-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Qmf+mzTx0fPyHMZJe4F6iU14Pwbjj9FSSP4MEjsXYyVQ1gMWPNnbUumgDZzS/1ZV Qib0G2w3iaCKpu6eU4g14w== 0000950144-94-000107.txt : 19940126 0000950144-94-000107.hdr.sgml : 19940126 ACCESSION NUMBER: 0000950144-94-000107 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TURNER BROADCASTING SYSTEM INC CENTRAL INDEX KEY: 0000100240 STANDARD INDUSTRIAL CLASSIFICATION: 4833 IRS NUMBER: 580950695 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 33 SEC FILE NUMBER: 033-62218 FILM NUMBER: 94502655 BUSINESS ADDRESS: STREET 1: ONE CNN CENTER STREET 2: 100 INTERNATIONAL BLVD CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4048271700 MAIL ADDRESS: STREET 1: P O BOX 105366 CITY: ATLANTA STATE: GA ZIP: 30348-5366 FORMER COMPANY: FORMER CONFORMED NAME: TURNER COMMUNICATIONS CORP DATE OF NAME CHANGE: 19791016 FORMER COMPANY: FORMER CONFORMED NAME: RICE BROADCASTING CO INC DATE OF NAME CHANGE: 19700909 424B3 1 PROSPECTUS SUPPLEMENT TO PROSPECTUS 1 424(B)(3) 33-62218 *************************************************************************** * * * This Preliminary Prospectus Supplement and the information contained * * herein are subject to completion or amendment and prospective * * purchasers are referred to the related final Prospectus Supplement * * for definitive information on any matter contained herein. This * * Preliminary Prospectus Supplement shall not constitute an offer to * * sell or the solicitation of an offer to buy nor shall there be any * * sale of these securities in any jurisdiction in which such offer, * * solicitation or sale would be unlawful prior to registration or * * qualification under the securities laws of any such jurisdiction. * * * *************************************************************************** SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS SUPPLEMENT DATED JANUARY 24, 1994 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 9, 1993 TURNER BROADCASTING SYSTEM, INC. $ % SENIOR NOTES DUE 2004 AND $ % SENIOR DEBENTURES DUE 2024 ------------------ The % Senior Notes due 2004 (the "Notes") and the % Senior Debentures due 2024 (the "Debentures" and, together with the Notes, the "Securities") are being offered by Turner Broadcasting System, Inc. (the "Company"). Interest on the Securities will be payable semi-annually on each January and July commencing July , 1994. The Notes will not be redeemable at the option of the Company. The Debentures may be redeemed at the Company's option, in whole or from time to time in part, at any time on or after January , 2004 at the redemption prices set forth herein, plus accrued and unpaid interest to the redemption date of the Debentures. See "Description of the Securities -- Redemption -- Redemption at the Option of the Company." Each Holder will have the right to require the Company to repurchase such Holder's Securities in whole, but not in part, upon the occurrence of certain Triggering Events (as defined), including, without limitation, a Change of Control (as defined), a Restricted Payment (as defined) or certain consolidations, mergers, conveyances or transfers of assets. The Company will not be required to make mandatory redemption or sinking fund payments with respect to the Notes or the Debentures prior to maturity. See "Description of the Securities -- Redemption -- Triggering Events." The Securities will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. ------------------ 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. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC(1) DISCOUNT(2) COMPANY(1)(3) ------------------------------------------------------ Per Note................................. % % % Per Debenture............................ % % % Total(3)................................. $ $ $
- --------------- (1) Plus accrued interest, if any, from the date of issuance. (2) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) Before deduction of expenses payable by the Company estimated at $ . ------------------ The Securities are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any orders in whole or in part. It is expected that the Securities will be ready for delivery in New York, New York, on or about February , 1994. GOLDMAN, SACHS & CO. CS FIRST BOSTON MERRILL LYNCH & CO. ------------------ The date of this Prospectus Supplement is January , 1994 2 Data contained in this Prospectus Supplement attributed to A.C. Nielsen Company ("Nielsen") represent Nielsen's estimates and should not be construed as statements of fact. As an industry matter, Nielsen estimates are primarily used in assessing relative television audiences delivered in connection with advertising and program performance; they are not intended to be used, among other things, for computing cable subscribers for subscription revenue purposes. --------------------- IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY OR OTHER SECURITIES OF THE COMPANY AT A LEVEL ABOVE THAT WHICH OTHERWISE MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE COMPANY The Company is a diversified entertainment company whose business segments include entertainment, news, syndication and licensing and sports. The Company owns and operates WTBS (commonly known as "TBS SuperStation"), a 24-hour per day independent UHF television station in Atlanta, Georgia, whose signal is telecast over-the-air to the Atlanta market and is also retransmitted by common carrier via satellite to cable systems in all 50 states, Puerto Rico and the Virgin Islands; Turner Network Television ("TNT"), a 24-hour per day cable television entertainment program service; and Cable News Network ("CNN"), Headline News and CNN International, three 24-hour per day television news services. The Company also owns one of the largest feature film libraries in the world (the "TEC Film Library") and over 3,000 one-half hours of animated programming associated with the names "Hanna-Barbera" and "Ruby Spears" (the "HB Library"). The TEC Film Library and the HB Library are used as sources of programming for the Company's cable services distributed in a variety of markets worldwide. The Company is the nation's leading supplier of programming for the basic cable television industry. On December 22, 1993, the Company acquired Castle Rock Entertainment, a motion picture production company. On December 29, 1993, the Company acquired the remaining 50% interest in HB Holding Co. In addition, the Company has entered into an agreement to acquire New Line Cinema Corporation, which acquisition is expected to be completed on or about January 28, 1994 but in any event by no later than February 28, 1994. See "Recent Developments." The Entertainment Segment principally consists of SuperStation, Inc., which operates TBS SuperStation, and Turner Network Television, Inc., which operates TNT. According to Nielsen audience estimates, overall during 1993, TBS SuperStation was the highest-rated advertiser-supported programming service distributed, on a 24-hour basis, to cable systems in the United States, and as of December 1993 was available in approximately 61.5 million U.S. television households, representing exposure to approximately 94% of U.S. cable homes and total exposure to 65% of U.S. television homes. In 1988, the Company launched TNT, with domestic distribution principally to subscribing cable television systems. According to Nielsen estimates, as of December 1993, TNT was available in cable systems servicing approximately 60.9 million U.S. television households, representing exposure to approximately 95% of U.S. cable television homes and total exposure to 65% of U.S. television homes. TBS SuperStation and TNT generally have available for their programming needs titles from the TEC Film Library and other filmed entertainment product, including 980 feature films and over 300 cartoon shorts and episodes of three television series under a 1990 license agreement with MGM-Pathe Communications Co. (now Metro-Goldwyn-Mayer Inc. ("MGM")). In January 1991, the Company expanded its Entertainment Segment internationally with the launch of TNT Latin America, which provides a 24-hour per day trilingual entertainment service distributed primarily to subscribing cable television systems in Latin America and the Caribbean. In October 1992 the Company launched the Cartoon Network, a 24-hour per day cartoon network in North America, which utilizes animated programming from both the HB Library and the TEC Film Library. In September 1993, the Company launched TNT Europe, which consists of European versions of the Cartoon Network and TNT originating in the United Kingdom and distributed throughout Europe. S-2 3 The News Segment principally consists of CNN, Headline News and CNN International. CNN and Headline News are distributed principally to subscribing cable television systems and others throughout the United States and Canada. CNN International is distributed to cable television systems, broadcasters, hotels and other businesses reaching approximately 140 countries and territories on five continents as of December 31, 1993. According to Nielsen audience estimates, as of December 1993, CNN and Headline News were available in cable television systems serving approximately 62.4 million and 54.2 million U.S. television households, respectively, representing exposure to approximately 97% and 85% of U.S. cable television homes, respectively, and total exposure to 66% and 58% of U.S. television homes, respectively. CNN was the second largest programming service distributed to cable television systems, based on the number of U.S. cable television households served as of December 1993. The principal activity of the Syndication and Licensing Segment is contracting with third parties relative to their use of the TEC Film Library. The TEC Film Library, the HB Library and other filmed entertainment product are distributed by the Company and certain third party distributors to a variety of markets worldwide, including the theatrical, home video, pay television and other syndication markets. The Company also syndicates the TEC Film Library, the HB Library and other filmed entertainment product to the Company's networks. The TEC Film Library contains approximately 3,700 feature-length motion pictures, 1,150 short subjects, 1,150 cartoon episodes, and a number of television shows. The TEC Film Library includes the MGM pre-1986 library, the Warner Bros. pre-1950 library and extensive rights to 750 RKO films. The HB Library consists of over 3,000 one-half hours of animated programming, including "The Flintstones," "Scooby Doo," "Yogi Bear" and "The Jetsons." The Sports Segment consists of the Atlanta Braves, a professional baseball club. In addition, the Company owns a 96% limited partnership interest in the Atlanta Hawks, a professional basketball club; a 44% interest in a limited partnership that owns SportSouth Network, a regional sports network serving the Southeast United States; and a 27.5% interest (at September 30, 1993) in a 24-hour per day German language news channel. The Company also owns CNN Center, a multi-use facility in Atlanta, Georgia, and certain other entities that operate the Omni Coliseum and contract for major events to be held in the Omni Coliseum and other venues in Georgia and has a one-third interest in a joint venture that operates a computerized ticket sales agency. S-3 4 RECENT DEVELOPMENTS NEW LINE MERGER On October 15, 1993, the Company, New Line Cinema Corporation ("New Line"), an independent producer and distributor of motion pictures, and NL Acquisition Co., a wholly owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, New Line will become a wholly owned subsidiary of the Company (the "New Line Merger"). At the effective time of the New Line Merger, each outstanding share of common stock, par value $0.01 per share, of New Line (the "New Line Common Stock") will be converted into the right to receive 0.96386 of a share (subject to appropriate adjustment in the event of certain dividends, stock splits and similar events) of Class B Common Stock, par value $0.0625 (the "Class B Common Stock"), of the Company. Assuming a valuation of $20.75 per share of Class B Common Stock and the exercise of all outstanding New Line options, warrants and convertible securities resulting in an issuance of a maximum of 21,312,174 shares of Class B Common Stock in the New Line Merger, the acquisition price for the New Line Common Stock would be approximately $442,228,000. All pro forma financial information set forth in this Prospectus Supplement with respect to the New Line Merger assumes a valuation of $20.75 per share of Class B Common Stock and the issuance of a total of 21,233,000 shares of Class B Common Stock in the New Line Merger. Such per share valuation for the Class B Common Stock was used by New Line and the Company for purposes of determining the exchange ratio to be used in the New Line Merger. The closing per share price of the Class B Common Stock on the American Stock Exchange, Inc. on August 4, 1993, immediately prior to the public announcement on August 5, 1993 that New Line and the Company were holding acquisition discussions was $20.625. See "Selected Pro Forma Financial Information." The Merger Agreement is subject to approval by the stockholders of New Line at a meeting to be held on January 28, 1994, and certain other customary conditions to closing. The New Line Merger is currently scheduled to close on or about January 28, 1994, but in any event by no later than February 28, 1994. CASTLE ROCK ACQUISITION On December 22, 1993, the Company acquired from Main Street Partners, Sony Pictures Entertainment, Inc. ("SPE") and Group W Investments, Inc. the equity interests in Castle Rock Entertainment ("Castle Rock"), a motion picture production company, for approximately $100 million in cash together with the repayment of approximately $187 million of outstanding indebtedness of Castle Rock and certain other acquisition costs. As part of the acquisition of Castle Rock, the Company entered into seven-year employment arrangements with the management of Castle Rock: Alan Horn, Rob Reiner, Martin Shafer, Andrew Scheinman and Glenn Padnick. In addition, the Company, Castle Rock and SPE have agreed to extend for several years certain theatrical, home video and television programming distribution agreements currently in place between Castle Rock and certain subsidiaries of SPE. See "Selected Pro Forma Financial Information." ACQUISITION OF HB HOLDING CO. In December 1991, the Company acquired a 50% common stock interest and a preferred stock interest in HB Holding Co. ("HB Holding Co."), at the time a newly-formed joint venture. The other investors in HB Holding Co. were Apollo Investment Fund, L.P. ("Apollo") and its affiliate, Altus Finance, S.A. ("Altus" and, together with Apollo, the "Investors"). At that time, HB Holding Co. acquired by merger for $262.5 million in cash, all of the stock of The Great American Entertainment Company, the subsidiaries of which owned Hanna-Barbera, Inc. and the HB Library. The Company also entered into a distribution agreement, a utilization agreement for an overseas production facility, an indemnity agreement together with Apollo relative to certain taxes and other arrangements with HB Holding Co. On December 29, 1993, the Company acquired the remaining 50% interest in HB Holding Co. in a transaction consisting of (i) the acquisition from Apollo of its 50% interest in HB Holding Co. for approximately $68 million in cash, (ii) the acquisition for $33 million of a senior note of HB Holding Co. S-4 5 from Altus and (iii) the repayment of other indebtedness of HB Holding Co. See "Selected Pro Forma Financial Information." AMENDED 1993 CREDIT AGREEMENT In December 1993, the Company amended the credit agreement that it entered into in July 1993 (the "1993 Credit Agreement" and, as so amended, the "Amended 1993 Credit Agreement") with a group of banks. The Amended 1993 Credit Agreement provides for, among other things, an increase of the original facility from $750 million to $1.5 billion and an extension of the term by six months. Amounts available for borrowing or reborrowing under the Amended 1993 Credit Agreement will reduce by $75 million as of the last business day of each of the calendar quarters ending March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 and by $150 million as of the last business day of each quarter thereafter until the revolving credit facility is reduced to zero. In addition, the parties amended the applicable margin rates and the ratios for certain financial covenants. The amount of borrowing availability under the Amended 1993 Credit Agreement continues to be subject to other provisions of the 1993 Credit Agreement. Concurrently with the closing of the amendments to the 1993 Credit Agreement, the Company borrowed under such amended agreement in order to prepay $636 million of term loans outstanding under a separate credit facility entered into by the Company in 1989 (the "1989 Credit Agreement"), terminating the 1989 Credit Agreement. In an unrelated transaction, a $125 million secured revolving credit agreement entered into in 1990 by CNN Center Ventures, an indirect wholly owned general partnership of the Company, was also cancelled. USE OF PROCEEDS The net proceeds to the Company from the sale of the Securities will be approximately $ . The Company intends to use substantially all of the net proceeds to repay amounts outstanding under the Amended 1993 Credit Agreement incurred in connection with the Company's acquisition of Castle Rock and the remaining 50% interest in HB Holding Co. and expected to be incurred in connection with the New Line Merger. Amounts outstanding under the Amended 1993 Credit Agreement to be repaid had an effective annual interest rate of 4.35% at January 14, 1994. Pending the application of such net proceeds, the Company will invest such proceeds in marketable securities. S-5 6 CAPITALIZATION The following table sets forth (i) the consolidated capitalization of the Company at September 30, 1993, (ii) the pro forma capitalization of the Company at September 30, 1993, giving effect to the Company's acquisition of Castle Rock and the remaining 50% interest in HB Holding Co. (together, the "Acquisitions") and the New Line Merger assuming that the Acquisitions and the New Line Merger had occurred at that date and (iii) the pro forma capitalization, adjusted by giving effect to the issuance of the Securities offered hereby and the application of the estimated net proceeds from the sale of the Securities to repay certain indebtedness under the Amended 1993 Credit Agreement. See "Use of Proceeds" and "Selected Pro Forma Financial Information."
AT SEPTEMBER 30, 1993 ------------------------------------------------- PRO FORMA PRO FORMA FOR THE FOR THE ACQUISITIONS ACQUISITIONS AND THE AND THE NEW LINE MERGER, ACTUAL NEW LINE MERGER AS ADJUSTED ----------- ---------------- ---------------- dollars in thousands, except share data Bank credit facilities(a)........................... $ 662,000 $ 1,301,081 $ % Senior Notes due 2004........................... 0 0 % Senior Debentures due 2024...................... 0 0 8 3/8% Senior Notes due 2013........................ 297,312 297,312 297,312 12% senior subordinated debentures(b)............... 536,658 536,658 536,658 Zero coupon subordinated convertible notes due 2007(c)........................................... 224,655 224,655 224,655 Other long-term debt(d)............................. 8,697 8,697 8,697 ----------- ---------------- ---------------- Total indebtedness(e)..................... 1,729,322 2,368,403 2,368,403 Stockholders' equity (deficit) Class C Convertible Preferred Stock, par value $.125; authorized 12,600,000 shares; issued and outstanding 12,396,976 shares............ 260,438 260,438 260,438 Class A Common Stock, par value $.0625; authorized 75,000,000 shares; issued and outstanding 68,330,388 shares................ 4,271 4,271 4,271 Class B Common Stock, par value $.0625; authorized 300,000,000 shares; issued and outstanding 120,544,518 shares(f)............ 7,534 8,861 8,861 Capital in excess of par value................. 719,303 1,158,561 1,158,561 Accumulated deficit............................ (1,009,751) (1,009,751) (1,009,751) ----------- ---------------- ---------------- Total stockholders' equity (deficit)...... (18,205) 422,380 422,380 ----------- ---------------- ---------------- Total capitalization................. $ 1,711,117 $ 2,790,783 $2,790,783 ----------- ---------------- ---------------- ----------- ---------------- ----------------
- --------------- (a) At December 31, 1993, the borrowings under the bank credit facilities aggregated $1,225,000,000, which amount gives effect to the borrowings incurred thereunder in connection with the Acquisitions. (b) Net of unamortized discount of approximately $3,342,000. (c) Net of unamortized discount of approximately $357,401,000. (d) Primarily includes long-term indebtedness of subsidiaries of the Company. At September 30, 1993, the actual current portion outstanding under other long-term debt was $2,298,000. (e) At September 30, 1993, the actual current portion outstanding under the 1989 Credit Agreement was $103,000,000. At September 30, 1993 there were no amounts outstanding under the 1993 Credit Agreement. (f) In addition to issued and outstanding shares, at September 30, 1993, there were reserved for issuance 74,381,856 shares issuable upon conversion of the Class C Convertible Preferred Stock, 8,412,819 shares issuable upon exercise of options under the Company's existing stock option plans, 7,440,422 shares issuable upon conversion of the zero coupon subordinated convertible notes due 2007 at the conversion rate in effect at September 30, 1993 and up to a maximum of approximately 7,400,000 shares issuable upon exercise of rights held by the Investors in HB Holding Co. The pro forma effects of the Acquisitions and the New Line Merger will reduce the number of shares reserved for issuance by approximately 7,400,000 as a result of the Company's acquisition of the remaining 50% interest in HB Holding Co. and will increase the number of shares issued or reserved for issuance by 21,312,174 to be issued in exchange for shares, warrants, options and convertible securities of New Line. S-6 7 SELECTED HISTORICAL FINANCIAL INFORMATION The selected consolidated financial data in the following table as of and for each of the years in the five-year period ended December 31, 1992 are derived from the consolidated financial statements audited by Price Waterhouse, independent accountants for the Company. The statement of operations data for the nine months ended September 30, 1992 and the financial data as of and for the nine months ended September 30, 1993 are derived from the Company's unaudited consolidated condensed financial statements for such periods contained in the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 1993, which is incorporated by reference herein, and, in the opinion of the management of the Company, contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of this information. The selected consolidated balance sheet data set forth below with respect to September 30, 1992 are derived from the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 1992 which is not incorporated herein by reference. Results for the nine months ended September 30, 1993 are not necessarily indicative of the results to be expected for the full year. The information is qualified in its entirety by, and should be read in conjunction with, the Company's audited consolidated financial statements as of December 31, 1991 and 1992 and for each of the three years ended December 31, 1992 and the unaudited consolidated condensed financial information as of September 30, 1992 and 1993 and for each of the nine-month periods ended September 30, 1992 and 1993 and the related notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1992 and Quarterly Report on Form 10-Q for the nine months ended September 30, 1993, which are incorporated by reference herein.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------------------------------------- ---------------------- 1988 1989 1990 1991 1992 1992 1993 ---------- ---------- ---------- ---------- ---------- ---------- ---------- in thousands, except ratios STATEMENT OF OPERATIONS DATA Revenue................. $ 806,626 $1,065,051 $1,393,521 $1,480,243 $1,769,892 $1,231,436 $1,386,574 Depreciation and amortization(a)....... 140,008 147,016 160,380 158,285 189,972 139,530 149,890 Operating profit (b).... 119,740 266,052 201,265 297,121 289,382 204,704 237,365 Interest expense, net of interest income....... 200,726 192,824 189,741 196,139 189,637 143,644 138,205 Income (loss) before extraordinary items and the cumulative effect of a change in accounting for income taxes...... (94,541) 27,632 (15,578) 42,936 34,061 23,393 58,360 Extraordinary items(c).............. -- (98,279) 20,200 43,000 43,561 24,530 (6,136) Cumulative effect of a change in accounting for income taxes...... -- -- -- -- -- -- (306,000) Net income (loss)....... (94,541) (70,647) 4,622 85,936 77,622 47,923 (253,776) Ratio of earnings to fixed charges(d)...... (e) 1.23x 1.04x 1.43x 1.43x 1.34x 1.64x
AT DECEMBER 31, AT SEPTEMBER 30, ---------------------------------------------------------- ---------------------- 1988 1989 1990 1991 1992 1992 1993 ---------- ---------- ---------- ---------- ---------- ---------- ---------- in thousands BALANCE SHEET DATA Working capital......... $ 65,434 $ 221,101 $ 264,796 $ 378,680 $ 475,397 $ 558,392 $ 481,359 Cash and cash equivalents........... 52,984 142,155 43,733 78,556 126,256 276,356 228,930 Total assets............ 1,859,031 2,114,763 2,152,617 2,397,227 2,523,573 2,605,619 2,594,573 Long-term debt, less current portion....... 1,260,502 1,688,548 1,855,619 1,968,937 1,709,051 1,832,570 1,624,024 Redeemable preferred stock(f).............. 316,998 324,996 334,160 4,855 -- 4,898 -- Stockholders' equity (deficit)............. (375,191) (431,649) (473,092) (37,603) 233,101 205,437 (18,205)
footnotes on next page S-7 8 - --------------- (a) Includes depreciation of property and equipment, amortization of purchased program rights and related intangibles, licensed program rights, participants' share and royalties and other intangibles. Licensed program rights amortization was $23,935,000, $30,609,000, $47,370,000, $50,632,000, $65,960,000, $49,495,000, and $52,336,000 for each of the five years ended December 31, 1992 and the nine months ended September 30, 1992 and 1993, respectively. (b) Operating profit is defined as income before interest expense, interest income, dividends on minority interest, provision for income taxes, extraordinary items and the cumulative effect of a change in accounting for income taxes. (c) Extraordinary items consist of (i) for the year ended December 31, 1989 and the nine months ended September 30, 1993, a loss on early extinguishment of indebtedness of $123,191,000, net of tax benefits of $24,912,000, and of $10,136,000, net of tax benefits of $4,000,000, respectively and (ii) for the years ended December 31, 1990, 1991 and 1992 and the nine months ended September 30, 1992 utilization of operating loss carryforwards. (d) Earnings used in computing the ratios consist of income (loss) before provision for income taxes, extraordinary items and the cumulative effect of a change in accounting for income taxes, excluding the undistributed earnings or losses of less than 50%-owned entities, plus fixed charges exclusive of interest capitalized. Fixed charges consist of interest expense (including amortization of debt issue cost and original issue discount), dividends on minority interest, interest capitalized and one-third of rental expense (considered by the Company to be representative of the interest factor). (e) For the year ended December 31, 1988, fixed charges exceeded earnings before fixed charges by $89,503,000. (f) Amounts represent the accreted value of the Class B Cumulative Preferred Stock outstanding at the end of each period. S-8 9 SELECTED OPERATING DATA
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1988 1989 1990 1991 1992 -------- -------- -------- -------- -------- Advertising Revenue in thousands(a) TBS SuperStation............................................ $247,347 $270,992 $276,284 $287,389 $309,684 TNT......................................................... 3,707 39,024 111,117 137,993 183,987 CNN......................................................... 110,034 137,164 151,067 171,844 179,023 Headline News............................................... 29,262 46,946 69,506 76,512 76,527 CNN International........................................... 770 1,161 3,866 13,222 25,983 Subscription Revenue in thousands(a) TNT......................................................... -- $ 55,123 $168,993 $231,933 $260,048 CNN......................................................... $104,511 127,133 136,881 148,590 166,256 Headline News............................................... 3,956 3,853 4,637 5,623 7,201 TNT Latin America........................................... -- -- -- 2,348 9,524 CNN International........................................... 1,689 3,878 6,100 16,203 22,639 Coverage Households in thousands(b)(c)(d) TBS SuperStation............................................ 47,925 52,149 55,515 57,457 60,032 TNT......................................................... -- 36,341 51,152 55,641 58,312 CNN......................................................... 49,223 53,799 56,702 58,877 61,172 Headline News............................................... 34,730 40,825 44,708 48,223 51,354 U.S. Cable Television Household Penetration(b)(c)(f) TBS SuperStation............................................ 93% 94% 94% 94% 94% TNT......................................................... -- 66 89 93 94 CNN......................................................... 96 97 97 97 97 Headline News............................................... 68 74 77 80 82 U.S. Television Household Penetration(b)(c)(g) TBS SuperStation............................................ 53% 57% 60% 62% 64% TNT......................................................... -- 39 55 60 63 CNN......................................................... 54 58 61 64 66 Headline News............................................... 38 44 48 52 55 Average U.S. Viewing Households in thousands(b)(e)(h) TBS SuperStation............................................ 797 792 840 793 803 TNT......................................................... -- 231 439 509 560 CNN......................................................... 283 335 391 685(i) 400 Headline News............................................... 121 143 153 182(i) 172 Ratings 24-hour basis(b)(e)(j) TBS SuperStation............................................ 1.7% 1.6% 1.5% 1.4% 1.4% TNT......................................................... -- .8 .9 .9 1.0 CNN......................................................... .6 .7 .7 1.2(i) .7 Headline News............................................... .4 .4 .4 .4(i) .3 Share of Viewing Households 24-hour basis(b)(e)(k) TBS SuperStation............................................ 5.4% 5.0% 4.9% 4.4% 4.3% TNT......................................................... -- 2.6 3.0 3.0 3.1 CNN......................................................... 1.9 2.1 2.2 3.7(i) 2.1 Headline News............................................... 1.2 1.2 1.1 1.2(i) 1.1
- --------------- (a) Certain amounts prior to 1992 have been reclassified to conform to the current year presentation. (b) Information derived by the Company from Nielsen data. (c) Measured as of the December rating period in each indicated year. (d) Coverage households, in thousands, for the December 1993 rating period, for TBS SuperStation, TNT, CNN, Headline News and the Cartoon Network were 61,525, 60,876, 62,420, 54,219 and 8,861, respectively. (e) Represents the average number or percentage of viewing households for the respective service at any given time based upon an average for each 24-hour period in the 12 rating periods in each indicated year. (f) U.S. Cable Television Household Penetration for the December 1993 rating period, for TBS SuperStation, TNT, CNN, Headline News and the Cartoon Network was 94%, 95%, 97%, 85% and 13%, respectively. (g) U.S. Television Household Penetration for the December 1993 rating period, for TBS SuperStation, TNT, CNN, Headline News and the Cartoon Network was 65%, 65%, 66%, 58% and 9%, respectively. (h) Average U.S. Viewing Households, in thousands, for the 12 rating periods in 1993, for TBS SuperStation, TNT, CNN, Headline News and the Cartoon Network were 815, 552, 369, 181 and 56, respectively. (i) Increase primarily due to Persian Gulf War coverage. (j) Ratings, 24-hour basis, for the average of the 12 rating periods in 1993, for TBS SuperStation, TNT, CNN, Headline News and the Cartoon Network were 1.3%, 0.9%, 0.6%, 0.3% and 0.9%, respectively. (k) Share of Viewing Households, 24-hour basis, for the average of the 12 rating periods in 1993, for TBS SuperStation, TNT, CNN, Headline News and the Cartoon Network was 4.2%, 2.9%, 1.9%, 1.1% and 2.7%, respectively.
S-9 10 SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION The selected unaudited pro forma financial information set forth below gives effect to the Acquisitions and the New Line Merger. The unaudited pro forma statement of operations data for the year ended December 31, 1992 and for the nine months ended September 30, 1993, present the unaudited pro forma combined results of the continuing operations of the Company, Castle Rock, HB Holding Co. and New Line for those periods assuming that the Acquisitions and the New Line Merger occurred at the beginning of the periods presented. The unaudited pro forma balance sheet data at September 30, 1993 present the pro forma condensed combined financial position of the Company, Castle Rock, HB Holding Co. and New Line assuming that the Acquisitions and the New Line Merger had occurred at that date. The selected unaudited pro forma financial information is provided for informational purposes only and does not purport to be indicative of the future results or financial position of the Company or what the results of operations or financial position would have been had the Acquisitions and the New Line Merger been effected on the dates indicated. This information is qualified in its entirety by, and should be read in conjunction with, the Company's Unaudited Pro Forma Condensed Combined Financial Information contained in the Company's Current Report on Form 8-K, dated December 22, 1993, which is incorporated herein by reference. This information should also be read in conjunction with the information set forth in "Selected Historical Financial Information" herein, the historical financial statements, including the related notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1992 and Quarterly Reports on Form 10-Q for the nine months ended September 30, 1993, the historical financial statements and related notes thereto of New Line included in the Company's Current Report on Form 8-K, dated January 24, 1994, and the historical financial statements and related notes thereto of Castle Rock included in the Company's Current Report on Form 8-K, dated December 22, 1993. The unaudited pro forma financial information is based on the Company's preliminary review of Castle Rock and New Line and the Company's knowledge of HB Holding Co. The Company has not received any appraisals or valuations from independent third parties of the assets or properties of Castle Rock, New Line or HB Holding Co. However, the unaudited pro forma information presented may be adjusted once complete information on the fair value of all of such companies' assets and liabilities is developed and once a more thorough review of such companies' operating and accounting policies and procedures has been completed. S-10 11
PRO FORMA FOR THE ACQUISITIONS AND THE NEW LINE MERGER ----------------------------------------- YEAR ENDED NINE MONTHS ENDED DECEMBER 31, 1992 SEPTEMBER 30, 1993 -------------------- ------------------ in thousands except ratios STATEMENT OF OPERATIONS DATA Revenue...................................................... $2,163,103 $1,774,306 Cost of operations........................................... 1,345,494 1,072,276 Selling, general and administrative.......................... 477,191 413,675 Operating profit(a).......................................... 283,142 234,086 Interest expense, net of interest income..................... 225,601 164,454 Income (loss) before extraordinary items and the cumulative effect of a change in accounting for income taxes.......... (3,804) 36,543 Ratio of earnings to fixed charges........................... 1.15x 1.38x
PRO FORMA FOR THE ACQUISITIONS AND THE NEW LINE MERGER ------------------------------ AT SEPTEMBER 30, 1993 ------------------------------ in thousands BALANCE SHEET DATA Working capital........................................................... $ 698,566 Cash and cash equivalents................................................. 291,851 Total assets.............................................................. 3,907,527 Total indebtedness........................................................ 2,368,403 Stockholders' equity...................................................... 422,380
- --------------- (a) Operating profit is defined as income before interest expense, interest income, provision for income taxes, extraordinary items and the cumulative effect of a change in accounting for income taxes. S-11 12 DESCRIPTION OF THE SECURITIES This description of the particular terms of the Securities supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities and the Indentures set forth in the accompanying Prospectus under the heading "Description of the Debt Securities," to which description reference is hereby made. The following description of the terms of the Securities does not purport to be complete and is qualified in its entirety by reference to the indenture pursuant to which the Securities will be issued (the "Indenture"), a copy of which has been filed as an exhibit to the Registration Statement of which the accompanying Prospectus is a part. Capitalized terms used but not defined herein or in the accompanying Prospectus have the meanings given to them in the Indenture. The Indenture is referred to in the Prospectus as the "Senior Indenture" and sometimes collectively with the Subordinated Indenture as the "Indentures." The Notes and the Debentures are "Senior Debt Securities" as that term is used in the Prospectus and are also referred to in the Prospectus as the "Offered Debt Securities." As used in this "Description of the Securities," the "Company" refers to Turner Broadcasting System, Inc. and does not include its subsidiaries. GENERAL The Notes and the Debentures each constitute a series of Senior Debt Securities for purposes of the Indenture. The Notes and the Debentures are limited to $ and $ aggregate principal amount, respectively. The Notes and the Debentures will bear interest from the date of issue at the respective rates per annum shown on the front cover of this Prospectus Supplement and will mature on January , 2004 and January , 2024, respectively. Interest on the Securities will be payable semi-annually in arrears on January and July of each year, commencing July , 1994, to the persons in whose names the Securities are registered at the close of business on and , as the case may be, next preceding such January or July , and interest will be calculated on the basis of a 360-day year of twelve 30-day months. The Company has appointed the Trustee under the Indenture as the Paying Agent, transfer agent and Registrar for the Securities. The Securities may be presented for payment, registration of transfer or exchange at the office of the Trustee. The Securities will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. SATISFACTION AND DISCHARGE The Company will be discharged from its obligations under the Securities of any series upon satisfaction of the following conditions: (a) the Company has irrevocably deposited in trust with the Trustee either (i) money in an amount as will, or (ii) U.S. Government Obligations, as will, together with the predetermined and certain income to accrue thereon without consideration of any reinvestment thereof, or (iii) a combination of (i) and (ii) as will (in a written opinion with respect to (ii) or (iii) of independent public accountants delivered to the Trustee), be sufficient to pay and discharge the entire principal of and interest, if any, to Stated Maturity on the outstanding Securities of such series at the time such payments become due; (b) the Company has paid or caused to be paid all other sums payable with respect to the Securities of such series; (c) no default or Event of Default shall have occurred and be continuing with respect to the Securities of such series and no Triggering Event shall have occurred as to which the Company has not fully satisfied the Redemption Rights of all Holders electing to have their Securities of such series redeemed; and (d) the Trustee has received an Officers' Certificate stating that all conditions precedent to the discharge of the Company's obligations have been complied with and an Opinion of Counsel to the effect that no other action under the Indenture is required as a precondition to the discharge of the Company's obligations. Upon and following the deposit of such funds or U.S. Government Obligations and the satisfaction of such other conditions the Holders of Securities of such series shall only be entitled to receive payment of the principal of (and premium, if any) and interest, if any, on the Securities of such series from deposited funds and the Company shall have no further obligations with respect thereto except for obligations with respect to registration of transfer and S-12 13 exchange of the Securities of such series. See "Certain Federal Income Tax Considerations -- Defeasance of Securities." REDEMPTION Redemption at the Option of the Company The Notes are not redeemable at the Company's option. The Debentures will be subject to redemption at any time on or after January , 2004, at the option of the Company, in whole or in part, on not less than 30 nor more than 60 days' prior notice, at the redemption prices set forth below (expressed as percentages of the principal amount), together with accrued and unpaid interest, if any, to but excluding the date of redemption, if redeemed during the 12-month period beginning January of the years indicated below:
REDEMPTION YEAR PRICE - ----------------- ---------- 2004 % and thereafter 100%
If less than all of the Debentures are to be redeemed, the Trustee shall select the Debentures or the portion thereof to be redeemed pro rata, by lot or by any other method the Trustee shall deem fair and reasonable. Redemption at the Option of the Holder Each Holder will have the option to require the Company to redeem all, but not less than all, of the Securities owned by such Holder (the "Redemption Right") at a redemption price, payable in cash, equal to 101% of the principal amount, plus accrued and unpaid interest to the date fixed for redemption, upon the occurrence of a Triggering Event (as hereinafter defined) with respect to the Securities of such series. In the event of any Triggering Event with respect to Securities of any series, each Holder of Securities of such series shall have the Redemption Right for a period of 45 days after the mailing of a notice to the Holders by the Company that such Triggering Event has occurred. A Holder must exercise such Redemption Right within the 45-day period after the mailing of such notice by the Company or such Redemption Right will expire with respect to such Triggering Event at the close of business on the last day of such period (the "Redemption Date"). Exercise of such Redemption Right will be irrevocable and interest on the Securities tendered for redemption will cease to accrue from and after the Redemption Date. Each Holder's exercise of such Redemption Right shall be made by submitting to the Trustee not later than the close of business on the Redemption Date a completed Demand Form (as defined below) relating to the Securities to be redeemed. If a Triggering Event occurs with respect to Securities of any series, then, as soon as practicable and in any event within 30 days after the occurrence of such Triggering Event, the Company shall mail to each Holder of Securities of such series and the Trustee a notice which shall disclose the occurrence of the Triggering Event and the right of the Holder to require the Company to redeem all, but not less than all, of such Holder's Securities and shall state the Redemption Date, the redemption price, the name and address of the paying agent, and that the Securities to be redeemed must be surrendered to the paying agent in order for the Holder of such Securities to collect the redemption price. Such notice shall be accompanied by a form of written demand to be used by the Holder to exercise their Redemption Right (a "Demand Form"). The Company will comply with all applicable tender offer rules under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including but not limited to, Rule 14e-1, as then in effect, with respect to any offer by the Company to redeem Securities of any series upon a Triggering Event. S-13 14 Because the Holders of Securities may, under the Redemption Right, cause the Company to redeem their Securities at 101% of the outstanding principal amount, plus accrued and unpaid interest, upon a Triggering Event, the Redemption Right may have certain anti-takeover effects. The Redemption Right could result in additional expense to a person or group that attempts to acquire the Company, and may render more difficult or discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of the Company's securities or the removal of incumbent management. The occurrence of certain of the events that would constitute a Triggering Event could constitute an event of default under the Company's existing or future indebtedness, including the Amended 1993 Credit Agreement. In addition, the exercise by Holders of the Redemption Right could cause a default under such indebtedness even if the Triggering Event does not, due to the effect of such redemptions on the financial condition of the Company. In the event a Triggering Event occurs and a substantial portion of Securities are presented for payment there is no assurance that the Company would have sufficient financial resources to enable it to redeem the Securities. In such event, the Company expects that it would be required to refinance such Securities to the extent it did not have funds available to meet its redemption obligations; however, there can be no assurance that the Company could obtain such financing. Triggering Events Mergers and Sales of Assets by the Company. It will be a Triggering Event with respect to the Securities of any series if (A) the Company consolidates with, or merges into, any other Person, (B) the Company conveys or transfers (by sale, lease, assignment or otherwise), directly or indirectly, in a single transaction or a series of related transactions, its properties and assets as an entirety or substantially as an entirety to any Person or group of related Persons or (C) the Company or any Subsidiary conveys or transfers (by sale, lease, assignment or otherwise), directly or indirectly, in a single transaction or a series of related transactions not in the ordinary course of the business of the Company or such Subsidiary, as the case may be, to any Person or group of related Persons, (other than the Company or another Subsidiary) its properties or assets (including the Capital Stock representing a majority of the Voting Power of Subsidiaries that owned such properties or assets) if either (i) such properties or assets produced more than 25% of the Company's Consolidated Operating Cash Flow for the four fiscal quarters ending immediately prior to such conveyance or transfer for which financial information in respect thereof is available, or (ii) the book value of such property or assets equals or exceeds 25% of the consolidated assets of the Company and its Subsidiaries at the end of the most recent fiscal quarter for which financial information in respect thereof is available, unless: (1) either the Company shall be the surviving Person or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company as an entirety or substantially as an entirety are conveyed or transferred shall be organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by a supplemental indenture, the due and punctual payment of the principal of, premium, if any, and interest, if any, on all outstanding Securities of such series and the performance of every covenant of the Indenture and provisions of the Securities of such series on the part of the Company to be performed or observed; (2) 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; (3) if a supplemental indenture is required in connection with such transaction, the Company shall have delivered to the Trustee an Officers' Certificate stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with the Indenture and that all conditions precedent therein provided for relating to such transaction have been complied with and, upon closing of the consolidation, merger, conveyance or transfer, an Opinion of Counsel stating that the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer the properties and assets of the Company as an entirety or substantially as an entirety is organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and has assumed, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, the due and punctual payment of the principal of and interest, if any, on all the outstanding S-14 15 Securities of such series and all other obligations under the Indenture and the Securities of such series; and (4) immediately after giving effect to such transaction on a pro forma basis the Consolidated Interest Coverage Ratio of the Company or such surviving Person shall be at least equal to 1.50 to 1. Restricted Payments. It will be a Triggering Event with respect to the Securities of any series if the Company or any of its Subsidiaries declares or makes any Restricted Payment if, at the time of such Restricted Payment, (A) an Event of Default shall have occurred and be continuing or would result therefrom or (B) after giving effect to such Restricted Payment, the Consolidated Interest Coverage Ratio of the Company would be less than 1.50 to 1. Notwithstanding the foregoing, the following actions shall not be a Triggering Event: (a) the payment of any dividend within 60 days after the date of its declaration if the dividend would have been permitted on the date of declaration; (b) the issuance of Capital Stock (other than Disqualified Capital Stock) of the Company upon conversion of the Company's Class C Convertible Preferred Stock; (c) the issuance of Capital Stock (other than Disqualified Capital Stock) of the Company upon the conversion of, or in exchange for, Capital Stock of the Company; (d) the declaration or payment by the Company or any Subsidiary in Capital Stock (other than Disqualified Capital Stock) of any dividend on, or the making by the Company or any Subsidiary of any distribution of, Capital Stock (other than Disqualified Capital Stock) in respect of, the Capital Stock of the Company; (e) the declaration or payment of any dividend or the making of any distribution in respect of the Capital Stock of any Subsidiary of the Company to the Company or another Subsidiary of the Company or the redemption, purchase, retirement or other acquisition for value by a Subsidiary of shares of such Subsidiary from the Company or another Subsidiary; (f) the declaration or payment to any Person other than the Company or a Subsidiary of the Company (the "Equity Holders") of any dividend or the making of any distribution in respect of the Capital Stock of a Subsidiary of the Company or the redemption, purchase, retirement or other acquisition for value by a Subsidiary of the Company of Capital Stock of such Subsidiary held by any Equity Holder, provided that the amounts declared or paid in respect thereof subsequent to the issuance of the Securities shall not exceed the sum of (A) the aggregate proceeds received by such Subsidiary from purchases of equity interests in such Subsidiary by the Equity Holders or other capital contributions made by the Equity Holders to such Subsidiary subsequent to the issuance of the Securities and (B) the Equity Holders' pro rata share of the aggregate Consolidated Operating Cash Flow of such Subsidiary (or if such aggregate Consolidated Operating Cash Flow is a deficit, minus 100% of such deficit) earned subsequent to June 30, 1993 and prior to the last day of the fiscal quarter immediately preceding the fiscal quarter in which such declaration or payment occurs, less all other declarations or payments to Equity Holders subsequent to the issuance of the Securities and prior to such declaration or payment; or (g) the acquisition by the Company of its Capital Stock (or, in the case of clause (D), below, warrants, rights or options to purchase or acquire shares of its Capital Stock) (A) to eliminate fractional shares, (B) to collect or compromise in good faith a debt, claim or controversy with any shareholder at a price not in excess of the fair market value thereof, (C) from any shareholder who, by reason of dissent from any corporate action, is entitled under applicable laws to be paid the fair market value of his shares, (D) from a director or an employee who has purchased or otherwise acquired the shares, warrants, rights or options from the Company or a Subsidiary under an agreement permitting or obligating the Company or a Subsidiary to repurchase the shares, warrants, rights or options, but in no event for a price greater than the higher of the fair market value thereof or the price at which they were sold by the Company, or (E) pursuant to a court order; provided, that the aggregate amount paid by the Company subsequent to the date of issuance of the Securities pursuant to subclauses (A), (B), (C), (D) and (E) shall not exceed $100,000,000. Change of Control. It will be a Triggering Event with respect to the Securities of each series if there is a Change of Control with respect to the Company. The occurrence of a Triggering Event upon a Change of Control may, in certain circumstances, make more difficult or discourage a takeover of the Company, other than by a Permitted Other Holder, and thus the removal of incumbent management. Subject to the limitations described herein, the Company could enter into certain transactions, including acquisitions, refinancings, asset sales or other recapitalizations, that would not constitute a Change of Control under the Indenture but that could adversely affect the Company's capital structure or credit rating. In addition, the Company understands that certain of its S-15 16 major stockholders who are Permitted Other Holders own Class C Convertible Preferred Stock through one or more special purpose subsidiaries. Under the terms of the Indenture, the acquisition by a third party of such subsidiary (or of any Permitted Other Holder) would permit such third party to acquire control of the Company without constituting a Change of Control that resulted in a Triggering Event. COVENANTS Incurrence of Senior Funded Debt Except as hereinafter described, the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, issue, incur, assume, guarantee or otherwise become liable, contingently or otherwise, with respect to, extend the maturity of or otherwise become responsible for the payment of (collectively "incur"), any Funded Debt, unless, after giving effect to (A) the issuance of such Funded Debt and (if applicable) the application of the net proceeds thereof to refinance other Funded Debt as if such Funded Debt was issued and the application of the proceeds occurred at the beginning of the period and (B) the issuance and retirement of any other Funded Debt since the first day of the period as if such Funded Debt was issued or retired at the beginning of the period, the Consolidated Interest Coverage Ratio is at least 1.50 to 1. Notwithstanding the foregoing, the Company and its Subsidiaries may incur each and all of the following: (a) Debt outstanding on the date of issuance of the Securities and any extension, renewal, replacement or refinancing thereof; (b) Debt of Subsidiaries of the Company to the Company or to other Subsidiaries of the Company; (c) up to $200,000,000 in aggregate principal amount at any one time outstanding of Debt of Subsidiaries of the Company incurred in the ordinary course of business the proceeds of which are used to finance the production, completion, distribution or exhibition of Works; (d) Debt of Persons which become Subsidiaries of the Company after the date of issuance of the Securities, provided that such Debt is in existence at the time the respective Persons become Subsidiaries of the Company and was not incurred or created in anticipation thereof; (e) Debt of the Company to Subsidiaries of the Company; (f) Debt of the Company which is subordinated in right of payment to the Securities; and (g) up to $200,000,000 in aggregate principal amount of Funded Debt of the Company and its Subsidiaries outstanding at any time. For purposes of the debt incurrence covenant, if the Company or any of its Subsidiaries has incurred Funded Debt to any other Subsidiary of the Company and such other Subsidiary thereafter ceases to be a Subsidiary of the Company, the Company and its Subsidiaries shall be deemed to have incurred such Funded Debt immediately after such other Subsidiary ceases to be a Subsidiary of the Company. In the event that an item of Funded Debt meets the criteria of more than one type of Funded Debt described in this paragraph, the Company has the right to determine in its sole discretion the category to which such Funded Debt applies and is not required to include the amount and type of such Funded Debt in more than one of such categories. Limitation on Subsidiary Funded Debt In addition, Subsidiaries may not incur Funded Debt if at the time of incurrence and after giving effect thereto the aggregate of the outstanding Funded Debt of Subsidiaries exceeds the greater of (x) 15% of consolidated Funded Debt of the Company and its Subsidiaries (without including Debt specified in clauses (i) through (iii) of the following sentence) and (y) 10% of consolidated borrowing capacity then available to the Company under the Consolidated Interest Coverage Ratio test described under "Incurrence of Senior Funded Debt" plus $20,000,000. The foregoing limitation on Funded Debt of Subsidiaries shall not apply to: (i) Debt of Subsidiaries of the Company incurred in the ordinary course of business the proceeds of which are used to finance the production, completion, distribution or exhibition of Works, (ii) Debt of Subsidiaries outstanding on the date of issuance of the Securities and any extensions, renewals, replacements or refinancings thereof and (iii) any Debt of Subsidiaries of the nature described in sections (b) or (d) of the preceding paragraph. Incurrence of Certain Liens The Company will not, and will not permit any Subsidiary to, subject to any Lien, or suffer to exist any Lien on, the whole or any part of any Property now owned or hereafter acquired by it, except as S-16 17 hereinafter described, unless the Company secures the Securities, and any other securities which may then be outstanding and entitled to the benefit of a covenant similar in effect to this covenant, equally and ratably with the indebtedness or obligations secured by such Lien, so long as any such indebtedness or obligations shall be so secured. Notwithstanding the foregoing, this clause is not applicable to the following: (a) Liens imposed by any governmental authority for taxes, assessments or charges not yet delinquent or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or any of its Subsidiaries, as the case may be, in accordance with generally accepted accounting principles; (b) pledges or deposits securing non-delinquent obligations under worker's compensation, unemployment insurance and other social security legislation; (c) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, leases, subleases, licenses, sublicenses, restrictions on the use of Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of the Company or any of its Subsidiaries; (d) Liens on Property of Persons which become Subsidiaries of the Company after the date of issuance of the Securities securing Debt described in clause (d) of "Incurrence of Funded Debt," provided that (i) such Liens were in existence at the time the respective Persons became Subsidiaries of the Company and were not created in anticipation thereof or (ii) such Liens do not extend to Property other than the Property of such Subsidiary that secured such Debt; (e) Liens on Works which either (i) existed in such Works prior to the time of their acquisition and were not created in anticipation thereof, or (ii) were created solely for the purpose of securing obligations to financiers, producers, distributors, exhibitors, completion guarantors, inventors, copyright holders, financial institutions or other participants incurred in the ordinary course of business in connection with the acquisition, financing, production, completion, distribution or exhibition of Works; (f) Liens upon Property acquired after the date of issuance of the Securities (by purchase, production, construction or otherwise) by the Company or any of its Subsidiaries, each of which either (i) existed on such Property before the time of its acquisition and was not created in anticipation thereof, or (ii) was created solely for the purpose of securing Debt representing, or incurred to finance, refinance or refund, the cost (including cost of construction, production, development or acquisition) of the respective Property or of the Capital Stock or other ownership interest in the entity which owns the Property at the time of acquisition; provided that no such Lien shall extend to or cover any Property of the Company or such Subsidiary other than the respective Property so acquired (including Property so acquired indirectly as a result of the acquisition by the Company or any Subsidiary through the acquisition of such Capital Stock or other ownership interest), improvements thereon, products and proceeds thereof and revenues therefrom; (g) any Lien on the office building and hotel complex located in Atlanta, Georgia known as the CNN Center Complex, including the parking decks for such complex (to the extent such decks are owned or leased by the Company or its Subsidiaries), or any portion thereof and all property rights therein and the products, revenues and proceeds therefrom created as part of any mortgage financing or sale-leaseback of the CNN Center Complex; (h) Liens on satellite transponders and all property rights therein and the products, revenues and proceeds therefrom which secure obligations incurred in connection with the acquisition, utilization or operation of such satellite transponders or the refinancing of any such obligations; (i) additional Liens created after the date of issuance of the Securities on Property, provided that the aggregate Debt secured thereby and incurred on and after the issue date of the Securities shall not exceed on the date that any such Lien is granted, the greater of $100,000,000 and five percent (5%) of the book value, net of depreciation and amortization, of the total assets of the Company, on a consolidated basis, shown on the consolidated financial statements of the Company as of the last day of the month preceding the creation of such Lien; (j) Liens existing on the date of issuance of the Securities; (k) Liens resulting from progress payments or partial payments under United States government contracts or subcontracts; (l) Liens arising from legal proceedings, so long as such proceedings are being contested in good faith by appropriate proceedings diligently conducted and so long as execution is stayed on all judgments resulting from any such proceedings; (m) restrictions arising under the Federal Communications Act of 1934, as amended, and similar statutes in effect in jurisdictions outside the United States of America; (n) restrictions on the Atlanta National League S-17 18 Baseball Club, Inc. and Atlanta Hawks, L.P. and their respective assets imposed by Major League Baseball or the Commissioner of Baseball, and the National Basketball Association, respectively, including, without limitation, restrictions on the transferability of the Company's or any of its Subsidiary's interests therein; (o) Liens imposed under capital leases entered into after the date of issuance of the Securities provided that such Liens extend only to the property or assets that are the subject of such capital leases; (p) Liens on Capital Stock of or other ownership interest in any Person not a Subsidiary of the Company securing Debt of such Person; (q) Liens arising in the ordinary course of business that do not secure the repayment of Debt, including, without limitation, the following Liens: (i) Liens on film or television production in favor of the Screen Actors Guild or other similar trade groups or guilds securing rights to residual payments owing to the Screen Actors Guild, such other trade group or their respective members in respect of such film or television production; (ii) Liens to secure the performance of bids, trade contracts (other than for borrowed money), statutory obligations, surety and appeal bonds, leases (other than capital leases), performance bonds and other obligations of a like nature; (iii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (iv) restrictions (other than security interests) on the transferability of investments in favor of co-investors or the issuers of such investments or imposed by law; (v) Liens on works arising out of the sale, license, syndication, transfer or other disposition of such works made in accordance with the customary practices in the film, publishing, video and television industries, of rights or interests in works, so long as such Lien attaches only to works of the Company or its Subsidiaries being so sold, licensed, syndicated, transferred or disposed of; (vi) Liens to secure the performance of operating leases provided that such Liens extend only to the property or assets that are the subject of such operating leases; (r) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens (whether or not statutory) arising in the ordinary course of business which are not overdue for a period of more than 90 days or which are being contested in good faith and by appropriate proceedings, for which a reserve or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made; and (s) any extension, renewal or replacement of the foregoing, provided, however, that the Liens permitted hereunder shall not be spread to cover any additional Property (other than a substitution of like Property). CERTAIN DEFINITIONS A "Change of Control" is deemed to occur with respect to the Securities of any series on the first date on which (a) the Permitted Turner Holders and the Permitted Other Holders (individually, collectively or in the aggregate) cease to beneficially own and have the power to vote at least a majority of the aggregate voting power of the Voting Stock of the Company and (b) within 120 days of the occurrence of the event specified in clause (a), the Securities of such series are downgraded to (i) lower than BB+ by Standard and Poor's Corporation or any successor rating agency thereto and (ii) lower than Ba2 by Moody's Investors Service or any successor rating agency thereto. As used herein, a person shall be deemed to have "beneficial ownership" with respect to, and shall be deemed to "beneficially own," any securities of the Company in accordance with the definitions of such terms in Section 13 of the Exchange Act, and the rules and regulations (including Rule 13d-3, Rule 13d-5, and any successor rules) promulgated by the Securities and Exchange Commission thereunder; provided, however, that a person shall be deemed to have beneficial ownership of all securities that any such person has a right to acquire whether such right is exercisable immediately or only after the passage of time and without regard to the 60-day limitation referred to in Rule 13d-3. The Company understands that certain of its major stockholders who are Permitted Other Holders own Class C Convertible Preferred Stock through one or more special purpose subsidiaries. Under the terms of the Indenture, the acquisition by a third party of such subsidiary (or of any Permitted Other Holder) would permit such third party to acquire control of the Company without constituting a Change of Control that resulted in a Triggering Event. "Consolidated Interest Coverage Ratio" means, for any Person, as of any date of determination, the ratio of (i) the aggregate amount of Consolidated Operating Cash Flow of such Person for the four fiscal quarters for which financial information in respect thereof is available ending immediately prior to the date S-18 19 of the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio (the "Transaction Date") to (ii) the aggregate Consolidated Interest Expense of such Person for the four fiscal quarters for which financial information in respect thereof is available ending immediately prior to the Transaction Date, assuming for purposes of this calculation that base interest rates in respect of floating interest obligations being incurred are equal to base interest rates in effect as of the Transaction Date. In addition to the foregoing, for purposes of this definition "Consolidated Operating Cash Flow" and "Consolidated Interest Expense" shall be calculated after giving effect, on a pro forma basis for such four-quarter period, to (a) the acquisition of the assets, Property or business of another Person during the period commencing on the first day of such period to and including the Transaction Date (the "Reference Period") if during the Reference Period such Person becomes (or such assets, Property or business, as acquired, become all or substantially all the assets or business of) a consolidated Subsidiary of the Company and (b) each sale, transfer, lease, mortgage or other disposition (including, without limitation, a sale-leaseback transaction or a merger or consolidation) of assets, Property or business ("disposition") or series of related dispositions during the Reference Period by the Company or any Subsidiary (other than to the Company or a Subsidiary) which disposition or series of related dispositions is not in the ordinary course of business of the Company or the Subsidiary making such disposition. "Consolidated Interest Expense" means, for any Person, for any period, the aggregate amount, determined on a consolidated basis in accordance with GAAP, of interest, whether expensed or capitalized, paid or accrued during such period, in respect of all Funded Debt of such Person and its consolidated subsidiaries. "Consolidated Operating Cash Flow" means for any Person, for any period, net income from continuing operations for such Person and its consolidated subsidiaries for such period taken as a single accounting period determined on a consolidated basis in accordance with GAAP, excluding the effect of (i) Consolidated Interest Expense; (ii) provision for income taxes; (iii) depreciation of property, plant and equipment; (iv) amortization expense (excluding amortization of licensed rights); (v) extraordinary items; (vi) the cumulative effect of a change in accounting principle; and (vii) gains or losses on the sale of assets to the extent such gains or losses are included in the calculation of net income from continuing operations, all as determined in accordance with GAAP. "Disqualified Capital Stock" means, (i) with respect to any Person, any Capital Stock of such Person that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of an event or the passage of time would be, required to be redeemed or repurchased by such Person or its subsidiaries, including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due, on or prior to the earlier of the Maturity Date of the Notes or Debentures, as the case may be, or the first date on which none of the Securities of such series are outstanding and (ii) with respect to any Subsidiary of the Company, any Capital Stock of such Subsidiary that has a preference, conditionally or otherwise, as to the declaration, payment or accrual of dividends, the distribution of assets upon liquidation, dissolution or winding up, or both, over any other Capital Stock of such Subsidiary. "Funded Debt" means, with respect to any Person at any date, without duplication (a) indebtedness created, issued or incurred by such Person for borrowed money (whether by loan or the issuance and sale of debt securities); (b) obligations of such Person (contingent or otherwise) in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person (other than trade letters of credit or letters of credit securing performance of bids, trade contracts, statutory obligations (including obligations in respect of taxes and tax refunds), surety and appeal bonds, leases, performance bonds and similar obligations), (c) Capitalized Lease Obligations of such Person and (d) Funded Debt of others Guaranteed by such Person. For purposes of calculating the amount of any Funded Debt hereunder: (i) there shall be no double-counting of direct obligations, Guarantees and reimbursement obligations for letters of credit, (ii) the principal amount of any Funded Debt of any Person arising by reason of such Person having granted a Lien on its Property to secure Funded Debt of others, when such Funded Debt has not been assumed by such Person, shall be the lower of the principal amount of such Funded Debt or the fair S-19 20 market value of such Property at the time the Lien is granted by such Person and (iii) the principal amount of any Funded Debt of any Person arising by reason of such Person having Guaranteed Funded Debt of others, where the amount of such Guarantee is limited to an amount less than the principal amount of the Funded Debt Guaranteed, shall be the amount as so limited. "GAAP" means generally accepted accounting principles as in effect on the date of issuance of the Securities. "Permitted Other Holders" means (a) each Person that, on the date of issuance of the Securities, was either (i) the beneficial holder (within the meaning of Rule 13d-3 under the Exchange Act as in effect on the date of issuance of the Securities) of shares of the Class C Convertible Preferred Stock, par value $.125 per share, of the Company or (ii) an Affiliate of a Person specified in clause (i) above and (b) each Person at least 51% of the voting power of the Voting Stock of which is beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act as in effect on the date of issuance of the Securities) by one or more of the Persons specified in clause (a) above. "Permitted Turner Holders" means R.E. Turner and his estate, heirs and legatees, and the legal representatives of any of the foregoing, including, without limitation, Turner Foundation, Inc., Turner Charitable Remainder Unitrust or the trustee of any trust of which one or more of the foregoing are the sole beneficiaries. "Property" means with respect to any Person, any and all tangible or intangible property, assets, revenues, rights (including, without limitation with respect to the Company, rights of the Company and/or any of its Subsidiaries to use (whether by ownership, license or otherwise) copyrighted programs, programming, films and similar assets) or business of such Person, owned by leasehold or in fee, by license, sublicense or outright, whether now owned or hereafter acquired by such Person. "Restricted Payment" means (a) the declaration or payment by the Company or any Subsidiary, either in cash or in property, of any dividend on, or the making by the Company or any Subsidiary of any other distribution in respect of, the Capital Stock of the Company or any Subsidiary, or (b) the redemption, repurchase, retirement or other acquisition for value (whether in cash, property or otherwise) by the Company or any Subsidiary, directly or indirectly, of any Capital Stock of the Company. "Subsidiary" means (i) a corporation at least a majority of whose Capital Stock with voting power, under ordinary circumstance, to elect directors is at the date of determination owned, directly or indirectly, by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries or (ii) a partnership in which the Company or a Subsidiary is, at the date of determination, the sole general partner of such partnership or (iii) any other person (other than a corporation or partnership) in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of the majority of the directors or other governing body of such person. "Works" means motion pictures, video, television, interactive or multi-media programming, audio-visual works, sound recordings, books and other literary or written material, any software, copyright or other intellectual property related thereto, acquired directly or indirectly after the date of the issuance of the Securities by purchase, business combination, production, creation or otherwise, any component of the foregoing or rights with respect thereto, and all improvements thereon, products and proceeds thereof and revenues derived therefrom. "works" means Works without reference to when acquired. S-20 21 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS GENERAL Set forth below is a summary of certain United States Federal income tax considerations of importance to the original purchasers of the Securities. The summary does not discuss all of the aspects of Federal income taxation which may be relevant to particular investors in light of their personal investment circumstances, nor does it discuss any international, state or local income or other tax considerations. The summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), and on regulations, rulings and decisions that are in effect as of the date of the Prospectus Supplement, all of which are subject to change. Prospective investors are advised to consult with their tax advisors regarding the Federal, state, local and international income and other tax consequences of purchasing, holding and disposing of the Securities. DISPOSITION OF SECURITIES In general an original Holder of a Security will recognize gain or loss on the sale, redemption, exchange or other disposition of the Security measured by the difference between the amount of cash received and the Holder's adjusted tax basis in the Security. Accrued interest is taxable as interest and not as gain upon such disposition. DEFEASANCE OF SECURITIES If the Company exercises its right to satisfy and discharge its obligations under the Indenture with respect to the Securities of a series prior to their maturity by depositing money or U.S. Government Obligations in trust for holders of outstanding Securities of such series, such satisfaction and discharge ("discharge") under present law, is likely to be treated as a redemption of the Securities of such series prior to maturity in exchange for the property deposited in trust. In such event, each holder of Securities of such series would generally recognize, at the time of discharge, gain or loss measured by the difference between the amount of any cash and the fair market value of any property deemed received (except to the extent attributable to accrued interest) and the holder's adjusted tax basis in the Securities deemed surrendered. Thereafter, each holder of Securities of such series would be treated as if it held an undivided interest in the cash (or investments made therewith) and the property held in trust. Each holder of Securities of such series would generally be subject to tax liability in respect of interest income thereon and would recognize gain or loss upon any disposition, including redemption, of the assets held in trust. Although tax might be owed upon discharge, the holder of a discharged Security would not receive cash (except for current payments of interest on the Securities) until the maturity or earlier redemption of the Securities of such series. Such tax treatment could affect the purchase price that a holder would receive upon the sale of the Securities. MARKET DISCOUNT ON RESALE OF SECURITIES Purchasers of Securities should be aware that resale of the Securities may be affected by the market discount provisions of the Code. These rules, among other things, generally provide that if a subsequent holder of a Security purchases it at a market discount and thereafter recognizes gain upon a disposition, the lesser of such gain or the portion of the market discount that accrued while the Security was held by such holder will be treated as interest income at the time of the disposition. S-21 22 UNDERWRITING The underwriters named below (the "Underwriters") have severally agreed to purchase from the Company the following respective principal amounts of the Securities:
PRINCIPAL AMOUNT ----------------------- UNDERWRITER NOTES DEBENTURES --------------------------------------------------- ------- ------------ Goldman, Sachs & Co................................ $ $ CS First Boston Corporation........................ Merrill Lynch, Pierce, Fenner & Smith Incorporated..................................... ------- ------------ Total.................................... $ $ ------- ------------ ------- ------------
The Terms Agreement, dated January , 1994, by and among the Company and the Underwriters provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the Securities if any are purchased. The Underwriters propose to offer the Securities to the public initially at the respective public offering prices set forth on the cover page of this Prospectus Supplement and to certain dealers at such price less a concession not in excess of 1% of the principal amount of such Securities. The Underwriters and such dealers may allow a discount not in excess of 0.5% of such principal amount of the Securities on sales to certain other dealers. After the initial public offering, the public offering price and concession and discount may be changed by the Underwriters. The Securities are new issues of securities with no established trading market. The Company does not intend to list the Securities on any securities exchange. The Underwriters have advised the Company that they intend to act as a market maker for the Securities. However, the Underwriters are not obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Securities. The Company has agreed to indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act of 1933, as amended and, under certain circumstances, to contribute to payments that the Underwriters may be required to make in respect thereof. LEGAL MATTERS Certain legal matters with respect to the legality of the Securities being offered hereby will be passed upon for the Company by Troutman Sanders, Atlanta, Georgia. Certain legal matters in connection with the Securities will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California. Skadden, Arps, Slate, Meagher & Flom have from time to time represented the Company and are currently representing the Company on certain other matters. EXPERTS The consolidated financial statements of New Line as of December 31, 1992 and 1991, and for each of the three years in the period ended December 31, 1992, incorporated by reference in this Prospectus Supplement, have been audited by Ernst & Young, independent auditors, as set forth in their report included therein and have been so incorporated in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of Castle Rock as of and for the years ended December 31, 1992 and 1991, incorporated by reference in this Prospectus Supplement, have been audited by Ernst & Young, independent auditors, as set forth in their report included therein, in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. S-22 23 PROSPECTUS TURNER BROADCASTING SYSTEM, INC. DEBT SECURITIES --------------------- Turner Broadcasting System, Inc. (the "Company") may offer from time to time pursuant to this Prospectus unsecured senior debt securities (the "Senior Debt Securities") or unsecured senior subordinated debt securities (the "Subordinated Debt Securities" and, together with the Senior Debt Securities, the "Debt Securities") consisting of notes, debentures or other evidence of indebtedness. The Debt Securities will be limited to $1,100,000,000 aggregate public offering price. The Debt Securities may be offered as a single series or as two or more separate series in amounts, at prices and on terms to be determined at the time of offering and to be set forth in one or more Prospectus Supplements (as defined herein). The Debt Securities will be issued in registered form without coupons. In addition, all or a portion of the Debt Securities may be issued as Book-Entry Securities (as defined herein). Book-Entry Securities will be issued in global registered form. The specific designation, aggregate principal amount, authorized denominations, maturity, rate (or method of determining the same) and time of payment of interest, if any, any redemption or repurchase terms, any listing on a securities exchange, the initial public offering price, the net proceeds to the Company, the names of, and the principal amounts to be purchased by or through, underwriters, dealers or agents, if any, the compensation of such persons and other specific terms in connection with the offering and sale of the series of Debt Securities in respect of which this Prospectus is being delivered (the "Offered Securities") will be set forth in the accompanying Prospectus Supplement (the "Prospectus Supplement"). This Prospectus may not be used to consummate sales of Debt Securities unless accompanied by a Prospectus Supplement. The Senior Debt Securities, when issued, will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt Securities, when issued, will be unsecured and subordinated to all present and future Senior Indebtedness (as defined herein) of the Company. The Debt Securities may be sold to or through one or more underwriters or dealers, directly by the Company, or through one or more agents designated from time to time. See "Plan of Distribution." If any underwriter or agent of the Company is involved in the sale of any Debt Securities in respect of which this Prospectus is being delivered, the name of such underwriter or agent and any applicable commission or discount will be set forth in a Prospectus Supplement. The net proceeds to the Company from such sale also will be set forth in such Prospectus Supplement. --------------------- 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 DATE OF THIS PROSPECTUS IS JUNE 9, 1993 24 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN, OR INCORPORATED BY REFERENCE IN, THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT, UNDERWRITER OR DEALER. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE DEBT SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, and at the Regional Offices of the Commission at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621; and Seven World Trade Center, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain debt and equity securities of the Company are listed on the American Stock Exchange, and reports and other information concerning the Company can be inspected at the offices of such exchange at 86 Trinity Place, New York, New York 10005. This Prospectus does not contain all of the information set forth in the Registration Statement on Form S-3 and the exhibits thereto which the Company has filed with the Commission (the "Registration Statement") under the Securities Act of 1933, as amended, and to which reference is hereby made for further information. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed by the Company with the Commission and are hereby incorporated by reference in this Prospectus and shall be deemed to be a part hereof: 1. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992; and 2. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993. All documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to the termination of the offering made by this Prospectus also shall be deemed to be incorporated herein by reference and shall be deemed to be a part hereof from the date of filing of such documents (such documents, and the document referred to above, being herein referred to as "Incorporated Documents"). Any statement contained in an Incorporated Document 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 Incorporated Document or in an accompanying Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company hereby undertakes to provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus has been delivered, on the written or oral request of such person, a copy of any or all of the documents referred to above which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such Incorporated Documents. Requests for such copies should be directed to Steven W. Korn, Corporate Secretary, Turner Broadcasting System, Inc., One CNN Center, Atlanta, Georgia 30303 (Telephone: (404) 827-1700). 2 25 THE COMPANY The Company is a diversified entertainment company whose business segments include entertainment, news, syndication and licensing, sports and real estate. The Entertainment Segment principally consists of SuperStation, Inc., which operates WTBS (commonly known as "TBS SuperStation"), and Turner Network Television, Inc., which operates Turner Network Television ("TNT"). The Entertainment Segment also includes TNT Latin America, the Cartoon Network and Hanna-Barbera, Inc. The News Segment principally consists of Cable News Network ("CNN"), Headline News and Cable News Network International ("CNN International"), three 24-hour per day television news services. The principal activity of the Syndication and Licensing Segment is contracting with third parties relative to their use of the Company's TEC Film Library, one of the largest feature film libraries in the world. The Company also owns a 50% interest in a joint venture that owns the animated entertainment library associated with the names "Hanna-Barbera" and "Ruby Spears." The Sports Segment includes the Atlanta Braves, a professional baseball club; a 96% limited partnership interest in the Atlanta Hawks, a professional basketball club; and a 44% interest in a limited partnership that owns SportSouth Network, a regional sports network serving the Southeast United States. The Company's Real Estate Segment consists primarily of its interest in CNN Center, a multi-use facility in Atlanta, Georgia, and certain entities that operate the Omni Coliseum. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the Company's ratio of earnings to fixed charges for each of the periods indicated:
YEAR ENDED DECEMBER 31, ------------------------------------------------ 1988 1989 1990 1991 1992 ---- ---- ---- ---- ---- Earnings to fixed charges....................... (a) 1.23 1.04 1.43 1.43
- --------------- (a) For the year ended December 31, 1988, fixed charges exceeded earnings before fixed charges by $89,503,000. Earnings used in computing the ratios consist of income (loss) before provision for income taxes and extraordinary items plus fixed charges exclusive of interest capitalized. Fixed charges consist of interest expense (including amortization of debt issue cost and original issue discount), dividends on minority interest, interest capitalized and one-third of rental expense (considered by the Company to be representative of the interest factor). USE OF PROCEEDS Except as may be set forth in an applicable Prospectus Supplement, the net proceeds available to the Company from the sale of the Debt Securities will be used to reduce borrowings of the Company (including outstanding commercial paper) and for general corporate purposes. 3 26 DESCRIPTION OF DEBT SECURITIES The Debt Securities may be issued from time to time as a single series or in two or more separate series. The following description sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms and provisions of any Offered Securities and the extent to which such general terms and provisions described below may apply thereto, will be described in the Prospectus Supplement relating to such Offered Securities. Senior Debt Securities will be issued under an Indenture to be dated as of May 15, 1993 (the "Senior Indenture") between the Company and The First National Bank of Boston, as Trustee (the "Senior Trustee"). Subordinated Debt Securities will be issued under an Indenture to be entered into (the "Subordinated Indenture") between the Company and a trustee to be selected by the Company (the "Subordinated Trustee"). The Senior Indenture and the Subordinated Indenture are sometimes referred to collectively as the "Indentures" and individually as an "Indenture." The Senior Trustee and the Subordinated Trustee are sometimes referred to collectively as the "Trustees" and individually as a "Trustee." The Indentures will be substantially in the forms filed as exhibits to the Registration Statement. Each of the Indentures incorporates the Company's Standard Multiple-Series Indenture Provisions (the "Standard Provisions") which are attached thereto and, to the extent incorporated therein, made a part thereof. The following are brief summaries of certain provisions of each Indenture and are subject to the detailed provisions of such Indenture, to which reference is hereby made for a complete statement of such provisions. Capitalized terms used herein and not otherwise defined are used with the meanings ascribed thereto in the Standard Provisions. The term "Securities," as used under this caption, refers to all securities issued or issuable from time to time under the Indentures and includes the Debt Securities. GENERAL Each Indenture does not limit the aggregate principal amount of Securities which may be issued thereunder and provides that Securities may be issued from time to time in one or more series. The Debt Securities will be unsecured general obligations of the Company. As of the date of this Prospectus, no Senior Debt Securities are outstanding under the Senior Indenture and no Subordinated Debt Securities are outstanding under the Subordinated Indenture. The Debt Securities shall be issued in fully registered form without coupons. Debt Securities which are book-entry securities ("Book-Entry Securities") will be issued as registered Global Securities. The Debt Securities will be issued, unless otherwise provided in the Prospectus Supplement, in denominations of $1,000 or an integral multiple thereof. The accompanying Prospectus Supplement describes the following terms of the Offered Securities to which such Prospectus Supplement relates, including, without limitation: (1) the title of the Offered Securities; (2) whether the Offered Securities are Senior Debt Securities or Subordinated Debt Securities; (3) the price or prices (expressed as a percentage or percentages of the principal amount thereof) at which the Offered Securities will be issued; (4) any limit on the aggregate principal amount of the Offered Securities; (5) the date or dates on which the principal of and premium, if any, on the Offered Securities are payable or the method of determination thereof; (6) the rate or rates (which may be fixed or variable) per annum, if any, at which the Offered Securities will bear interest or the method of determining such rate or rates and the date or dates from which such interest, if any, will accrue; (7) the place or places where the principal of, premium, if any, and interest, if any, on the Offered Securities will be payable; (8) the date or dates on which interest, if any, on the Offered Securities will be payable and the regular record dates for such payment dates; (9) the terms for redemption, repurchase or early payment, if any, including any mandatory or optional sinking fund or analogous provisions and any provision for remarketing of the Offered Securities; (10) each office or agency where, subject to the terms of the Indenture as described below under "Payment and Paying Agents," the principal of and interest, if any, on the Offered Securities will be payable and each office or agency where, subject to the terms of the Indenture as described below under "Exchange, Registration and Transfer," the Offered Securities may be presented for exchange and registration of transfer; (11) the date, if any, after or on which, and the price or prices at which, the Offered Securities may, pursuant 4 27 to any optional or mandatory redemption provisions, be redeemed, in whole or in part, and the other detailed terms and provisions of any such optional or mandatory redemption provisions; (12) the denominations in which any Offered Securities will be issuable, if other than denominations of $1,000 and any integral multiple thereof; (13) if the amounts of payments of principal of and interest, if any, on the Offered Securities are to be determined by reference to an index, formula or other method, or based on a coin or currency other than that in which the Offered Securities are stated to be payable, the manner in which such amounts shall be determined and the calculation agent, if any, with respect thereto; (14) if other than the principal amount thereof, the portions of the principal amount of the Offered Securities that will be payable upon declaration of acceleration of the Maturity thereof pursuant to an Event of Default; (15) if other than as defined in the Indenture, the meaning of "Business Day" when used with respect to the Offered Securities; (16) if the Offered Securities may be issued or delivered (whether upon original issuance or upon exchange of a temporary Security of such series or otherwise), or any installment of principal or interest payable, only upon receipt of certain certificates or other documents or satisfaction of other conditions in addition to those specified in the Indenture, the forms and terms of such certificates, documents or conditions; (17) any addition to, or modification or deletion of, any Event of Default or any covenant of the Company specified in the Indenture with respect to the Offered Securities; and (18) any other terms of the Offered Securities not inconsistent with the provisions of the Indenture, including the ability of the Company to satisfy and discharge its obligations under the Indenture with respect to the Offered Securities. Any such Prospectus Supplement also will describe any special provisions for the payment of additional amounts with respect to the Offered Securities. The variable terms of the Debt Securities are subject to change from time to time, but no such change will affect any Debt Security already issued or as to which an offer to purchase has been accepted by the Company. No service charge will be made for any transfer or exchange of the Debt Securities but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Debt Securities of a single series may be issued with different maturity dates and different principal repayment provisions, may bear interest at different rates, may be issued at or above par or with an original issue discount, and may otherwise vary, all as provided in the Indentures. Debt Securities may be issued as Original Issue Discount Securities, which may be sold at a discount below their principal amount. Special federal income tax considerations applicable to Debt Securities issued at an original issue discount, including Original Issue Discount Securities, will be set forth in a Prospectus Supplement relating thereto. RANKING Senior Debt Securities The Senior Debt Securities will be unsecured and unsubordinated general obligations of the Company and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. Subordinated Debt Securities The Subordinated Debt Securities are subordinated to the prior payment when due of the principal of and interest on all Senior Indebtedness (and, in the case of the Credit Agreement (as defined herein), all fees, expenses and other amounts payable thereunder, including Accrued Bankruptcy Interest). No payment may be made by the Company on account of principal of or interest on the Subordinated Debt Securities or to acquire any of the Subordinated Debt Securities (other than through the issuance of common stock of the Company) (i) upon the maturity of any Senior Indebtedness by lapse of time, mandatory prepayment, acceleration (unless waived) or otherwise, unless and until all principal thereof and interest thereon (and, in the case of the Credit Agreement, all fees, expenses and other amounts payable thereunder, including Accrued Bankruptcy Interest) shall first be paid in full, in cash or cash equivalents, or (ii) upon the happening of any default in payment of any principal of and interest on Senior Indebtedness (or, in the case of the Credit Agreement, any fees, expenses and other amounts payable thereunder, including Accrued Bankruptcy 5 28 Interest) when the same becomes due and payable (a "Payment Default"), unless and until such default shall have been cured or waived or shall have ceased to exist. Upon the happening of an event of default (other than a Payment Default) with respect to Senior Indebtedness, as such event of default is defined therein or in the instrument under which it is outstanding, permitting the holders to accelerate the maturity thereof, and upon written notice thereof given to the Company and the Subordinated Trustee ("Payment Notice"), then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, no payment may be made by the Company with respect to the principal of or interest on the Subordinated Debt Securities or to acquire any of the Subordinated Debt Securities (other than through the issuance of common stock of the Company); provided, however, that this sentence shall not prevent the making of any payment for more than 179 days after the Payment Notice shall have been given. Notwithstanding the foregoing, (a) not more than one Payment Notice shall be given within a period of 365 consecutive days, (b) no event of default that existed or was continuing on the date of any Payment Notice (whether or not such event of default is on the same issue of Senior Indebtedness) shall be made the basis for the giving of a subsequent Payment Notice, (c) if the Company or the Subordinated Trustee receives any Payment Notice, a similar notice relating to or arising out of the same default (other than a default that has been cured) or facts giving rise to such default (whether or not such default is on the same issue of Senior Indebtedness) shall not be effective for purposes of the immediately preceding sentence, and (d) a Payment Notice may only be given (i) if Senior Indebtedness is then outstanding under the Credit Agreement, by the Credit Agent and (ii) if no Senior Indebtedness is then outstanding under the Credit Agreement, by holders (or the Representative of holders) of at least $100 million principal amount of Senior Indebtedness then outstanding. Upon any payment or distribution of assets or securities of the Company or upon any dissolution, winding up or liquidation of the Company, the holders of all Senior Indebtedness shall first be entitled to receive payment in full, in cash or cash equivalents, of the principal and interest due thereon (and, in the case of the Credit Agreement, all fees, expenses and other amounts payable thereunder, including Accrued Bankruptcy Interest) before the Holders of Subordinated Debt Securities are entitled to receive any payment on account of the principal of or interest on the Subordinated Debt Securities or to acquire any of the Subordinated Debt Securities or any distribution of assets or securities of the Company (other than through the issuance of common stock of the Company). Failure by the Company to pay the principal of or interest on the Subordinated Debt Securities as a result of such subordination will not prevent the occurrence of any Event of Default (as defined below). So long as the Company's 12% Senior Subordinated Debentures due 2001 are outstanding, "Debt" is defined in the Subordinated Indenture solely for purposes of defining "Senior Indebtedness" thereunder to include with respect to any Person (i) all liabilities, contingent or otherwise, of such Person (a) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or representing the balance deferred and unpaid of the purchase price of any property or services (other than any such balance incurred by such Person in the ordinary course of business of such Person in connection with obtaining film contracts, other inventory or similar property, or services, which account is not overdue by more than 120 days unless such account is being contested in good faith and either such account is not the subject of a judicial proceeding or collection thereof is stayed), or (c) for the payment of money relating to a Capitalized Lease Obligation; (ii) reimbursement obligations of such Person with respect to letters of credit; (iii) obligations of such Person with respect to Interest Swap Obligations; (iv) all liability of others of the kind described in the preceding clause (i), (ii) or (iii) that such Person has guaranteed or that are otherwise its legal liability; (v) all obligations secured by a Lien to which the property or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of such Person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be such Person's legal liability; and (vi) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (i), (ii), (iii), (iv) or (v). If the Company's 12% Senior Subordinated Debentures due 2001 are no longer outstanding, "Debt" is defined in the Subordinated Indenture for purposes of defining "Senior Indebtedness" thereunder to include 6 29 with respect to any Person at any date, without duplication, (a) indebtedness created, issued or incurred by such Person for borrowed money (whether by loan or the issuance and sale of debt securities); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade, film contracts, employment contracts and other accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business; (c) obligations of such Person (contingent or otherwise) in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (d) Capitalized Lease Obligations of such Person; and (e) Debt of others guaranteed by such Person. "Senior Indebtedness" is defined to mean the principal of and interest (including in the case of the Credit Agreement, Accrued Bankruptcy Interest with respect thereto) or accrued original issue discount on any Debt of the Company, including, without limitation, any Debt of the Company in respect of the Credit Agreement, (and, in the case of the Credit Agreement, all fees and expenses and other amounts payable thereunder), whether outstanding on the date of the Subordinated Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company unless, in the case of any particular Debt, the instrument creating the same or the assumption or guarantee thereof expressly provides that such Debt shall not be senior in right of payment to the Subordinated Debt Securities. The following do not constitute Senior Indebtedness: (a) Debt represented by the Company's zero coupon convertible subordinated debentures due 2004; (b) Debt represented by the Company's zero coupon convertible subordinated debentures due 2007; (c) Debt to, or guaranteed on behalf of, any Significant Stockholder, director, officer or employee of the Company or any Subsidiary (including, without limitation, amounts owed for compensation); (d) Debt of the Company to any Subsidiary or Affiliate of the Company; (e) so long as the Company's 12% Senior Subordinated Debentures due 2001 are outstanding, Debt of the Company to trade creditors and other amounts incurred in connection with obtaining goods, materials, film contracts, other inventory or similar property or services; (f) if the Company's 12% Senior Subordinated Debentures due 2001 are no longer outstanding, Debt of the Company to trade creditors and other amounts not evidenced by bonds, notes or similar instruments incurred in the ordinary course of business in connection with obtaining goods, materials, film contracts, other inventory or similar property or services; (g) Debt represented by the Company's 12% Senior Subordinated Debentures due 2001; and (h) Debt incurred in violation of the provisions, if any, of the Subordinated Indenture relating to any incurrence by the Company of Debt; provided, that clause (h) does not apply to Debt under the Credit Agreement that is incurred in violation of such provisions if the Credit Agent shall have received an Officers' Certificate from the Company at the time of the incurrence thereof to the effect that such Debt is not incurred in violation of the provisions of the Subordinated Indenture. "Accrued Bankruptcy Interest," with respect to any Senior Indebtedness, means all interest accruing after the filing of a petition by or against the Company under Title 11 of the United States Code or any similar federal, state or foreign law for the relief of debtors, in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in the documents relating to such Debt, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such law. "Credit Agent" means, at any time, the then-acting agent as defined in and under the Credit Agreement. "Credit Agreement" means the Credit Agreement, dated as of October 6, 1989, by and among the Company, the Banks referred to therein, and The Chase Manhattan Bank (National Association), as Agent, as the same may be amended or supplemented from time to time in accordance with the terms thereof, and any agreement governing Debt incurred to refund or refinance the entirety of the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement; provided, that such refunding or refinancing by its terms states that it is intended to be senior in right of payment to the Subordinated Debt Securities. "Interest Swap Obligations" means any obligation of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or floating rate of interest on the same notional amount; provided, that the term "Interest Swap Obligation" also includes interest rate exchange, collar, cap, swap option or similar agreements providing interest rate protection. 7 30 "Significant Stockholder" means, with respect to any Person (the "specified person"), (i) each other Person who is the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more than 10% of the voting power of the specified person's Voting Stock and (ii) each Affiliate of a Significant Stockholder of the specified person (other than any Affiliate of such Significant Stockholder that would not be an Affiliate of such Significant Stockholder but for the control by the specified person or its subsidiaries of such Affiliate). Subordinated Debt Securities will rank on a parity with all other Senior Subordinated Debt. "Senior Subordinated Debt" means the Company's 12% Senior Subordinated Debentures due 2001 and any subordinated debt of the Company which by the terms of the instrument creating or evidencing such debt ranks pari passu with the Subordinated Debt Securities. EXCHANGE, REGISTRATION AND TRANSFER Debt Securities (other than Book-Entry Securities) of any series will be exchangeable for other Debt Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations. Debt Securities may be presented for exchange as provided above, and Debt Securities (other than Book-Entry Securities) may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed), at the office of the Security Registrar or at the office of any transfer agent designated by the Company for such purpose with respect to any series of Debt Securities and referred to in an applicable Prospectus Supplement, without service charge and upon payment of any taxes, assessments and other governmental charges as described in the applicable Indenture. Such transfer or exchange will be effected upon the Security Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company initially has appointed the Trustee under each Indenture as Security Registrar. If a Prospectus Supplement refers to any transfer agents (in addition to the Security Registrar) initially designated by the Company with respect to any series of Debt Securities, the Company may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except the Company will be required to maintain a transfer agent in each Place of Payment for such series. The Company may at any time designate additional transfer agents with respect to any series of Debt Securities. The Company shall not be required to: (i) issue, register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption or (ii) register the transfer or exchange of any Debt Security, or portion thereof, called for redemption, except the unredeemed portion of any Debt Security being redeemed in part. A discussion of restrictions on the exchange, registration and transfer of any series of Debt Securities that will be issued in book-entry form and represented by one or more Global Securities will be described in an applicable Prospectus Supplement relating to such series. PAYMENT AND PAYING AGENTS Unless otherwise provided in an applicable Prospectus Supplement, payment of principal of and premium, if any, on Debt Securities will be made in U.S. Dollars at the office of such Paying Agent or Paying Agents as the Company may designate from time to time, and payment of interest will be made in U.S. Dollars by check mailed to the address of the person entitled thereto as such address shall appear in the Security Register. Unless otherwise provided in an applicable Prospectus Supplement, payment of any installment of interest on Debt Securities will be made to the person in whose name such Debt Security is registered at the close of business on the Regular Record Date for such interest. Unless otherwise provided in an applicable Prospectus Supplement, the Corporate Trust Office of each Trustee will be designated as the Company's Paying Agent for payments. Any other Paying Agents in the United States initially designated by the Company for the Offered Securities will be named in an applicable Prospectus Supplement. The Company may at any time designate additional Paying Agents or rescind the designation of any Paying Agent or approve a change in the office through which any Paying Agent acts, 8 31 except that the Company will be required to maintain a Paying Agent in each Place of Payment for each series of Debt Securities. All moneys paid by the Company to a Paying Agent for the payment of principal of, premium, if any, or interest, if any, on any Debt Security that remain unclaimed at the end of two years after such principal, premium or interest shall have become due and payable will be repaid to the Company and the Holder of such Debt Security will thereafter look only to the Company for payment thereof. GLOBAL SECURITIES The Debt Securities of a series may be issued in whole or in part in global form (a "Global Security") as one or more Global Securities that will be deposited with, or on behalf of, a depositary located in the United States. The specific terms of the depositary arrangement with respect to any Debt Securities of a series will be described in an applicable Prospectus Supplement relating to such series. ABSENCE OF RESTRICTIVE COVENANTS The Company will not be restricted by the Senior Indenture or the Subordinated Indenture from paying dividends or from incurring, assuming or becoming liable for any type of Debt or other obligations or from creating liens on its property for any purpose. Neither the Senior Indenture nor the Subordinated Indenture will require the maintenance of any financial ratios or specified levels of net worth or liquidity. The Indentures do not contain any covenants or other provisions designed to afford Holders of the Debt Securities protection in the event of a change in control, reorganization, restructuring, merger, recapitalization or highly leveraged or other similar transaction involving the Company. MERGER AND CONSOLIDATION Each Indenture will provide that the Company shall not (i) consolidate with, or merge into, any other Person, or convey or transfer (by lease, assignment or otherwise) its properties and assets as an entirety or substantially as an entirety to any Person or (ii) adopt a Plan of Liquidation unless (A) either the Company shall be the continuing person, or the successor (if other than the Company) (or, in the case of a Plan of Liquidation, one Person to which assets are transferred) is a corporation organized under the laws of any domestic jurisdiction and expressly assumes the Company's obligations under such Indenture and the Debt Securities issued thereunder; (B) 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; and (C) if a supplemental indenture is required in connection with such transaction, certain certificates and legal opinions are delivered. "Plan of Liquidation" is defined, with respect to any Person, as a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously) (i) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety and (ii) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of such Person to holders of Capital Stock of such Person. Each Indenture will provide that, upon any consolidation or merger or conveyance or transfer of the properties and assets of the Company substantially as an entirety as described in the preceding paragraph, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall be substituted for the Company with the same effect as if such successor corporation had been named as the Company. Thereafter, the Company shall be relieved of the performance and observance of all obligations and covenants of such Indenture and the Senior Debt Securities or Subordinated Debt Securities, as the case may be, including but not limited to the obligation to make payment of the principal of and interest, if any, on all the Debt Securities then outstanding, and the Company may thereupon or any time thereafter be liquidated and dissolved. 9 32 SATISFACTION AND DISCHARGE Unless the Prospectus Supplement provides otherwise, the Company will be discharged from its obligations under the Outstanding Debt Securities of a series upon satisfaction of the following conditions: (a) the Company has irrevocably deposited with the Trustee either (i) money in an amount as will, or (ii) U.S. Government Obligations as will, together with the predetermined and certain income to accrue thereon without consideration of any reinvestment thereof, or (iii) a combination of (i) and (ii) as will (in a written opinion with respect to (ii) or (iii) of independent public accountants delivered to the Trustee), be sufficient to pay and discharge the entire principal of, premium, if any, and interest, if any, to Stated Maturity or any redemption date on, the Outstanding Debt Securities of such series; (b) the Company has paid or caused to be paid all other sums payable with respect to the Outstanding Debt Securities of such series; (c) the Trustee has received an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent have been complied with; and (d) the Trustee has received an opinion of tax counsel to the effect that such deposit and discharge will not cause the Holders of the Debt Securities of such series to recognize income, gain or loss for federal income tax purposes and that the Holders will be subject to federal income tax in the same amounts, in the same manner and at the same times as would have been the case if such deposit and discharge had not occurred. Upon such discharge, the Company will be deemed to have satisfied all the obligations under the Indenture, except for obligations with respect to registration of transfer and exchange of the Debt Securities of such series, and the rights of the Holders to receive from deposited funds payment of the principal of (and premium, if any) and interest, if any, on the Debt Securities of such series. MODIFICATION OF THE INDENTURES Each Indenture will provide that the Company and the Trustee thereunder may, without the consent of any Holders of Debt Securities, enter into supplemental indentures for the purposes, among other things, of adding to the Company's covenants, adding additional Events of Default, establishing the form or terms of Debt Securities or curing ambiguities or inconsistencies in such Indenture or making other provisions; provided such action shall not adversely affect the interests of the Holders of any series of Debt Securities in any material respect. Each Indenture will contain provisions permitting the Company, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Debt Securities of all affected series (acting as one class), to execute supplemental indentures adding any provisions to or changing or eliminating any of the provisions of such Indenture or modifying the rights of the Holders of the Debt Securities of such series, except that no such supplemental indenture may, without the consent of the Holders of all the Outstanding Debt Securities affected thereby, among other things: (i) change the maturity of the principal of, or any installment of principal of or interest on, any of the Debt Securities; (ii) reduce the principal amount thereof (or any premium thereon) or the rate of interest, if any, thereon; (iii) reduce the amount of the principal of Original Issue Discount Securities payable on any acceleration of maturity; (iv) change any obligation of the Company to maintain an office or agency in the places and for the purposes required by such Indenture; (v) impair the right to institute suit for the enforcement of any such payment on or after the applicable maturity date; (vi) reduce the percentage in principal amount of the Outstanding Debt Securities of any series, the consent of the Holders of which is required for any such supplemental indenture or for any waiver of compliance with certain provisions of, or of certain defaults under, such Indenture; or (vii) with certain exceptions, modify the provisions for the waiver of certain covenants and defaults and any of the foregoing provisions. EVENTS OF DEFAULT An Event of Default in respect of any series of Debt Securities (unless it is either inapplicable to a particular series or has been modified or deleted with respect to any particular series) is defined in each Indenture to be: (i) a default for 30 days in the payment when due of any interest on such series of Debt Securities; (ii) a default in the payment of principal of such series of Debt Securities, whether payable at maturity, by call for redemption, pursuant to any sinking fund or repurchase obligation or otherwise; (iii) a default for 60 days after a notice of default with respect to the performance of any covenant in such Indenture 10 33 (other than a covenant included in such Indenture solely for the benefit of a series of Debt Securities other than that series); (iv) certain events of bankruptcy, insolvency or reorganization; (v) an event of default under any mortgage, indenture (including such Indenture) or other instrument under which any Debt of the Company or any Subsidiary if (a) such default either (i) results from the failure to pay any principal of any Debt at maturity (after expiration of any application grace period) or (ii) relates to an obligation other than the obligation to pay any principal of such Debt at maturity and results in the holder or holders of such Debt causing such Debt to become due prior to its stated maturity and (b) the principal amount of such Debt, together with the principal amount of any other such Debt in default for failure to pay principal at maturity or the maturity of which has been so accelerated, aggregates $100,000,000 or more at any one time; and (vi) any other event of default provided for such series of Debt Securities. For purposes of the Event of Default provisions, "Debt" is defined in the Indentures to include with respect to any Person at any date, without duplication (a) indebtedness created, issued or incurred by such Person for borrowed money (whether by loan or by the issuance and sale of debt securities); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade, film contracts, employment contracts and other accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business; (c) obligations of such Person (contingent or otherwise) in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (d) Capitalized Lease Obligations of such Person; and (e) Debt of others guaranteed by such Person. Each Indenture will provide that if an Event of Default specified therein in respect of any series of Outstanding Debt Securities issued under such Indenture shall have happened and be continuing, either the Trustee thereunder or the Holders of not less than 25% in principal amount of the Outstanding Debt Securities of such series may declare the principal (or, if such Debt Securities are Original Issue Discount Securities, such portion of the principal amount as may be specified by the terms of such Debt Securities) of all of the Outstanding Debt Securities of such series to be immediately due and payable. Each Indenture will provide that the Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee thereunder, or exercising any trust or power conferred on such Trustee, with respect to the Debt Securities of such series; provided that (i) such direction shall not be in conflict with any rule of law or with the Indenture, (ii) the Trustee may take any other action deemed proper that is not inconsistent with such direction and (iii) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Holders of Debt Securities of such series not taking part in such direction. Each Indenture will provide that the Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series may on behalf of the Holders of all of the Outstanding Debt Securities of such series waive any past default under the applicable Indenture with respect to such series and its consequences, except a default (i) in the payment of the principal of (or premium, if any) or any interest, if any, on any of the Debt Securities of such series or (ii) in respect of a covenant or provision of such Indenture which, under the terms of such Indenture, cannot be modified or amended without the consent of the Holders of all of the Outstanding Debt Securities of such series affected thereby. Each Indenture will contain provisions entitling the Trustee thereunder, subject to the duty of such Trustee during an Event of Default in respect of any series of Debt Securities to act with the required standard of care, to be indemnified by the Holders of the Debt Securities of such series before proceeding to exercise any right or power under such Indenture at the request of the Holders of the Debt Securities of such series. Each Indenture will provide that the Trustee thereunder will, within 90 days after the occurrence of a default in respect of any series of Debt Securities, give to the Holders of the Debt Securities of such series notice of all uncured and unwaived defaults known to it; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or any interest on, or any sinking fund installment with respect to, any of the Debt Securities of such series such Trustee will be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interests of the Holders of the Debt Securities of such series; and provided, further, that such notice shall not be given 11 34 until at least 90 days after the occurrence of an Event of Default regarding the performance of any covenant of the Company under such Indenture other than for the payment of the principal of or any interest on, or any sinking fund installment with respect to, any of the Debt Securities of such series. The term default for the purpose of this provision only means any event that is, or after notice or lapse of time, or both, would become, an Event of Default with respect to the Debt Securities of such series. NOTICES Except as otherwise provided in each Indenture, notices to Holders will be given by mail to the addresses of such Holders as they appear in the Security Register. REPORTS The Company is required to furnish to the Trustee annually a statement to the fulfillment by the Company of all of its covenants under the respective Indenture. THE TRUSTEES The Senior Trustee is a national banking association organized under the laws of the United States of America. The Senior Trustee is a participating lender under a revolving credit agreement of the Company. The Subordinated Trustee will be designated by the Company and qualified under the Trust Indenture Act prior to the issuance of any Subordinated Debt Securities and will be described in any Prospectus Supplement relating thereto. The Indentures contain certain limitations on the rights of the respective Trustee, as a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. The Trustees will be permitted to engage in other transactions with the Company and its Subsidiaries; provided, however, that if such Trustee acquires any conflicting interest at such time as a default is pending under the Indentures, such Trustee must (with certain exceptions) eliminate such conflict or resign. PLAN OF DISTRIBUTION The Company may sell Debt Securities to one or more underwriters or dealers for public offering and sale by them or may sell Debt Securities to investors directly or through one or more agents designated from time to time by the Company. Any such underwriter or agent involved in the offer and sale of the Debt Securities will be named in an applicable Prospectus Supplement. Underwriters may offer and sell the Debt Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Company also may, from time to time, authorize underwriters, acting as the Company's agents, to offer and sell the Debt Securities upon the terms and conditions as shall be set forth in an applicable Prospectus Supplement. In connection with the sale of Debt Securities, underwriters may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions and also may receive commissions from purchasers of Debt Securities for whom they may act as agent. Underwriters may sell Debt 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 of Debt Securities for whom they may act as agent. Any compensation paid by the Company to underwriters or agents in connection with the offering of Debt Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Debt Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Debt Securities may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended, (the "Securities 12 35 Act"). Underwriters, dealers and agents may be entitled, under agreements with the Company to indemnification against, and contribution toward, certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by the Company for certain expenses. Underwriters, dealers or agents to or through which Debt Securities may be offered and sold may engage in transactions with, or perform other services for, the Company and its subsidiaries in the ordinary course of business. If so indicated in an applicable Prospectus Supplement, the Company may authorize underwriters or dealers, acting as the Company's agents, to solicit offers by certain institutions to purchase Debt Securities from the Company at the public offering price set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount not less than, and the aggregate principal amount of Debt Securities sold pursuant to Contracts shall not be less nor more than, the respective amounts stated in such Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and other institutions, but will in all cases be subject to the approval of the Company. Contracts will not be subject to any conditions except: (i) the purchase by an institution of the Debt Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject; and (ii) if the Debt Securities are being sold to underwriters, the Company shall have sold to such underwriters the total principal amount of the Debt Securities, less the principal amount thereof covered by Contracts. Underwriters and dealers will have no responsibility in respect of the delivery or performance of Contracts, except to the extent they have entered into a Contract. The Debt Securities may or may not be listed on a national securities exchange or an international securities exchange. No assurances can be given that there will be a market for the Debt Securities. LEGAL OPINIONS The legality of the Debt Securities will be passed upon for the Company by Troutman Sanders, Atlanta, Georgia. Certain legal matters in connection with the Debt Securities will be passed upon for any underwriters or agents by Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California. Skadden, Arps, Slate, Meagher & Flom have from time to time represented the Company and are currently representing the Company on certain unrelated matters. EXPERTS The financial statements incorporated in this Prospectus by reference to the most recent Annual Report on Form 10-K of the Company have been so incorporated in reliance upon the report of Price Waterhouse, independent accountants, given on the authority of said firm as experts in auditing and accounting. 13 36 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. --------------------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- The Company............................... S-2 Recent Developments....................... S-4 Use of Proceeds........................... S-5 Capitalization............................ S-6 Selected Historical Financial Information............................. S-7 Selected Unaudited Pro Forma Financial Information............................. S-10 Description of the Securities............. S-12 Certain Federal Income Tax Considerations.......................... S-21 Underwriting.............................. S-22 Legal Matters............................. S-22 Experts................................... S-22 PROSPECTUS Available Information..................... 2 Incorporation of Certain Documents by Reference............................... 2 The Company............................... 3 Ratio of Earnings to Fixed Charges........ 3 Use of Proceeds........................... 3 Description of Debt Securities............ 4 Plan of Distribution...................... 12 Legal Opinions............................ 13 Experts................................... 13
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ TURNER BROADCASTING SYSTEM, INC. $ % SENIOR NOTES DUE 2004 AND $ % SENIOR DEBENTURES DUE 2024 ------------------ PROSPECTUS SUPPLEMENT ------------------ GOLDMAN, SACHS & CO. CS FIRST BOSTON MERRILL LYNCH & CO. - ------------------------------------------------------ - ------------------------------------------------------ -----END PRIVACY-ENHANCED MESSAGE-----