Directors); provided, however, that the Series B Directors shall not constitute less than a majority of the Company's Board of Directors. Hearst's ownership of the Series B Common Stock may have the effect of impeding the acquisition of control of the Company. REGISTRATION RIGHTS The Company has executed a Registration Rights Agreement for the benefit of certain holders of Series A Common Stock that are former partners of Argyle Television Investors, L.P. (collectively, the "ATI Holders"). The Registration Rights Agreement provides that the ATI Holders will have the right, subject to certain limitations and conditions, to require the Company to register for distribution through a firm commitment underwriting all or any portion of Series A Common Stock issued to them in the Merger. In addition, the ATI Holders also will have piggyback registration rights with respect to any proposed offering of Series A Common Stock for cash through a firm commitment underwriting sought by the Company. LIMITATIONS ON DIRECTOR LIABILITY The Company's Amended and Restated Certificate of Incorporation provides that, to the fullest extent permitted by the DGCL, a director or former director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar of Series A Common Stock is Harris Trust and Savings Bank. 20 PLAN OF DISTRIBUTION The Company may sell the Securities in any one or more of the following three ways: (i) to or through underwriters or dealers; (ii) through agents; or (iii) directly to one or more purchasers. With respect to each series of Securities being offered hereby, the terms of the offering of the Securities of such series, including the name or names of any underwriters, dealers or agents, the purchase price of such Securities and the proceeds to the Company from such sale, any underwriting discounts, selling commissions and other items constituting underwriters', dealers' or agents' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers or agents, and any securities exchanges on which the Securities of such series may be listed, will be set forth in, or may be calculated from the information set forth in, the Prospectus Supplement. Only underwriters so named in the Prospectus Supplement will be deemed to be underwriters in connection with the Securities offered thereby. If underwriters are used to sell any of the Securities, the Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The Securities may be offered to the public either through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all the Securities offered by the Prospectus Supplement if any of such Securities are purchased. In connection with the sale of Securities, underwriters may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Securities for whom they may act as agent. Underwriters may sell Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions (which may be changed from time to time) from the purchasers for whom they may act as agent. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. The Company may grant an option to the underwriters named in the Prospectus Supplement, exercisable during a fixed period after the date of the Prospectus Supplement, to purchase in the aggregate up to a maximum of 1,500,000 additional shares of Series A Common Stock to cover overallotments, if any, at the same price per share as the initial shares to be purchased by the underwriters. The underwriters may purchase such shares only to cover the overallotments made in connection with an offering of Series A Common Stock. Securities may also be sold directly by the Company or through agents (which may also act as principals) designated by the Company from time to time. Any agent involved in the offer or sale of the Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent will be set forth in, or may be calculated from the information set forth in, the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. In the case of sales made directly by the Company, no commission will be payable. If so indicated in the Prospectus Supplement, the Company will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase Securities from the Company at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a future date specified in the Prospectus Supplement. Such contracts will be subject to the conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commissions payable for solicitation of such contracts. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments that the agents or underwriters may be required to make in respect 21 thereof. Agents and underwriters may be customers of, engage in transactions with, or perform services for the Company or its affiliates in the ordinary course of business. The Company's Series A Common Stock is currently quoted on the Nasdaq National Market under the symbol "HATV." The Debt Securities may or may not be listed on a national securities exchange or a foreign securities exchange. The Debt Securities will be a new issue of securities with no established trading market. In the event that the Debt Securities are not listed on a national securities exchange, certain broker-dealers may make a market in the Debt Securities, but will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given that any broker- dealer will make a market in the Debt Securities or as to the liquidity of the trading market for the Debt Securities. The Prospectus Supplement with respect to the Debt Securities of any series will state, if known, whether or not any broker-dealer intends to make a market in such Securities. If no such determination has been made, the Prospectus Supplement will so state. LEGAL MATTERS Certain legal matters relating to the Securities will be passed upon for the Company by Rogers & Wells, New York, New York. Certain legal matters relating to the Securities will be passed upon for any underwriters, dealers or agents by Dow, Lohnes & Albertson, PLLC, Washington, D.C. EXPERTS The consolidated financial statements of Argyle appearing in the Argyle's Form 10-K for the year ended December 31, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. The combined financial statements of the Selected Gannett Television Stations and the financial statements of Multimedia Entertainment, Inc. (d.b.a. WLWT-TV) a subsidiary of Multimedia, Inc., appearing in Argyle Television Inc.'s Proxy Statement/Prospectus filed on July 31, 1997 and appearing in the Argyle Television, Inc. Current Report on Form 8-K/A filed on April 15, 1997, and incorporated by reference in this Prospectus, have been so incorporated in reliance on the reports of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The combined financial statements as of December 31, 1995 and 1996 and for each of the three years in the period ended December 31, 1996 of the Hearst Broadcast Group of The Hearst Corporation appearing in the Company's Proxy Statement/Prospectus filed on July 31, 1997 and the related financial statement schedule included elsewhere therein have been audited by Deloitte & Touche LLP, independent auditors, as set forth in their reports thereon included therein and incorporated herein by reference. Such combined financial statements and financial statement schedule are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 22 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN- CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PRO- SPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE- SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITA- TION OF AN OFFER TO BUY, THE SERIES A COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRO- SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT The Common Stock Offering................................................ S-3 The Company.............................................................. S-5 Recent Developments...................................................... S-7 Risk Factors............................................................. S-9 Use of Proceeds.......................................................... S-15 Price Range of Common Stock and Dividend Policy......................................................... S-16 Capitalization........................................................... S-17 Selected Unaudited Pro Forma Financial Data.......................................................... S-18 Selected Financial Data of Argyle........................................ S-21 Selected Financial Data of the Hearst Broadcast Group.................... S-24 Principal Stockholders................................................... S-26 Shares Eligible for Future Sale.......................................... S-27 Underwriting............................................................. S-29 Certain United States Tax Consequences to Non-United States Holders of Series A Common Stock................................................... S-32 Cautionary Statement Concerning Forward-Looking Statements............... S-35 PROSPECTUS Available Information.................................................... 2 Incorporation of Certain Documents by Reference............................................................ 2 The Company.............................................................. 4 Use of Proceeds.......................................................... 5 Ratio of Earnings to Fixed Charges....................................... 6 General Description of Securities and Risk Factors............................................................ 7 Description of Debt Securities........................................... 7 Description of Capital Stock............................................. 17 Plan of Distribution..................................................... 21 Legal Matters............................................................ 22 Experts.................................................................. 22
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 4,000,000 SHARES LOGO SERIES A COMMON STOCK ---------------------- PROSPECTUS SUPPLEMENT ---------------------- MERRILL LYNCH INTERNATIONAL CREDIT SUISSE FIRST BOSTON J.P. MORGAN SECURITIES LTD. MORGAN STANLEY DEAN WITTER NOVEMBER 5, 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----