<PAGE>   1
 
================================================================================
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------
 
                                   FORM 10-K
                            ------------------------
       FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   SECURITIES EXCHANGE ACT OF 1934
 
   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
 
                                       OR
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   SECURITIES EXCHANGE ACT OF 1934
 
   FOR THE TRANSITION PERIOD FROM           TO
 
                         COMMISSION FILE NUMBER 1-13275
 
                             OUTDOOR SYSTEMS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------
 
<TABLE>
<S>                                                   <C>
                      DELAWARE                                             86-0736400
            (STATE OR OTHER JURISDICTION                                (I.R.S. EMPLOYER
                  OF INCORPORATION)                                    IDENTIFICATION NO.)
 
            2502 N. BLACK CANYON HIGHWAY
                  PHOENIX, ARIZONA                                            85009
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                             (ZIP CODE)
</TABLE>
 
                                 (602) 246-9569
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
<CAPTION>
                                                       NAME OF EACH EXCHANGE
                TITLE OF EACH CLASS                     ON WHICH REGISTERED
                -------------------                    ---------------------
<S>                                                   <C>
            Common Stock, $.01 par value              New York Stock Exchange
     9 3/8% Senior Subordinated Notes due 2006        New York Stock Exchange
 Guarantees of 9 3/8% Senior Subordinated Notes due
                        2006                          New York Stock Exchange
     8 7/8% Senior Subordinated Notes due 2007        New York Stock Exchange
 Guarantees of 8 7/8% Senior Subordinated Notes due
                        2007                          New York Stock Exchange
</TABLE>
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
                            ------------------------
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
 
                         Yes    X           No   _____
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
    The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on March 13, 1998
as reported by the New York Stock Exchange, was approximately $2,747.7 million.
 
    The number of shares of the Registrant's Common Stock outstanding at March
13, 1998 was 121,123,367.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the Registrant's definitive proxy statement for the Registrant's
Annual Meeting of Stockholders to be held on May 21, 1998 are incorporated by
reference herein.
================================================================================
<PAGE>   2
 
                                    CONTENTS
 
<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
                                   PART I
ITEM 1.   BUSINESS
          GENERAL.....................................................    1
          INDUSTRY OVERVIEW...........................................    1
          BUSINESS STRATEGY...........................................    2
          MARKETS.....................................................    3
          INVENTORY...................................................    4
          EMPLOYEES...................................................    5
          SALES AND SERVICE...........................................    5
          CUSTOMERS...................................................    5
          PRODUCTION..................................................    6
          COMPETITION.................................................    7
          GOVERNMENT REGULATION.......................................    7
ITEM 2.   PROPERTIES..................................................    9
ITEM 3.   LEGAL PROCEEDINGS...........................................    9
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........    9
ITEM 4A.  EXECUTIVE OFFICERS OF THE COMPANY...........................   10
 
                                  PART II
 
ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
             STOCKHOLDER MATTERS......................................   11
ITEM 6.   SELECTED FINANCIAL DATA.....................................   12
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS................................   13
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
             RISKS....................................................   18
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................   19
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
             AND FINANCIAL DISCLOSURE.................................   43
 
                                  PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........   43
ITEM 11.  EXECUTIVE COMPENSATION......................................   43
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT...............................................   43
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............   43
 
                                  PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
             8-K......................................................   43
</TABLE>
<PAGE>   3
 
                                    PART I.
 
ITEM 1.  BUSINESS
 
GENERAL
 
     Outdoor Systems, Inc. (the "Company") is the largest out-of-home media
company in North America, operating, as of December 31, 1997, approximately
98,300 bulletin, poster, mall and transit advertising display faces in 90
metropolitan markets in the United States and 13 metropolitan markets in Canada
and approximately 125,000 subway advertising display faces in New York City. The
Company has operations in 50 of the 50 largest United States markets and 13 of
the 15 largest Canadian markets.
 
     Since going public in April of 1996, the Company has effected four
three-for-two stock splits of the Common Stock. All applicable information in
this report, including the Consolidated Financial Statements and the Notes
thereto, have been adjusted to reflect these stock splits on a retroactive basis
for all periods presented.
 
INDUSTRY OVERVIEW
 
     The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $2.1 billion in 1997, or approximately 1.1% of the
total advertising expenditures in the United States, while the out-of-home
advertising industry, consisting of transit and in-store advertising displays in
addition to outdoor advertising, generated revenues in excess of $4.0 billion in
1997, according to estimates by the Outdoor Advertising Association of America
("OAAA"). Outdoor advertising's 1997 revenues represent growth of approximately
8.8% over estimated total revenues for 1996, which compares favorably to the
growth of total U.S. advertising expenditures of approximately 6.6% during the
same period.
 
     Advertisers purchase outdoor advertising for a number of reasons. Outdoor
advertising offers repetitive impact and a relatively low cost
per-thousand-impressions, a commonly used media measurement, as compared to
television, radio, newspaper, magazine and direct mail marketing. Accordingly,
because of its cost-effective nature, outdoor advertising is a good vehicle to
build "mass market" support. In addition, outdoor advertising can be used to
target a defined audience in a specific location and, therefore, can be relied
upon by local businesses concentrating on a particular geographic area where
customers have specific demographic characteristics. For instance, restaurants,
motels, service stations and similar roadside businesses may use outdoor
advertising to reach potential customers close to the point of sale and provide
directional information. Other local businesses such as television and radio
stations and consumer products companies may wish to appeal more broadly to
customers and consumers in the local market. National brand name advertisers may
use the medium to attract customers generally and build brand awareness. In all
cases, outdoor advertising can be combined with other media such as radio and
television to reinforce messages being provided to consumers.
 
     The outdoor advertising industry has experienced significant changes due to
a number of factors. First, the entire "out-of-home" advertising category has
expanded to include, in addition to traditional billboards and roadside
displays, displays in shopping centers and malls, airports, stadiums, movie
theaters and supermarkets, as well as on taxis, trains, buses and subways.
Second, while the outdoor advertising industry has experienced a decline in the
percentage of total revenues represented by its tobacco category, it has
increased its visibility with and attractiveness to local advertisers as well as
national retail, entertainment and consumer product-oriented companies. Third,
the industry has benefited significantly from improvements in production
technology, including the use of computer printing, vinyl advertising copy and
improved lighting techniques, which have facilitated a more dynamic, colorful
and creative use of the medium. This technological advance has permitted the
outdoor advertising industry to respond more promptly and efficiently to the
changing needs of its advertising customers and to increase its participation in
multi-media campaigns. Lastly, the outdoor advertising industry has benefited
from the growth in automobile travel time for business and leisure due to
increased highway congestion and continued demographic shifts of residences and
businesses from the cities to outlying suburbs. According to the Federal Highway
Administration, it takes 14% more time to commute to work and the drivers and
vehicles per household are growing at rates, three and six
 
                                        1
<PAGE>   4
 
times, respectively, of the population growth rate. The Company believes that
the foregoing trends have resulted in increased consumer exposure to existing
billboard structures at a time when other media have been fragmenting their
audiences as the number of broadcast and cable networks and other narrowly
targeted formats has increased.
 
     An expanding opportunity within the out-of-home advertising industry is
transit advertising. Local governments are providing transit amenities to
enhance their service and image to local transit users. To finance these transit
amenities, municipalities issue contracts for advertising displays on bus
shelters, subways and buses to private enterprises. Under these contracts, the
private party constructs and maintains the amenities, which it can use for
advertising displays. The primary benefits of privatizing transit advertising
are the avoidance of capital expenditures by the municipality, the prospect of
additional revenue for the municipality from a portion of the advertising
revenue, the consistent quality that a coordinated transit program can provide
and the benefits of regular cleaning and maintenance undertaken by private
enterprises.
 
     The outdoor advertising industry is comprised of several large outdoor
advertising and multi-media companies with operations in multiple markets, as
well as many smaller and local companies operating a limited number of
structures in a single or a few local markets. While the industry has
experienced some consolidation within the past few years, the OAAA estimates
that, as of December 31, 1997, there were approximately 600 companies in the
outdoor advertising industry operating approximately 396,000 bulletin and poster
display faces. The Company expects the trend of consolidation in the outdoor
advertising industry to continue.
 
BUSINESS STRATEGY
 
     The Company's primary objective is to be the leading provider of
out-of-home advertising services in each of its major markets. The Company's
successful operating strategy, focusing on superior sales and service, optimal
management of its inventory, centralized administration, low overhead and
strategic acquisitions, has enabled it to improve the historical operating
results in each of its existing markets. Management intends to apply this
strategy to each of its newly-acquired markets.
 
- Superior Sales and Service.  The Company seeks to gain market share in each of
  its markets through an intensive focus on customer sales and service, quality
  displays and competitive pricing. The Company has recruited and trained a
  skilled sales force that is motivated by a program of commission-based
  compensation and supported by a network of experienced local managers who
  operate under a centrally coordinated marketing plan. Each of the Company's
  markets has a general manager who is actively engaged in sales. In addition,
  the Company seeks to attract and retain advertisers through creative
  advertising layouts, timely installation and rotation of displays and rapid
  response to customer needs.
 
- National Sales Force.  The Company's markets generally possess demographic
  characteristics that are attractive to national advertisers, allowing the
  Company to combine several of its markets into single contracts so that
  advertisers with national and regional campaigns can simplify their purchasing
  process while presenting their messages in multiple markets. The Company seeks
  to gain national market share by providing advertisers easy access to all of
  the Company's markets through one of its four national sales offices.
 
- Optimal Inventory Management.  The Company seeks to balance advertising rate
  growth with optimal occupancy of its displays in order to maximize revenues.
  The Company's variety of outdoor advertising displays in its geographically
  diverse markets permits flexibility in pricing and packaging its display
  inventory.
 
- Centralized Administration.  The Company has consolidated substantially all of
  its administration, accounting, sales management and leasing management
  functions into its Phoenix headquarters and four regional offices. This
  centralization allows the Company to focus local efforts on customer service
  and sales and to exercise greater control over administrative costs and
  expenses.
 
- Strategic Acquisitions.  The Company pursues strategic acquisitions in
  existing and new markets to achieve increased operating efficiencies, greater
  geographic diversification and increased market penetration. The Company is
  primarily interested in further expansion in the 50 largest United States and
  ten largest Canadian markets, because these markets typically generate greater
  outdoor market revenues, readily attract national advertisers, provide a
  better basis for regional advertising, attract quality management and offer
  opportunities to gain a larger market share from competitive media.
 
                                        2
<PAGE>   5
 
MARKETS
 
     The Company's markets generally possess demographic characteristics that
are attractive to national advertisers, allowing the Company to combine several
of its markets into single contracts so that advertisers with national and
regional campaigns can simplify their purchasing process while presenting their
messages in multiple markets. Each market also has unique local industries,
businesses, sports franchises and special events that are frequent users of
outdoor advertising. The following table sets forth certain information with
respect to the Company's outdoor markets as of December 31, 1997:
 
<TABLE>
<CAPTION>
                                                                                                MALL AND              TOTAL
                                                      MARKET               30-SHEET   8-SHEET   AIRPORT              DISPLAY
                       MARKET                          RANK    BULLETINS   POSTERS    POSTERS   POSTERS    TRANSIT    FACES
                       ------                         ------   ---------   --------   -------   --------   -------   -------
<S>                                                   <C>      <C>         <C>        <C>       <C>        <C>       <C>
UNITED STATES:
New York-New Jersey(1)..............................     1         864       2,979       262       264      2,710     7,079
Los Angeles.........................................     2       1,613       2,961        --       473      2,912     7,959
Chicago.............................................     3         756          --       640       162         --     1,558
Philadelphia........................................     4          23          --        --       116        498       637
San Francisco.......................................     5         213       1,005       563       196      1,528     3,505
Boston..............................................     6          --          --        --       130         --       130
Washington D.C......................................     7          --          --        --       195         --       195
Dallas..............................................     8         849          --        --       127         --       976
Detroit.............................................     9         656       1,342        91       138      1,000     3,227
Houston.............................................    10       1,047          --        --       114         --     1,161
Atlanta.............................................    11         933       1,679        --       101        650     3,363
Seattle.............................................    12          --          --        --        89         --        89
Cleveland...........................................    13          70          --        --       107         --       177
Minneapolis.........................................    14          54          --        --       155         --       209
Miami-Ft. Lauderdale................................    15         404          --        --       168         --       572
Tampa-St. Petersburg-Sarasota.......................    16         881          --        --       116         --       997
Phoenix.............................................  17..         673       1,516       659        79      1,490     4,417
Sacramento-Stockton-Modesto.........................    18         446       1,271        --        91         --     1,808
Denver..............................................    19         227         784        --       156      5,266     6,433
St. Louis...........................................    20         466         833         1        10         --     1,310
Pittsburgh..........................................    21          --          --        --        78         --        78
Baltimore...........................................    22          --          --        --        61         --        61
San Diego...........................................    23         109         541        --       106        680     1,436
Orlando.............................................    24         466          --        --        93         --       559
Portland, OR........................................    25          17          --        --        33         --        50
Indianapolis........................................    26         137          --        --        59         --       196
Hartford-New Haven..................................    27         151         831        --        25         --     1,007
Cincinnati..........................................    28         104          --        --        60         --       164
Salt Lake...........................................    29          61          --        --        35         --        96
Charlotte...........................................    30         145          --        --        27         --       172
Milwaukee...........................................    31          --          --        --        32         --        32
Raleigh-Durham......................................    32          33          --        --        20         --        53
Nashville...........................................    33         248          --        --        38         --       286
Kansas City.........................................    34         242         840        --        72         --     1,154
Columbus, OH........................................    35         104          --        --        12         --       116
San Antonio.........................................    36          85          --        --        36         --       121
Greenville, SC......................................    37          --          --        --        20         --        20
Grand Rapids........................................    38          56         568        --        16        180       820
Norfolk.............................................    39          --          --        --        57         --        57
New Orleans.........................................    40         345       1,042       428        38        214     2,067
Memphis.............................................    41          77          --        --        27         --       104
Buffalo.............................................    42         116          --        --        54         --       170
Albuquerque.........................................    43          99          --        --        27         --       126
Providence..........................................    44          --          --        --        33         --        33
Harrisburg..........................................    45          --          --        --        29         --        29
Fresno..............................................    46         125         892        --        64         --     1,081
Oklahoma City.......................................    47          --          --        --        58         --        58
Scranton............................................    48          --          --        --        10         --        10
Louisville..........................................    49         296       1,052       243        38        224     1,853
Winston-Salem.......................................    50          35          --        --        16         --        51
Birmingham..........................................    51         154          --        --        28         --       182
West Palm Beach.....................................    52         219          --        --        54         --       273
Dayton..............................................    53         123          --        --        24         --       147
Albany..............................................    54          --          --        --       107         --       107
Jacksonville........................................    55         178          --        --        20         --       198
Richmond, VA........................................    56          --          --        --         5         --         5
Charleston, SC......................................    57         181          --        --        16         --       197
Little Rock.........................................    58          --          --        --        26         --        26
Flint...............................................    59          86         423        32        21         --       562
Tulsa...............................................    60          --          --        --         6         --         6
Wichita.............................................    61          --          --        --        10         --        10
Mobile..............................................    62          --          --        --        22         --        22
</TABLE>
 
                                        3
<PAGE>   6
 
<TABLE>
<CAPTION>
                                                                                                MALL AND              TOTAL
                                                      MARKET               30-SHEET   8-SHEET   AIRPORT              DISPLAY
                       MARKET                          RANK    BULLETINS   POSTERS    POSTERS   POSTERS    TRANSIT    FACES
                       ------                         ------   ---------   --------   -------   --------   -------   -------
UNITED STATES (CONTINUED):
<S>                                                   <C>      <C>         <C>        <C>       <C>        <C>       <C>
Knoxville...........................................    63          78          --        --        12         --        90
Toledo..............................................    64          --          --        --        12         --        12
Syracuse............................................    65          --          --        --        62         --        62
Austin..............................................    66          --          --        --         6         --         6
Green Bay...........................................    67          --          --        --        14         --        14
Las Vegas...........................................    68         156          --        --        31         --       187
Roanoke.............................................    70          49          --        --        20         --        69
Des Moines..........................................    71          --          --        --        28         --        28
Honolulu............................................    72          --          --        --       551         --       551
Rochester...........................................    73          --          --        --        78      3,715     3,793
Shreveport..........................................    74          41          --        --        16         --        57
Omaha...............................................    75          52          --        --        15         --        67
Tucson..............................................    78         170           6       338        --         10       524
Rio Grande..........................................    82         316          --        --        --         --       316
Columbia, SC........................................    83         158          --        --        24         --       182
El Paso.............................................    84          81          --        --        --         --        81
Chattanooga.........................................    85          63          --        --        36         --        99
Jackson, MS.........................................    87          76          --        --        20         --        96
Ft. Myers...........................................    96         108          --        --        39         --       147
Colorado Springs....................................    99          62          --        --        --         --        62
Ft. Wayne...........................................   106          69          --        --        --         --        69
Tyler, TX...........................................   110          87          --        --        --         --        87
Eugene..............................................   123          77         382        --        --         --       459
Bakersfield, CA.....................................   124          50          --        --        --         --        50
Reno................................................   126         104          --        --        --         --       104
Columbus, GA........................................   127         190         412       100        --         --       702
Beaumont............................................   135         110          --        --        --         --       110
Midland-Odessa, TX..................................   144          47          --        --        --         --        47
Non-Metro Markets...................................   N/A      12,439         175        --     1,136         --    13,750
                                                                ------      ------    ------     -----     ------    ------
  UNITED STATES TOTAL(1)............................            28,750      21,534     3,357     6,700     21,077    81,418
                                                                ------      ------    ------     -----     ------    ------
CANADA:
Toronto.............................................     1         287       1,452        --        47      3,557     5,343
Montreal............................................     2         137         747        --        75      1,823     2,782
Vancouver...........................................     3           2          --        --        68        276       346
Ottawa..............................................     4          19         172        --        --        809     1,000
Edmonton............................................     5           5         294        --        --        548       847
Calgary.............................................     6         476         119        --        38        648     1,281
Quebec City.........................................     7         193         327        --        35        290       845
Winnipeg............................................     8         109         246        --        --        349       704
Hamilton............................................     9          19         303        --        80        598     1,000
London..............................................    10          --          53        --        --         --        53
Kitchener...........................................    11          --          72        --        --         --        72
St. Catharines......................................    12           7          91        --        --         --        98
Halifax.............................................    13          17         169        --        26        214       426
Other...............................................   N/A         361       1,116        --        81        480     2,038
                                                                ------      ------    ------     -----     ------    ------
  CANADA TOTAL......................................             1,632       5,161         0       450      9,592    16,835
                                                                ------      ------    ------     -----     ------    ------
  TOTAL(1)..........................................            30,382(2)   26,695     3,357     7,150     30,669    98,253
                                                                ======      ======    ======     =====     ======    ======
</TABLE>
 
---------------
(1) Display faces do not include 125,000 subway advertising display faces in New
    York City.
 
(2) Includes 141 wall murals and 51 "Spectacular" signs.
 
INVENTORY
 
     The Company operates five standard types of outdoor advertising billboards
and displays:
 
- Bulletins generally are 14 feet high and 48 feet wide (672 square feet). The
  advertising copy is either hand painted onto panels at the facilities of the
  outdoor advertising company in accordance with design specifications supplied
  by the advertiser, and then attached to the outdoor advertising structure, or
  is printed with computer-generated graphics on a single sheet of vinyl that is
  "wrapped" around the structure. On occasion, to attract more attention, some
  of the panels may extend beyond the linear edges of the display face and may
  include three-dimensional embellishments. Because of their greater impact and
  higher cost, bulletins are usually located on major highways.
 
- 30-sheet posters generally are 12 feet high by 25 feet wide (300 square feet)
  and are the most common type of billboard. Advertising copy for 30-sheet
  posters consists of lithographed or silk-screened paper sheets supplied by the
  advertiser that are pasted and applied like wallpaper to the face of the
  display, or single
 
                                        4
<PAGE>   7
 
  sheets of vinyl with computer-generated advertising copy that are wrapped
  around the structure. 30-sheet posters are concentrated on major traffic
  arteries.
 
- Junior (8-sheet) posters usually are 6 feet high by 12 feet wide (72 square
  feet). Displays are prepared and mounted in the same manner as 30-sheet
  posters, except that vinyl sheets are not typically used on junior posters.
  Most junior posters, because of their smaller size, are concentrated on city
  streets and target pedestrian traffic.
 
- Mall and airport posters are displayed in backlighted cases. The displays are
  generally constructed, owned and maintained by the outdoor advertising company
  under a contract with a governmental entity or a shopping mall owner who
  receives a share of the advertising revenues.
 
- Transit displays include displays on bus shelters, subways and bus benches.
  Bus shelters and benches are usually constructed, owned and maintained by the
  outdoor advertising company under a contract with the municipality or transit
  authority which receives a share of the shelter's advertising revenues. Bus
  shelter displays are enclosed within glassed, backlighted cases on sides of a
  pedestrian shelter at an urban bus stop on city rights of way. Subway displays
  are located within subway stations and walkways as well as in subway trains.
  Advertisements appear on lithographed or silk-screened posters supplied in a
  single sheet by the advertiser. Transit displays are an attractive medium to
  advertisers using "vertical" advertising copy, such as magazines and movie
  posters, because the advertising copy is easily adapted for use in transit
  shelters, and because of the proximity of the display to consumers.
 
     Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Billboard structures, bus
shelters and benches are durable, have long useful lives and do not require
substantial maintenance. When disassembled, they typically can be moved and
relocated at new sites.
 
EMPLOYEES
 
     The Company had approximately 1,360 and 1,490 employees at December 31,
1996 and 1997, respectively.
 
SALES AND SERVICE
 
     The Company devotes considerable time and resources to recruiting, training
and coordinating the activities of its sales force. Sales personnel are
compensated primarily on a commission basis to maximize the incentive to
perform. Arturo R. Moreno, President, Chief Executive Officer and a member of
the Board of Directors, and Wally C. Kelly, Senior Vice President, are the
Company's two principal officers responsible for day-to-day operations, and have
an aggregate of approximately 44 years of experience in the outdoor advertising
industry, virtually all of which has been spent in sales and management
positions.
 
CUSTOMERS
 
     Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising as well as the choice of media and the planning and
implementation of the overall campaign. The Company pays commissions to the
agencies for advertising contracts that are procured by or through those
agencies. Advertising rates are based on a particular display's visual exposure
(or number of "impressions" delivered) in relation to the demographics of the
particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent auditing companies.
 
     The size and geographic diversity of the Company's markets allows it to
attract national advertisers by providing the opportunity to package displays in
several of its markets in a single contract allowing a national advertiser to
simplify the purchasing process and simultaneously present its message in
several markets.
                                        5
<PAGE>   8
 
National advertisers generally seek wide exposure in major markets and therefore
tend to make larger purchases. The Company competes for national advertisers
primarily on the basis of price, availability and service.
 
     The Company also focuses its efforts on local sales. Local advertisers tend
to have smaller advertising budgets and require greater assistance from the
Company's production and creative personnel in designing and producing
advertising copy. In local sales, the Company often expends more sales efforts
on educating customers regarding the benefits of outdoor media and helping
potential customers develop an advertising strategy using outdoor advertising.
While price and availability are important competitive factors, service and
customer relationships are also critical components of local sales.
 
     Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. In the 1990s, due to a declining population of
smokers, societal pressures, consolidation in the tobacco industry and price
competition from generic brands, the leading tobacco companies substantially
reduced their expenditures for outdoor advertising. Because tobacco advertisers
often utilized some of the industry's prime inventory, the decline in
tobacco-related advertising expenditures made this space available for other
advertisers, including those that had not traditionally utilized outdoor
advertising. As a result of this decline in tobacco-related advertising revenues
and the increased use of outdoor advertising by other advertisers, the range of
the Company's advertisers has become quite diverse, with no single category of
advertisers accounting for more than 11.1% of net revenues in 1997. The
following table illustrates the diversity of the Company's advertising base:
 
                            NET REVENUES BY CATEGORY
 
<TABLE>
<CAPTION>
                                                               PERCENTAGE
                                                                   OF
                                                              NET REVENUES
                                                              ------------
<S>                                                           <C>
Retail/Consumer Products....................................      11.1%
Travel and Entertainment....................................       8.5
Automotive..................................................       8.0
Tobacco.....................................................       7.6
Media.......................................................       6.9
Restaurants.................................................       3.7
Health......................................................       3.6
Liquor......................................................       3.2
Banking.....................................................       2.6
Beer........................................................       2.4
Realtors....................................................       1.7
Beverages -- Soft Drinks....................................       1.5
Hotels......................................................       1.2
Miscellaneous...............................................      38.0
                                                                 -----
          Total.............................................     100.0%
                                                                 =====
</TABLE>
 
PRODUCTION
 
     The Company possesses internal production facilities and staff to perform
the full range of activities required to develop, create and install outdoor
advertising. Production work includes creating the advertising copy design and
layout, painting the design or coordinating its printing and installing the
designs on its displays. The Company usually provides its full range of
production services to local advertisers and to
 
                                        6
<PAGE>   9
 
advertisers that are not represented by advertising agencies, since national
advertisers and advertisers represented by advertising agencies often use
preprinted designs that require only installation. However, the Company's
creative and production personnel frequently are involved in production
activities even when advertisers are represented by agencies by developing new
designs or adapting copy from other media for use on billboards. The Company's
artists also assist in the development of marketing presentations,
demonstrations and strategies to attract new advertisers.
 
     With the increased use of vinyl and pre-printed advertising copy furnished
to the outdoor advertising company by the advertiser or its agency, outdoor
advertising companies are becoming less responsible for labor-intensive
production work since vinyl and pre-printed copy is typically produced by the
advertiser or its agency and can be installed quickly. The Company believes that
this trend over time will reduce operating expenses associated with production
activities.
 
COMPETITION
 
     The Company competes in each of its markets with other outdoor advertising
operations as well as other media, including broadcast and cable television,
radio, print and direct mail marketers. In addition, the Company also competes
with a wide variety of "out-of-home" media, including advertising in shopping
centers and malls, airports, stadiums, movie theaters and supermarkets, as well
as on taxis, trains, buses and subways. Advertisers compare relative costs of
available media and cost-per-thousand impressions, particularly when delivering
a message to customers with distinct demographic characteristics. In competing
with other media, outdoor advertising relies on its low cost per-thousand
impressions and its ability to reach a broad segment of the population in a
specific market or to target a particular geographic area or population with a
particular set of demographic characteristics within that market.
 
     The outdoor advertising industry is highly fragmented, consisting of
several large outdoor advertising and media companies with operations in
multiple markets as well as smaller and local companies operating a limited
number of structures in a single or a few local markets. Although some
consolidation has occurred over the past few years, according to the OAAA, as of
December 31, 1997, there were approximately 600 companies in the outdoor
advertising industry operating approximately 396,000 bulletin and poster display
faces. In several of its markets, the Company encounters direct competition from
other major outdoor media companies. The Company believes that its strong
emphasis on sales and customer service and its position as a major provider of
advertising services in each of its markets enable it to compete effectively
with the other outdoor advertising companies, as well as other media, within
those markets.
 
GOVERNMENT REGULATION
 
     U.S. Regulations.  The outdoor advertising industry is subject to
governmental regulation at the federal, state and local level. Federal law,
principally the Highway Beautification Act of 1965, encourages states, by the
threat of withholding 10% of the federal appropriations for the construction and
improvement of highways within such states, to implement state legislation to
prohibit billboards located within 660 feet of, or visible from, interstate and
primary highways except in commercial or industrial areas where off-site signage
is permitted provided it meets spacing and size restrictions. Most of the states
have implemented regulations at least as restrictive as the Highway
Beautification Act, prohibiting the removal of billboards from federally aided
highways without compensation.
 
     The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of outdoor advertising structures adjacent to federally-aided
highways and other thoroughfares. Such regulations, often in the form of
municipal building, sign or zoning ordinances, specify minimum standards for the
height, size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel or from nonilluminated to
illuminated structures, and/or restrict the reconstruction of billboards which
are substantially destroyed as a result of storms or other causes. From time to
time governmental authorities order the removal of billboards by the exercise of
eminent domain. Thus far, the Company believes it has been able
 
                                        7
<PAGE>   10
 
to obtain satisfactory compensation for any of its structures removed at the
direction of governmental authorities, although there is no assurance that it
will be able to continue to do so in the future.
 
     Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. In theory, amortization permits the billboard owner to
operate its billboard as a non-conforming use for a specified period of time
during which it is to recover its investment, after which it must remove or
otherwise conform its billboard to the applicable regulations at its own cost
without any compensation. Several municipalities in the Company's markets,
including municipalities or townships in Denver, Houston, Jacksonville, Kansas
City and St. Louis, currently have amortization ordinances or regulations.
Ordinances requiring the removal of a billboard without compensation, whether
through amortization or otherwise, are being challenged in various state and
federal courts with conflicting results. In some cities, amortization ordinances
or regulations are not being enforced or have been held unconstitutional.
However, no assurance can be given as to the effect on the Company of the
enforcement of existing laws or regulations, or of new laws and regulations that
may be adopted in the future.
 
     In recent years, there have been efforts to restrict billboard advertising
of certain products, including tobacco and alcohol. Congress has passed no
legislation at the federal level except legislation requiring health hazard
warnings similar to those on cigarette packages and print advertisements. In
1996, the Food and Drug Administration promulgated rules which, among other
things, would limit certain types of outdoor advertising by tobacco companies.
While certain of these regulations have been declared invalid by a lower court
ruling, appeals are likely and there can be no assurance that further
developments resulting in a validation or implementation of these or similar
regulations will not occur. Outdoor advertising of tobacco products also may be
affected by city or state regulations. For example, in 1995, the Court of
Appeals for the Fourth Circuit upheld the validity of a Baltimore city ordinance
restricting the placement of outdoor advertisements of cigarettes and alcohol in
publicly visible locations, such as billboards, signboards and sides of
buildings. Subsequently, the United States Supreme Court declined to review an
appeal of the case. Restrictions similar to the Baltimore ordinance are also
being contemplated or introduced in other states or municipalities around the
country, including New Jersey, New York City, San Francisco, Chicago and Los
Angeles. While Baltimore is not a municipality in which the Company conducts
business, there can be no assurance that additional local or state governments
will not enact similar ordinances or statutes to limit outdoor advertising of
tobacco in the future in markets in which the Company operates. Certain states
in which the Company operates have historically prohibited the outdoor
advertising of distilled spirits. In California and Phoenix, Arizona, transit
shelter advertising posters on public rights of way are prohibited from
displaying tobacco and/or alcohol advertising. San Francisco has adopted an
ordinance banning all tobacco and alcohol advertising on public property, but
has "grandfathered" existing sales contracts through 2002. For each of the past
three years, the California legislature has considered proposed legislation
which would ban, or substantially limit, all outdoor advertising of tobacco.
While that legislation has not been passed, the proponents have publicly stated
they will continue to attempt to have such proposal enacted. It is uncertain
whether additional legislation of this type will be enacted on the national
level or in any of the markets in which the Company operates.
 
     It also has been reported that certain cigarette manufacturers who are
defendants in numerous class action suits throughout the United States have
reached agreement with Attorneys General of various states for an out of court
settlement with respect to such suits that would, among other things, prohibit
outdoor advertising by the tobacco industry. The settlement is subject to
various conditions including approval and implementing legislation by the United
States Congress. There can be no assurance as to the effect of this settlement
agreement and potential legislation on the Company's business and on its net
revenues and financial position.
 
     In addition, the states of Florida, Mississippi and Texas have entered into
separate settlements of litigation with the tobacco industry. These settlements
are not conditioned on federal government approval and provide for the
elimination of all outdoor advertising of tobacco products. A reduction in
billboard advertising by the tobacco industry would cause an immediate reduction
in the Company's direct revenue from such advertisers and would simultaneously
increase the available space on the existing inventory of billboards in the
outdoor advertising industry. This could in turn result in a lowering of outdoor
advertising rates in each of the
                                        8
<PAGE>   11
 
Company's outdoor advertising markets or limit the ability of industry
participants to increase rates for some period of time. Any such consequence
could have a material adverse effect on the Company.
 
     Canadian Regulations.  Outdoor advertising in Canada is subject to
regulation at the federal, provincial and municipal levels. These regulations
may prohibit advertising of certain products on outdoor signs in certain
locations. For example, in Ontario, billboards and posters advertising liquor
may not be placed within 200 meters of a primary or secondary school.
Additionally, Canadian federal legislation was enacted in April, 1997 which
effectively prohibits substantially all outdoor tobacco advertising. While this
legislation is being challenged, there can be no assurance that such challenge
will be successful. In addition, the placement of outdoor billboards is
primarily regulated at the provincial and local level. For example, Quebec
regulates the placement of advertising adjacent to highways, as well as the
language used on outdoor signs.
 
     General.  To date, regulations in the Company's markets have not materially
adversely affected its operations. However, the outdoor advertising industry is
heavily regulated and at various times and in various markets can be expected to
be subject to varying degrees of regulatory pressure affecting the operation of
advertising displays. Accordingly, although the Company's experience to date is
that the regulatory environment is not prohibitive, no assurance can be given
that existing or future laws or regulations will not materially adversely affect
the Company.
 
ITEM 2.  PROPERTIES
 
     Outdoor Advertising Sites.  The Company owns parcels of real property that
serve as sites for its outdoor displays. In addition, the Company possesses
perpetual easements on parcels of real property owned by third parties on which
it has placed outdoor displays. The majority of the Company's advertising
display sites are leased.
 
     The Company's leases are for varying terms ranging from monthly or annual
periods to terms of ten years or longer, and many provide for renewal options.
There is no significant concentration of displays under any one lease or subject
to negotiation with any one landlord.
 
     Office and Production Facilities.  The Company's principal executive and
administrative offices are located in Phoenix, Arizona, in a facility owned by
the Company. A portion of this facility also is used for painting, poster
prepasting and related production activities. Additionally, the Company owns the
majority of the office and production facilities from which it operates in its
United States and Canadian metropolitan markets.
 
     See also "Item 1 -- Business -- Markets."
 
ITEM 3.  LEGAL PROCEEDINGS
 
     The Company is party either as plaintiff or defendant to various actions,
proceedings and pending claims, in the ordinary course of business. Litigation
is subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims referred to above could be decided against the
Company. Although the ultimate amount for which the Company or its subsidiaries
may be held liable with respect to matters where the Company is defendant is not
ascertainable, the Company believes that any resulting liability will not
materially affect the Company's financial statements.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.
 
                                        9
<PAGE>   12
 
ITEM 4A.  EXECUTIVE OFFICERS OF THE COMPANY
 
     The executive officers of the Company are as follows:
 
<TABLE>
<CAPTION>
                                                                                     YEARS WITH
           NAME              AGE                       POSITION                       COMPANY
           ----              ---                       --------                      ----------
<S>                          <C>   <C>                                               <C>
William S. Levine..........  66    Chairman of the Board and Director                    18
Arthur R. Moreno...........  51    President, Chief Executive Officer and Director       14
Wally C. Kelly.............  41    Senior Vice President                                 14
Robert M. Reade............  58    Vice President                                         6
Bill M. Beverage...........  47    Treasurer, Secretary and Chief Financial Officer       7
</TABLE>
 
     Mr. Levine, a founder and principal stockholder of the Company, has been
Chairman of the Board and a director of the Company since its formation. Mr.
Levine has 18 years of experience in the outdoor advertising industry. He is an
owner and officer of numerous privately-owned firms and commercial real estate
operations. Since 1990, Mr. Levine has dedicated a substantial portion of his
time to the Company's affairs.
 
     Mr. Moreno has served as the Company's President and Chief Executive
Officer and has been a director of the Company since April 1984. Mr. Moreno has
25 years of experience in the outdoor advertising industry. From 1981 to 1984,
Mr. Moreno served as President and General Manager of Gannett Outdoor of New
Jersey. From 1979 to 1981, he was President and General Manager of Gannett
Outdoor of Kansas City (Missouri). From 1973 to 1981, Mr. Moreno worked in
Phoenix as a Vice President of Sales for Gannett Outdoor and its predecessor
company. Mr. Moreno is also a director of Ugly Duckling, Inc.
 
     Mr. Kelly has been the Company's Senior Vice President since 1984. Mr.
Kelly has 19 years of experience in the outdoor advertising business. From 1979
to 1984, Mr. Kelly worked for Whiteco Metrocom, Inc. in Tucson (1979 to 1981) as
Sales Manager and in Chicago as Vice President of National Sales (1982 to 1984).
 
     Mr. Reade has been Vice President of the Company since May 1997. He served
as the Company's Director of Real Estate from April 1993 to May 1997 and was a
consultant to the Company from 1992 to April 1993. Mr. Reade has 28 years of
experience in the outdoor advertising industry. From 1987 to 1990, Mr. Reade
served as President and Chief Operating Officer of a major convenience store
chain and from 1985 to 1987 was Real Estate Manager of such chain. In 1985, Mr.
Reade served as Vice President, Sales and Marketing for Gannett Outdoor Group in
New York and from 1970 to 1985 he was General Manager for Gannett Outdoor and
its predecessor company in Phoenix.
 
     Mr. Beverage has served as the Company's Controller since 1992, its
Treasurer and Secretary since May 1993, and its Chief Financial Officer since
October 1995. Mr. Beverage has 19 years of experience in the accounting
departments of various outdoor advertising companies. From 1990 to 1992, he
served as the Company's Atlanta real estate manager. From 1988 until 1990, he
worked for Outdoor Today, Inc. in Atlanta (which was acquired by the Company in
1990) as a consultant and as its accounting manager. Prior to 1988, he worked
for five years for Turner Outdoor Advertising in Atlanta and for four years for
Creative Displays in Atlanta. From 1976 to 1979, he was an auditor for Arthur
Young & Co. (now known as Ernst & Young).
 
     Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve at the discretion of the Board of Directors.
 
                                       10
<PAGE>   13
 
                                    PART II.
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Company effected the initial public offering of its Common Stock on
April 24, 1996 at a price of $2.96 per share, as adjusted for all subsequent
stock splits. The Company's Common Stock is currently traded on the New York
Stock Exchange under the symbol "OSI". From April 24, 1996 to September 1, 1997,
the Common Stock was quoted on the Nasdaq Stock Market under the symbol "OSIA".
The following table sets forth, for the periods indicated, the high and low
sales prices per share of the Common Stock as reported by the New York Stock
Exchange or the Nasdaq Stock Market, as applicable.
 
<TABLE>
<CAPTION>
                          1996                                HIGH      LOW
                          ----                               ------    ------
<S>                                                          <C>       <C>
2nd Quarter (from April 24, 1996)........................    $ 7.46    $ 2.96
3rd Quarter..............................................     14.00      6.78
4th Quarter..............................................     14.67     10.22
</TABLE>
 
<TABLE>
<CAPTION>
                          1997                                HIGH      LOW
                          ----                               ------    ------
<S>                                                          <C>       <C>
1st Quarter..............................................    $15.06    $ 9.67
2nd Quarter..............................................     17.00     11.44
3rd Quarter..............................................     18.08     15.42
4th Quarter..............................................     26.29     17.25
</TABLE>
 
     On March 13, 1998, the last reported sales price of the Common Stock on the
New York Stock Exchange was $29.875 per share. As of March 13, 1998, there were
64 shareholders of record of the Common Stock.
 
     The Company's Senior Credit Facility prohibits the payment of cash
dividends and other distributions until certain financial ratios are achieved.
 
                                       11
<PAGE>   14
 
ITEM 6.  SELECTED FINANCIAL DATA
 
     The selected consolidated financial data presented below were derived from
the audited consolidated financial statements of the Company for the five years
ended December 31, 1997. The financial statements of the Company as of December
31, 1996 and 1997 and for the three years in the period ended December 31, 1997
together with the report of Deloitte & Touche LLP, independent auditors are
included elsewhere herein. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements, including
the Notes thereto, appearing elsewhere herein.
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                           --------------------------------------------------------------------
                                              1993          1994          1995          1996           1997
                                           -----------   -----------   -----------   -----------   ------------
                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA(1):
  Net revenues(2)........................  $    49,151   $    52,077   $    64,813   $   173,116   $    471,004
  Operating Expenses:
    Direct advertising expenses..........       23,721        24,433        30,462        87,593        237,175
    General and administrative
      expenses...........................        2,777         3,357         4,096        13,458         28,563
    Depreciation and amortization........       10,421         9,165         9,970        22,555         75,327
  Gain on the Atlanta and Denver
    Dispositions.........................           --         4,325            --         7,344             --
  Operating income.......................       12,232        19,447        20,285        56,854        129,939
  Foreign currency translation (gain)
    loss.................................           --            --            --          (171)         2,093
  Interest expense.......................       11,894        16,393        17,199        32,489         87,150
  Income (loss) before extraordinary item
    and change in accounting
    principle(3).........................          111         1,333         2,768        14,336         22,211
  Net income (loss)......................       (3,176)        1,333         2,768        (3,444)        15,438
  Net income (loss) attributable to
    common stockholders..................       (5,748)         (263)          307        (6,905)        15,438
  Basic net income (loss) per share......         (.14)         (.01)          .01          (.10)           .14
  Diluted net income (loss) per share....         (.11)         (.01)          .01         (0.09)           .13
  Shares used in basic per share
    computations.........................   40,277,554    37,729,530    47,466,853    67,672,701    109,096,011
  Shares used in diluted per share
    computations.........................   50,014,877    47,466,853    57,204,176    79,342,506    122,432,867
 
OTHER DATA:
  EBITDA(4)..............................  $    22,653   $    24,287   $    30,255   $    72,065   $    205,266
  EBITDA margin(5).......................        46.1%         46.6%         46.7%         41.6%          43.6%
  Capital expenditures...................  $     4,387   $     4,924   $     7,070   $     9,046   $     30,189
  Number of advertising displays.........       10,800        11,900        12,700        61,600(6)       98,300(6)
 
BALANCE SHEET DATA (AT END OF PERIOD):
  Working capital........................  $    13,967   $    15,022   $     8,221   $    36,142   $     61,229
  Total assets...........................      129,433       151,260       138,213       933,455      2,229,157
  Total debt.............................      129,812       155,204       142,269       606,409      1,444,159
  Common stockholders' equity
    (deficiency).........................      (28,811)      (29,074)      (28,767)      288,179        695,471
</TABLE>
 
---------------
(1) During 1996 and 1997, the Company completed certain acquisitions, including
    the Gannett Outdoor Acquisition and the Denver Disposition in 1996, and the
    Van Wagner Acquisition and the 3M Media Acquisition in 1997. In December
    1994, the Company consummated the Atlanta Disposition. In addition, in 1993
    the Company refinanced a substantial portion of its indebtedness with
    10 3/4% Senior Notes due 2003 (the "10 3/4% Senior Notes"). Accordingly,
    operating results are not necessarily
 
                                       12
<PAGE>   15
 
    comparable on a year-to-year basis. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations" and Note 2 of the
    Consolidated Financial Statements.
 
(2) Net revenues are gross revenues minus agency commissions, plus other income
    of $1.0 million, $0.4 million, $6.1 million and $15.3 million for the years
    ended December 31, 1994, 1995, 1996 and 1997, respectively.
 
(3) Deferred financing costs of $3.3 million, $17.8 and $6.8 million associated
    with borrowings which were retired or redeemed were charged as an
    extraordinary loss during 1993, 1996 and 1997, respectively.
 
(4) "EBITDA" is defined as operating income (loss) before depreciation and
    amortization expense and, in 1994 and 1996, before the gain on the Atlanta
    and Denver Dispositions, respectively. While EBITDA should not be considered
    in isolation or as a substitute for net income, cash flows from operating
    activities and other income or cash flow statement data prepared in
    accordance with generally accepted accounting principles, or as a measure of
    profitability or liquidity, management understands that it is customarily
    used by certain investors as one measure to evaluate the financial
    performance of companies in the outdoor advertising industry.
 
(5) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
 
(6) Does not include approximately 125,000 subway advertising display faces in
    New York City.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     The following discussion of the consolidated results of operations of the
Company for the three years ended December 31, 1997 and financial condition at
December 31, 1997 should be read in conjunction with the Consolidated Financial
Statements of the Company and the related notes included elsewhere herein.
 
GENERAL
 
     The performance of an outdoor advertising business, such as the Company, is
measured by its ability to generate EBITDA. EBITDA is defined as operating
income (loss) before interest, taxes, depreciation and amortization expense and,
with respect to 1996, before the gain on the Denver Disposition. Although EBITDA
is not a measure of performance calculated in accordance with generally accepted
accounting principles, the Company believes that EBITDA is accepted by the
outdoor advertising industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of outdoor
advertising companies. Nevertheless, this measure should not be considered in
isolation or as a substitute for operating income, net income, net cash provided
by operating activities or any other measure for determining the Company's
operating performance or liquidity which is calculated in accordance with
generally accepted accounting principles.
 
     Revenues are a function of both the occupancy of the Company's outdoor
advertising display inventory (the amount of time that its display faces contain
advertisements) and the rates that the Company charges for use of its display
faces. Accordingly, the Company focuses its sales efforts on attaining an
optimal "mix" of occupancy and rates in order to maximize revenues, and believes
that there are opportunities for additional improvements to its occupancy and
rate mix with respect to its entire inventory.
 
     Net revenues are gross revenues less commissions paid to advertising
agencies that contract for the use of advertising display faces on behalf of
advertisers plus other income arising from the Company's operations. Advertisers
typically contract for advertising space through agencies, although in some
cases the Company sells advertising space directly to local advertisers. Agency
commissions are typically 15% of gross revenues on local sales and 16 2/3% of
gross revenues on national sales. The Company measures its operating performance
based upon percentages of net revenues rather than gross revenues.
 
     The Company's most significant operating expenses are direct advertising
expenses and general and administrative expenses. Direct advertising expenses
consist of rental payments to property owners for use of land on which
advertising display faces are located, production expenses and selling expenses.
Production expenses consist of salaries for operations personnel and real estate
representatives, materials and supplies used in the preparation and display of
advertising copy, annual permits, property taxes and other similar expenses.
Selling expenses consist of salaries and commissions for salespeople, travel and
entertainment
                                       13
<PAGE>   16
 
relating to sales, sales administration and other similar expenses. The
Company's general and administrative expenses consist of expenses related to
accounting, administrative functions, insurance, bad debts and other similar
expenses.
 
     The Company had Federal income tax net operating loss carryforwards of
approximately $47.1 million as of December 31, 1997, which will expire over a
period of years beginning in 2003. Although realization is not assured,
management believes, based on operating results in 1997 and its expectations for
the future, that the taxable income of the Company will more likely than not be
sufficient to utilize all of the $47.1 million of net operating loss
carryforwards prior to their ultimate expiration in 2017. However, there can be
no assurances that the Company will generate taxable income in the future.
 
ACQUISITIONS
 
     3M Media Acquisition.  On August 15, 1997, the Company acquired the outdoor
advertising operations of Minnesota Mining and Manufacturing Company ("3M")
through the purchase of the capital stock of National Advertising Company, a
subsidiary of 3M ("3M Media"), for approximately $1.0 billion in cash (the "3M
Media Acquisition"). The 3M Media operations include approximately 29,900
advertising display faces consisting of 20,800 bulletins, 2,400 posters and
6,700 mall advertising display faces in 56 metropolitan markets and
non-metropolitan locations in the United States (net of assets disposed of as
described below).
 
     The Company financed the purchase price of the 3M Media Acquisition and the
fees and expenses associated with the acquisition and the acquisition financing
through (i) proceeds from the offering of 30,375,000 shares of common stock (the
"1997 Common Stock Offering") to the public, completed on May 28, 1997, (ii)
proceeds of an offering of $500 million aggregate principal amount of 8 7/8%
Senior Subordinated Notes due 2007 (the "1997 Notes") completed on June 23, 1997
(the "1997 Notes Offering"), and (iii) borrowings under the Company's Senior
Credit Facility which was amended to provide for a revolving credit facility and
term loans of up to approximately $900 million.
 
     In connection and simultaneously with the 3M Media Acquisition, the Company
sold to Lamar Advertising Company ("Lamar") and another outdoor advertising
company certain outdoor advertising assets the Company acquired from 3M. The
assets sold consisted of approximately 1,800 advertising displays in Atlanta,
Denver, Detroit, Grand Rapids, Houston, New Orleans, Kansas City, Louisville,
Phoenix and Sacramento. The selling price for such assets was approximately $116
million in cash. There was no gain or loss recognized on this sale.
 
     Van Wagner Acquisition.  On May 22, 1997, the Company purchased all of the
capital stock of Van Wagner for approximately $170.0 million in cash (the "Van
Wagner Acquisition"). The Van Wagner operations include approximately 50
"Spectacular" signs in Times Square, 105 bulletins and 172 posters and eight
wall murals in New York City, 372 bulletins and 16 wall murals in Los Angeles,
four bulletins in San Francisco, and additional transit displays and transit
management agreements in New York, Los Angeles, Northern California and Las
Vegas. The Van Wagner operations have been integrated as an acquisition of
advertising display inventory.
 
     Gannett Outdoor Acquisition.  On August 22, 1996, the Company purchased
substantially all of the assets of Gannett Outdoor (the "Gannett Outdoor
Acquisition"), including the stock of certain indirect subsidiaries of Gannett
Co., Inc. ("Gannett")related to the outdoor division, for approximately $700.0
million in cash. The Company acquired from Gannett a total of approximately
40,000 advertising display faces consisting of 4,100 bulletins, 20,400 posters
and 15,500 transit advertising displays (the Company also acquired approximately
125,000 subway advertising display faces in New York City) in 15 metropolitan
markets in the United States and seven metropolitan markets in Canada.
 
     The Company financed the acquisition through (i) its Senior Credit
Facility, (ii) a Subordinated Credit Facility ("Bridge Loan") and (iii) the
proceeds from the offering of 28,991,250 shares of Common Stock (the "1996
Common Stock Offering") to the public, completed on August 22, 1996, for which
it received proceeds of approximately $283,135,000 net of underwriting discounts
and commissions and offering expenses of approximately $13,133,000. In October
1996, the Company sold $250,000,000 of 9 3/8% Senior Subordinated
 
                                       14
<PAGE>   17
 
Notes due 2006 (the "1996 Notes"). The proceeds from this offering (the "1996
Notes Offering") were used to repay all borrowings under the Bridge Loan and to
partially repay amounts outstanding under the Senior Credit Facility (see Note 5
to the Consolidated Financial Statements).
 
     Other Acquisitions.  See Note 2 to the Consolidated Financial Statements
for information concerning other acquisitions effected by the Company during
1996 and 1997.
 
RESULTS OF OPERATIONS
 
     Operating results for the twelve months ended December 31, 1996 include the
operations of the Gannett Outdoor Acquisition completed August 22, 1996.
Operating results for the twelve months ended December 31, 1997 include the
operations of the Van Wagner Acquisition completed May 22, 1997, the operations
of the 3M Media Acquisition completed August 15, 1997, and the several other
acquisitions completed during 1997 (the "Other 1997 Acquisitions") (see Note 2
to the Consolidated Financial Statements) (collectively, the "Acquisitions").
 
  COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997
 
     Gross revenues increased by 171.7% from $194.2 million in 1996 to $527.5
million in 1997. Gross revenues increased approximately 9.8% during 1997
compared to 1996 for markets where the Company operated both in 1997 and 1996.
The balance of the increased revenues were a result of the 3M Media Acquisition,
the Van Wagner Acquisition and the Other 1997 Acquisitions (collectively, the
"1997 Acquisitions") (see Note 2 to the Consolidated Financial Statements).
 
     Agency commissions were 13.6% of gross revenues in 1997 compared to 14.0%
in 1996. Agency commissions were lower in 1997 primarily as a result of slightly
lower proportion of revenues generated through advertising agencies.
 
     Net revenues increased by 172.1% from $173.1 million in 1996 to $471.0
million in 1997, primarily as a result of the increase in gross revenues
combined with an increase of other income from $6.1 million in 1996 to $15.3
million in 1997. Other income increased primarily due to the inclusion of
license fee revenue from perpetual easements acquired in 1997 and the inclusion
in 1997 of a full twelve months of revenues from a printing operation acquired
in connection with the Gannett Outdoor Acquisition.
 
     Direct advertising expenses increased from $87.6 million in 1996 to $237.2
million in 1997. This was primarily a result of the 1997 Acquisitions. As a
percentage of net revenues, direct advertising expenses were approximately 50.6%
in 1996 and 50.4% in 1997.
 
     General and administrative expenses increased from $13.5 million in 1996 to
$28.6 million in 1997. This was primarily a result of the 1997 Acquisitions. As
a percentage of net revenues, general and administrative expenses decreased from
7.8% in 1996 to 6.1% in 1997 because of efficiencies realized from economies of
scale.
 
     As a result of the above factors, EBITDA increased by 184.8% from $72.1
million in 1996 to $205.3 million in 1997.
 
     Depreciation and amortization expenses increased from $22.6 million in 1996
to $75.3 million in 1997, primarily due to the net increase in depreciation due
to the 1997 Acquisitions which was offset in part by certain assets becoming
fully depreciated during 1997. As a percentage of net revenues, depreciation and
amortization expense increased from 13.0% in 1996 to 16.0% in 1997.
 
     Interest expense increased from $32.5 million in 1996 to $87.2 million in
1997, as a result of interest expense related to obligations incurred in
connection with the 1997 Acquisitions. As a percentage of net revenues, interest
expense decreased from 18.8% in 1996 to 18.5% in 1997, primarily due to the
increase in net revenues.
 
     Income before taxes and extraordinary item was approximately $24.5 million
in 1996 and $40.7 million in 1997. Included in 1996 income before taxes and
extraordinary item was a $7.3 million gain on the Denver
 
                                       15
<PAGE>   18
 
Disposition. Disregarding the effect of this gain, income before taxes and
extraordinary item increased from $17.2 million in 1996 to $40.7 million in
1997.
 
     The Company recorded an income tax provision of $10.2 million in 1996 and
$18.5 million in 1997. The increase in the reported effective income tax rate
for 1997 is due primarily to the inclusion of a full year of operations of the
Company's Canadian subsidiary.
 
     The Company reported an extraordinary loss of $17.8 million, net of $9.8
million tax benefit, in 1996 and $6.8 million, net of $4.5 million tax benefit
in 1997. Both of these extraordinary losses resulted primarily from, one time
bridge loan commitment costs in connection with the Acquisitions and from a
premium associated with the early redemption of the 10 3/4% Senior Notes.
 
  COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1996
 
     Operating results for 1996 include the operations of the Gannett Outdoor
Acquisition subsequent to August 23, 1996. Gross revenues increased by 160.0%
from $74.7 million in 1995 to $194.2 million in 1996. Approximately 89.8% of
this increase in gross revenues was attributable to the Gannett Outdoor
Acquisition, with the remaining 10.2% of such increase in all other markets
resulting primarily from increased inventory utilization.
 
     Agency commissions increased from $10.3 million in 1995 to $27.1 million in
1996 primarily as a result of the Gannett Outdoor Acquisition. As a percentage
of gross revenues, agency commissions increased from 13.8% in 1995 to 14.0% in
1996 as a result of a slightly higher proportion of revenues generated through
advertising agencies.
 
     Net revenues increased by 167.1% from $64.8 million in 1995 to $173.1
million in 1996, primarily as a result of the increase in gross revenues
combined with an increase of other income from $0.4 million in 1995 to $6.1
million in 1996. Other income increased primarily due to the inclusion of
license fee revenue from perpetual easements acquired in early 1996 and the
inclusion of revenues from a printing operation acquired in connection with the
Gannett Outdoor Acquisition.
 
     Direct advertising expenses increased from $30.5 million in 1995 to $87.6
million in 1996. Approximately 95.8% of this increase was attributable to the
Gannett Outdoor Acquisition. As a percentage of net revenues, direct advertising
expenses were approximately 47.0% in 1995 and 50.6% in 1996.
 
     General and administrative expenses increased from $4.1 million in 1995 to
$13.5 million in 1996. Approximately 99.4% of this increase was due to the
Gannett Outdoor Acquisition with the remaining increase primarily due to
increased provisions for bad debts and increases in incentive and management
compensation in 1996. As a percentage of net revenues, general and
administrative expenses increased from 6.3% in 1995 to 7.8% in 1996.
 
     As a result of the above factors, EBITDA increased by 162.5% (138.2% before
the gain on the Denver Disposition) from $30.3 million in 1995 to $79.4 million
($72.1 million before the gain on the Denver Disposition) in 1996.
 
     Depreciation and amortization expenses increased from $10.0 million in 1995
to $22.4 million in 1996, primarily due to the net increase in depreciation due
to the Gannett Outdoor Acquisition which was offset in part by certain assets
becoming fully depreciated during 1996. As a percentage of net revenues,
depreciation and amortization expense decreased from 15.4% in 1995 to 12.9% in
1996.
 
     Interest expense increased from $17.2 million in 1995 to $32.5 million in
1996, as a result of interest expense related to obligations incurred in
connection with the Gannett Outdoor Acquisition. As a percentage of net
revenues, interest expense decreased from 26.5% in 1995 to 18.8% in 1996,
primarily due to the increase in net revenues.
 
     Income before taxes and extraordinary item was approximately $3.1 million
in 1995 and $24.5 million in 1996. Included in 1996 income before taxes and
extraordinary item was a $7.3 million gain on the Denver
 
                                       16
<PAGE>   19
 
Disposition. Disregarding the effect on this gain, income before taxes and
extraordinary item increased from $3.1 million in 1995 to $17.2 million in 1996.
 
     The Company recorded an income tax provision of $0.3 million in 1995 and
$10.2 million in 1996. The low effective tax rate in 1995 is the result of
reversing a $1.1 million valuation allowance for deferred income taxes. See Note
11 to the Consolidated Financial Statements.
 
     The Company reported an extraordinary loss of $17.8 million, net of $9.8
million tax benefit, in 1996. Approximately $11.2 million of this extraordinary
loss is a result of the redemption of the 10.75% Senior Notes, $5.7 million
results from one time financing fees in connection with the Gannett Outdoor
Acquisition and $0.9 million results from the redemption of subordinated notes.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's working capital was $36.1 million at December 31, 1996 and
$61.2 million at December 31, 1997. The increase in working capital resulted
primarily from working capital acquired in the 1997 Acquisitions, offset by an
increase in current maturities relating to new debt associated with the 1997
Acquisitions.
 
     Net cash provided by operating activities increased by $41.1 million from
$49.6 million during 1996 to $90.7 million during 1997, primarily due to
increased net income resulting from the 1997 Acquisitions and the effect of a
larger depreciation and amortization expense as a component of net income which
were partially offset by changes in working capital accounts. Net cash used in
investing activities increased from $754.1 million in 1996 to $1,293.8 million
in 1997, primarily due to the 1997 Acquisitions. Net cash provided by financing
activities increased from 714.6 million in 1996 to $1,197.3 million in 1997,
primarily because of proceeds received from the 1997 Common Stock Offering, the
1997 Notes Offering and borrowings under the Senior Credit Facility, all used to
finance the 1997 Acquisitions.
 
     The Company made approximately $30.2 million of capital expenditures during
1997, an increase from approximately $9.0 million during 1996. Currently, the
Company has no material commitments for capital expenditures, although it
anticipates ongoing capital expenditures in the ordinary course of business,
other than for acquisitions, will be approximately $30.0 million to $32.0
million in each of the next two years.
 
     During 1997, the Company completed the 1997 Acquisitions. The Company
financed the purchase price of the 1997 Acquisitions and the fees and expenses
associated with the 1997 Acquisitions and the acquisition financing through (i)
proceeds from the 1997 Common Stock Offering, (ii) proceeds from the 1997 Notes
Offering, and (iii) borrowings under the Company's Senior Credit Facility.
 
     The Company believes that internally generated funds and available
borrowings under the Senior Credit Facility will be sufficient to satisfy its
operating cash requirements for at least the next twelve to twenty-four months.
The Company may, however, require additional capital to consummate significant
acquisitions in the future and there can be no assurance that such capital will
be available.
 
     The Company recognizes the need to ensure that its operations will not be
adversely impacted by Year 2000 software failures. The Company has identified
all significant applications that will require modification to ensure Year 2000
compliance (" Year 2000 Compliance"). Internal and external resources are being
used to make the required modifications and test Year 2000 Compliance. The
Company plans on completing the testing process of all significant applications
by December 31, 1998.
 
     In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
 
     The total cost to the Company of these Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. These costs and the
                                       17
<PAGE>   20
 
date on which the Company plans to complete the Year 2000 modification and
testing processes are based on management's best estimates, which were derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ from those plans.
 
INFLATION
 
     Because a significant portion of the Company's costs are fixed, the Company
does not believe that inflation has had or will have a material adverse effect
on its operations. However, there can be no assurance that a high rate of
inflation in the future will not have an adverse effect on the Company's
operations.
 
FORWARD-LOOKING STATEMENTS
 
     This report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
When used in this report, the words "estimate", "expect", "anticipate",
"believe" and similar expressions are intended to identify forward-looking
statements. The Company cautions that reliance on any forward-looking statement
involves risk and uncertainties, and that although the Company believes that the
assumptions on which the forward-looking statements contained herein are based
are reasonable, any of those assumptions could prove to be inaccurate, and, as a
result, the forward-looking statements based on those assumptions also could be
incorrect. The uncertainties in this regard include, but are not limited to,
those identified in the risk factors discussed under "Risk Factors" in the
Company's Prospectus dated July 24, 1997 included in the Company's Registration
Statement on Form S-4 (Reg. No. 333-30957).
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
     Not applicable.
 
                                       18
<PAGE>   21
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
 
Independent Auditors' Report................................   20
 
Consolidated Balance Sheets as of December 31, 1996 and
  1997......................................................   21
 
Consolidated Statements of Operations for the Years Ended
  December 31, 1995, 1996 and 1997..........................   22
 
Consolidated Statements of Common Stockholders' Equity
  (Deficiency) for the Years Ended December 31, 1995, 1996
  and 1997..................................................   23
 
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1995, 1996 and 1997..........................   24
 
Notes to Consolidated Financial Statements..................   25
</TABLE>
 
                                       19
<PAGE>   22
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors
Outdoor Systems, Inc.
Phoenix, Arizona
 
     We have audited the accompanying consolidated balance sheets of Outdoor
Systems, Inc. and subsidiaries (the "Company") as of December 31, 1996 and 1997,
and the related consolidated statements of operations, common stockholders'
equity (deficiency), and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Outdoor Systems, Inc. and
subsidiaries at December 31, 1996 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
 
DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 3, 1998, except for the last
paragraph of Note 5, for which
the date is March 17, 1998.
 
                                       20
<PAGE>   23
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
            (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                1996         1997
                                                              --------    ----------
<S>                                                           <C>         <C>
                                       ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $ 11,887    $    5,897
  Accounts receivable -- less allowance for doubtful
     accounts of $5,398 and $13,850.........................    56,975       119,745
  Prepaid land leases.......................................    10,938        28,659
  Other current assets, including amounts due from related
     parties of $385 and $298...............................    15,737        16,686
  Deferred income taxes.....................................     1,637         5,914
                                                              --------    ----------
          Total current assets..............................    97,174       176,901
PROPERTY AND EQUIPMENT -- Net...............................   742,144     1,598,011
OTHER ASSETS................................................    10,155        13,565
DEFERRED FINANCING COSTS -- Net.............................    24,151        40,520
GOODWILL -- Net.............................................    59,831       400,160
                                                              --------    ----------
TOTAL.......................................................  $933,455    $2,229,157
                                                              ========    ==========
                    LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable..........................................  $  8,323    $   11,454
  Accrued interest..........................................     7,056         8,940
  Accrued expenses and other liabilities....................    17,653        44,678
  Current maturities of long-term debt......................    28,000        50,600
                                                              --------    ----------
          Total current liabilities.........................    61,032       115,672
LONG-TERM DEBT..............................................   578,409     1,393,550
OTHER LONG-TERM OBLIGATIONS.................................     3,552         4,327
DEFERRED INCOME TAXES.......................................     2,283        20,137
                                                              --------    ----------
          Total liabilities.................................   645,276     1,533,686
                                                              --------    ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 10 and 12)
COMMON STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value -- authorized, 200,000,000
     shares; issued and outstanding, 90,350,170 and
     121,123,367 shares.....................................       904         1,211
  Additional paid-in capital................................   316,486       709,730
  Accumulated deficit.......................................   (25,275)       (9,837)
  Treasury stock at cost -- 25,819,997 shares...............    (4,053)       (4,053)
  Foreign currency translation adjustment...................       117        (1,580)
                                                              --------    ----------
          Total common stockholders' equity.................   288,179       695,471
                                                              --------    ----------
TOTAL.......................................................  $933,455    $2,229,157
                                                              ========    ==========
</TABLE>
 
                See notes to consolidated financial statements.
                                       21
<PAGE>   24
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
            (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                            -------------------------------------
                                                               1995         1996         1997
                                                            ----------   ----------   -----------
<S>                                                         <C>          <C>          <C>
REVENUES:
  Outdoor advertising.....................................  $   74,690   $  194,183   $   527,547
  Less agency commissions.................................      10,294       27,136        71,798
                                                            ----------   ----------   -----------
          Total...........................................      64,396      167,047       455,749
  Lease, printing and other revenues......................         417        6,069        15,255
                                                            ----------   ----------   -----------
          Net revenues....................................      64,813      173,116       471,004
                                                            ----------   ----------   -----------
OPERATING EXPENSES:
  Direct advertising -- including $139, $139 and $139 to
     related parties......................................      30,462       87,593       237,175
  General and administrative -- including $385, $450 and
     $450 to related parties..............................       4,096       13,458        28,563
  Depreciation and amortization...........................       9,970       22,555        75,327
                                                            ----------   ----------   -----------
          Total operating expenses........................      44,528      123,606       341,065
                                                            ----------   ----------   -----------
GAIN ON DENVER DISPOSITION................................          --        7,344            --
                                                            ----------   ----------   -----------
OPERATING INCOME..........................................      20,285       56,854       129,939
OTHER:
  Foreign currency translation (gain) loss................          --         (171)        2,093
  Interest expense........................................      17,199       32,489        87,150
                                                            ----------   ----------   -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS.........       3,086       24,536        40,696
INCOME TAXES..............................................         318       10,200        18,485
                                                            ----------   ----------   -----------
INCOME BEFORE EXTRAORDINARY LOSS..........................       2,768       14,336        22,211
EXTRAORDINARY LOSS........................................          --      (17,780)       (6,773)
                                                            ----------   ----------   -----------
NET (LOSS) INCOME.........................................       2,768       (3,444)       15,438
LESS STOCK DIVIDENDS, ACCRETIONS AND DISCOUNT ON
  REDEMPTIONS.............................................       2,461        3,461            --
                                                            ----------   ----------   -----------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS.....  $      307   $   (6,905)  $    15,438
                                                            ==========   ==========   ===========
BASIC AND DILUTED INCOME (LOSS) PER SHARE (Note 1):
Basic:
  Income before extraordinary loss........................  $      .01   $      .16   $       .20
  Extraordinary loss......................................          --         (.26)         (.06)
                                                            ----------   ----------   -----------
  Net income (loss).......................................  $      .01   $     (.10)  $       .14
                                                            ==========   ==========   ===========
  Weighted average number of shares outstanding...........  47,466,853   67,672,701   109,096,011
                                                            ==========   ==========   ===========
Diluted:
  Income before extraordinary loss........................  $      .01   $      .14   $       .18
  Extraordinary loss......................................          --         (.23)         (.05)
                                                            ----------   ----------   -----------
  Net income (loss).......................................  $      .01   $     (.09)  $       .13
                                                            ==========   ==========   ===========
  Weighted average number of shares outstanding...........  57,204,176   79,342,506   122,432,867
                                                            ==========   ==========   ===========
</TABLE>
 
                See notes to consolidated financial statements.
                                       22
<PAGE>   25
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
      CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                              ---------------------------------------
                                                                 1995          1996          1997
                                                              ----------    ----------    -----------
<S>                                                           <C>           <C>           <C>
COMMON STOCK OUTSTANDING: Shares:
  Balance, beginning of year................................  21,096,379    47,467,133     90,350,170
  Stock splits..............................................  26,370,754                           --
  Stock options exercised...................................          --       337,500        398,197
  Initial public offering...................................          --    13,554,287             --
  Secondary offering........................................          --    28,991,250     30,375,000
                                                              ----------    ----------    -----------
  Balance, end of year......................................  47,467,133    90,350,170    121,123,367
                                                              ----------    ----------    -----------
COMMON STOCK OUTSTANDING: Amount:
  Balance, beginning of year................................  $       21    $       47    $       904
  Stock splits..............................................          26           601            171
  Initial public offering...................................          --            60             --
  Secondary offering........................................          --           196            136
                                                              ----------    ----------    -----------
  Balance, end of year......................................  $       47    $      904    $     1,211
                                                              ----------    ----------    -----------
ADDITIONAL PAID-IN CAPITAL:
  Balance, beginning of year................................  $       --    $      (43)       316,486
  Stock splits..............................................         (43)         (743)          (171)
  Stock options exercised...................................          --            --             13
  Tax benefit from stock options exercised..................          --            --          1,979
  Initial public offering...................................          --        36,617
  Secondary offering........................................          --       283,135        391,423
  Common/preferred stock accretion..........................          --        (2,480)            --
                                                              ----------    ----------    -----------
  Balance, end of year......................................  $      (43)   $  316,486        709,730
                                                              ----------    ----------    -----------
ACCUMULATED DEFICIT:
  Balance, beginning of year................................  $  (25,025)   $  (24,718)   $   (25,275)
  Common/preferred stock accretion..........................      (1,507)         (688)            --
  Dividend on exchangeable preferred stock..................         (82)           --             --
  Cash dividends............................................        (872)         (293)
  Cancellation of put option on common stock................          --         3,868             --
  Net income (loss).........................................       2,768        (3,444)        15,438
                                                              ----------    ----------    -----------
  Balance, end of year......................................  $  (24,718)   $  (25,275)   $    (9,837)
                                                              ----------    ----------    -----------
COMMON STOCK IN TREASURY: Amount
  Balance...................................................  $   (4,053)   $   (4,053)   $    (4,053)
                                                              ----------    ----------    -----------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT:....................
  Balance, beginning of year................................  $       --    $       --    $       117
  Unrealized foreign currency translation gain (loss).......          --           117         (1,697)
                                                              ----------    ----------    -----------
                                                              $       --    $      117    $    (1,580)
                                                              ==========    ==========    ===========
TOTAL COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)..............  $  (28,767)   $  288,179    $   695,471
                                                              ==========    ==========    ===========
</TABLE>
 
                See notes to consolidated financial statements.
                                       23
<PAGE>   26
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                              ------------------------------------
                                                                1995        1996          1997
                                                              --------    ---------    -----------
<S>                                                           <C>         <C>          <C>
OPERATING ACTIVITIES:
  Net (loss) income.........................................  $  2,768    $  (3,444)   $    15,438
  Adjustments to reconcile net (loss) income to net cash
    provided by operating activities:
    Extraordinary loss......................................        --       17,780          6,773
    Gain on sale of land....................................      (417)          --             --
    Gain on disposals.......................................                 (7,344)            --
    Loss on foreign currency translation adjustment.........        --         (171)         2,093
    Deferred taxes..........................................        90        8,121         12,181
    Deferred financing fees.................................       821        1,389          5,469
    Depreciation and amortization...........................     9,970       22,555         75,327
    Allowance for doubtful accounts.........................       761        2,492          4,129
    Other...................................................       363        3,664            727
  Changes in net assets and liabilities -- net of effects
    from acquisitions and disposals:
    Accounts receivable.....................................     4,539         (767)       (47,042)
    Prepaid expenses and other current assets...............     2,486           74            694
    Accrued interest........................................       (84)       2,216          1,899
    Accounts payable and other liabilities..................    (1,924)       3,023         12,999
                                                              --------    ---------    -----------
        Net cash provided by operating activities...........    19,373       49,588         90,687
                                                              --------    ---------    -----------
INVESTING ACTIVITIES:
  Acquisition of 3M Media...................................        --           --       (894,299)
  Acquisition of Gannett Outdoor, net of cash overdraft
    acquired................................................        --     (712,545)            --
  Capital expenditures......................................    (7,070)      (9,046)       (30,189)
  Proceeds from sale of land................................       769
  Other acquisitions........................................        --      (13,991)      (337,715)
  Net proceeds from disposals...............................        --        3,049             --
  Acquisition of perpetual land easements...................        --      (21,525)       (31,548)
                                                              --------    ---------    -----------
        Net cash used in investing activities...............    (6,301)    (754,058)    (1,293,751)
                                                              --------    ---------    -----------
FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt..................    10,679      846,853      1,538,135
  Tender for 10.75% notes...................................        --     (128,205)            --
  Principal payments on debt and capital leases.............   (23,977)    (269,893)      (699,311)
  Increase in deferred financing fees.......................      (821)     (37,483)       (33,127)
  Cash dividends paid on preferred stock....................      (872)        (293)            --
  Redemption of preferred and exchangeable preferred
    stock...................................................        --      (16,369)            --
  Issuance of common stock..................................        --      320,008        391,572
                                                              --------    ---------    -----------
        Net cash provided by (used in) financing
        activities..........................................   (14,991)     714,618      1,197,269
                                                              --------    ---------    -----------
  Effect of exchange rate changes on cash...................        --           --           (195)
                                                              --------    ---------    -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........    (1,919)      10,148         (5,990)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............     3,658        1,739         11,887
                                                              --------    ---------    -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD....................  $  1,739    $  11,887    $     5,897
                                                              ========    =========    ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for:
    Interest................................................  $ 16,162    $  27,519    $    82,974
                                                              ========    =========    ===========
    Income taxes............................................  $    227    $     275    $     6,853
                                                              ========    =========    ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
  ACTIVITIES:
  In conjunction with the large acquisitions (Gannett
    Outdoor (1996), 3M Media and Van Wagner (1997)),
    liabilities were assumed as follows:
    Fair value of assets acquired...........................  $     --    $ 728,848    $ 1,105,981
    Cash paid...............................................        --      707,980      1,081,520
                                                              --------    ---------    -----------
  Liabilities assumed and incurred and issuance of notes
    payable.................................................  $     --    $  20,868    $    24,461
                                                              ========    =========    ===========
  Accretion of common and preferred stock...................  $  1,507    $      --    $        --
                                                              ========    =========    ===========
  Accrued dividends on exchangeable preferred stock.........  $     82    $      --    $        --
                                                              ========    =========    ===========
  Additional obligation on CSX transaction..................  $     --    $   2,198    $       523
                                                              ========    =========    ===========
  Write-off of deferred financing costs.....................  $     --    $   3,130    $        --
                                                              ========    =========    ===========
  Note receivable on Denver Disposition.....................  $     --    $   6,440    $        --
                                                              ========    =========    ===========
</TABLE>
 
                See notes to consolidated financial statements.
                                       24
<PAGE>   27
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Organization -- Outdoor Systems, Inc. was incorporated on February 22,
1980, and is engaged principally in the rental of advertising space on outdoor
advertising structures in 90 metropolitan markets in the United States and 13
metropolitan markets in Canada.
 
     Principles of consolidation -- The consolidated financial statements
include the accounts of Outdoor Systems, Inc. and its subsidiaries
(collectively, the "Company"), including its Canadian subsidiary Mediacom, Inc.
("Mediacom"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
 
     Significant accounting policies are as follows:
 
     a. Cash and cash equivalents -- The Company considers all highly liquid
investments with an initial maturity of three months or less to be cash
equivalents.
 
     b. Property and equipment are recorded at cost. Normal maintenance and
repair costs are expensed. Improvements which extend the life or usefulness of
an asset are capitalized. Depreciation is computed principally on a
straight-line method based upon the following useful lives:
 
<TABLE>
<S>                                                           <C>
Buildings...................................................  25-32 years
Advertising structures......................................   5-20 years
Vehicles....................................................    3-5 years
Furniture and fixtures......................................      5 years
Perpetual land easements....................................     40 years
</TABLE>
 
     c. Deferred financing costs are amortized using the effective interest
method over the terms of the related loans.
 
     d. Goodwill represents the excess purchase price over net assets acquired
and is amortized over 30 years. Amortization expense was $47,000, $713,000 and
$6,128,269 in 1995, 1996 and 1997, respectively.
 
     e. Revenue recognition -- The Company recognizes revenue from advertising
contracts when billed, which is on a straight-line pro rata monthly basis in
accordance with contract terms. Costs associated with providing service for
specific contracts are expensed as incurred, although such contracts generally
extend beyond one month. Other revenue represents license fees from perpetual
land easements and revenues from a printing operation.
 
     f. Income (loss) per share -- Basic income (loss) per common share is
computed based on the weighted average number of common shares outstanding
during each period. Diluted income (loss) per share is computed based on the
weighted average number of common and common equivalent shares outstanding
during each year and includes shares issuable upon exercise of stock options
except in those circumstances where such options would be anti-dilutive.
 
     g. Impairment of long-lived assets -- The Company reviews the carrying
values of its long-lived assets and identifiable intangibles for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of assets to be held and used may not be recoverable. The
adoption of SFAS No. 121 had no effect on the December 31, 1996 consolidated
financial statements.
 
     h. Use of estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from these
estimates.
 
                                       25
<PAGE>   28
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     i. Stock-based compensation -- As permitted by SFAS No. 123, Accounting for
Stock-Based Compensation, the Company uses the intrinsic value based method
prescribed by the Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans because the exercise price has been equal to
market price at date of grant. A summary of the pro forma effects on reported
income from continuing operations and earnings per share for 1997 and 1996, as
if the fair value based method of accounting defined in SFAS No. 123 had been
applied is included in Note 9 to these consolidated financial statements. Such
information is not presented for 1995 because no options were issued.
 
     j. New accounting pronouncements -- The Financial Accounting Standards
Board recently issued SFAS No. 128, Earnings per Share ("SFAS No. 128"), SFAS
No. 130, Reporting Comprehensive Income ("SFAS No. 130") and SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS No.
131"). SFAS No. 128 establishes new standards for computing and presenting
earnings per share ("EPS"). The Company adopted SFAS No. 128 during the quarter
ended December 31, 1997, accordingly, EPS has been restated for all periods
presented. SFAS No. 130 and 131 are effective for fiscal years beginning after
December 15, 1997. SFAS. No. 130 changes the reporting of certain items
currently reported in the common stock equity section of the balance sheet. SFAS
No. 131 requires that public companies report certain information about
operating segments in their financial statements. It also establishes related
disclosures about products and services, geographic areas, and major customers.
The Company is currently evaluating what impact SFAS Nos. 130 and 131 will have
on its financial statements.
 
     k. Stock splits -- Since going public in April of 1996, the Company has
effected four three-for-two stock splits of the Common Stock. The consolidated
financial statements and the notes thereto have been adjusted to reflect these
stock splits on a retroactive basis for all periods presented.
 
     l. Reclassifications -- Certain reclassifications were made to the 1995 and
1996 financial statements to conform with the 1997 presentation.
 
2. OFFERINGS AND ACQUISITIONS
 
COMPLETION OF INITIAL PUBLIC OFFERING
 
     On April 24, 1996, the Company completed its Initial Public Offering
("IPO") by selling 13,554,297 shares of its common stock. The Company received
proceeds of approximately $36,677,000 net of underwriting discounts and
commissions and offering expenses of approximately $3,517,000.
 
GANNETT OUTDOOR ACQUISITION
 
     On August 22, 1996, the Company purchased substantially all of the
billboard and transit advertising operations of the Outdoor Advertising Division
of Gannett Co., Inc. (the "Gannett Outdoor Acquisition"), for approximately
$712,545,000 ($707,980,000 before cash overdraft acquired of $4,565,000). The
Company also acquired an option to acquire the Gannett Outdoor operations in
Houston ("Gannett Houston"), which option was exercised on November 14, 1996 for
$12,174,000.
 
     The Company financed the acquisition through borrowings under its Senior
Credit Facility, a Subordinated Credit Facility ("Bridge Loan") and the 1996
Common Stock Offering for which it received proceeds of approximately
$283,135,000 net of underwriting discounts and commissions and offering expenses
of approximately $13,133,000. In October 1996, the Company sold $250,000,000 of
9 3/8% Senior Subordinated Notes due 2006 (the "1996 Notes"). The proceeds from
the 1996 Notes Offering were used to repay all borrowings under the Bridge Loan
and to partially repay amounts outstanding under the Senior Credit Facility (see
Note 5).
 
                                       26
<PAGE>   29
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The acquisition was accounted for using the purchase method of accounting
and the results of operations have been included in the consolidated financial
statements subsequent to the date of acquisition. The acquisition resulted in
goodwill of $60 million which represents the excess of the purchase price over
the fair value of the assets which is amortized on a straight-line basis over 30
years.
 
DENVER DISPOSITION
 
     In connection with the Gannett Outdoor Acquisition, on August 8, 1996, the
Company sold substantially all of its existing billboard assets in Denver
("Denver Disposition") to an unrelated party for $2,760,000 in cash and a
$6,440,000 9% promissory note due November 8, 2006, which is included in other
assets. The Denver Disposition resulted in a gain of $7,344,000.
 
OTHER 1996 ACQUISITIONS
 
     On May 22, 1996, the Company completed the acquisition of perpetual land
easements located on real property and leased to independent outdoor advertising
companies from CSX Realty Development Corporation ("CSX") for $21,525,000 in
cash and certain future payments in an aggregate amount not to exceed
$10,000,000 payable over a period of ten years beginning no later than the year
2006. The exact amount and timing of such payments is to be determined based
upon the results of the Company's operation of the easements. The cost of the
perpetual land easements is included in property and equipment and is amortized
on a straight-line basis over 40 years.
 
     In April 1996, the Company acquired all of the stock of Decade
Communications Group, Inc. (the "Bench Ad Acquisition"), which owned
approximately 5,300 bus benches in the Denver metropolitan area for a purchase
price of approximately $1,817,000. The acquisition was accounted for as a
purchase and the results of operations of the Bench Ad Acquisition are included
in these financial statements from the date of acquisition.
 
UNAUDITED PRO FORMA INFORMATION
 
     The following table summarizes unaudited pro forma operating results for
the Company for the two years ended December 31, 1996, assuming that the Gannett
Outdoor Acquisition and other 1996 acquisitions and the Denver Disposition had
occurred at the beginning of the applicable year and after giving effect to
financing costs and purchase accounting adjustments.
 
<TABLE>
<CAPTION>
                                                                1995         1996
                                                              ---------    ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Consolidated net revenues...................................  $314,386     $335,826
                                                              ========     ========
Income before extraordinary loss............................  $  5,005     $ 14,173
                                                              ========     ========
Net income..................................................  $  5,005     $ 13,329
                                                              ========     ========
Income attributable to common stockholders..................  $  2,544     $  9,868
                                                              ========     ========
Basic net income per share..................................  $    .03     $    .11
                                                              ========     ========
Diluted net income per share................................  $    .03     $    .10
                                                              ========     ========
</TABLE>
 
                                       27
<PAGE>   30
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
1997 ACQUISITIONS
 
     During 1997, the Company acquired outdoor advertising assets in the
following locations for the following purchase prices (the "1997 Acquisitions"):
 
<TABLE>
<CAPTION>
                                                     DATE ACQUIRED        PURCHASE PRICE
                                                     -------------        --------------
                                                                          (IN THOUSANDS)
<S>                                                  <C>                  <C>
Villepigue Outdoor - New York                        January 9              $   27,261
Atlanta Bus Shelters - Atlanta                       January 10                  6,401
Philbin & Coine, Inc. - Louisville                   January 22                    830
Scadron Enterprises - Chicago                        February 14                24,528
Murad Communications - Toronto                       February 28                 5,516
Reynolds Outdoor, LP - Dallas                        February 28                31,651
Ad Outdoor - Halifax                                 March 6                       845
Burlington Northern/Santa Fe perpetual
  easements - Western and Midwestern states          March 26                   30,213
3M Transit - Toronto                                 March 31                    2,823
Van Wagner - New York & Los Angeles                  May 22                    187,221
Key One - Canada                                     May 29                        661
CSX perpetual easements - Atlanta                    May 31                      1,335
May - Los Angeles                                    June 5                      1,026
Connell - Dallas                                     June 5                      1,011
3M Media*                                            August 15                 894,299
Sellex - Toronto                                     August 29                     859
Gleason - Atlanta                                    August 31                   2,729
Landex - Toronto                                     September 12                1,438
MacDonald & MacDonald - Edmonton                     September 30                3,839
Gallop & Gallop - Alberta                            October 31                  5,197
Eastern Ontario Billboard Corporation - Ontario      November 28                   314
Roberts Outdoor - Los Angeles                        November 14                 5,095
Outdoor Media Group - Las Vegas                      December 1                 28,470
                                                                            ----------
                                                                            $1,263,562
                                                                            ==========
</TABLE>
 
---------------
* Net of proceeds received by the Company upon the simultaneous disposition of
  certain assets as described below.
 
     The 1997 Acquisitions have been accounted for using the purchase method of
accounting and the results of operations have been included in the consolidated
financial statements subsequent to the date of acquisition. The acquisitions
resulted in goodwill of $346.5 million which represents the excess of the
purchase price over the fair value of the assets which is amortized on a
straight-line basis over 30 years. The Company is continuing its evaluation of
the fair value of the 1997 acquisitions and further adjustments to the purchase
prices may be made.
 
     As set forth in the table above, on August 15, 1997, the Company acquired
the outdoor advertising operations of Minnesota Mining and Manufacturing Company
("3M") through the purchase of the capital stock of National Advertising
Company, a subsidiary of 3M ("3M Media"), for approximately $1.0 billion in cash
(the "3M Media Acquisition").
 
                                       28
<PAGE>   31
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company financed the purchase price of the 3M Media Acquisition and the
fees and expenses associated with the acquisition and the acquisition financing
through (i) proceeds from the offering of 30,375,000 shares of common stock (the
"1997 Common Stock Offering") to the public, completed on May 28, 1997, (ii)
proceeds of an offering of $500 million aggregate principal amount of 8 7/8%
Senior Subordinated Notes due 2007 completed on June 23, 1997 (the "1997 Notes
Offering"), and (iii) borrowings under the Company's Senior Credit Facility
which was amended to provide for a revolving credit facility and term loans of
up to approximately $900 million.
 
     In connection and simultaneously with the 3M Media Acquisition, the Company
sold to Lamar Advertising Company ("Lamar") and another outdoor advertising
company certain outdoor advertising assets the Company acquired from 3M. The
assets sold consisted of approximately 1,800 advertising displays in Atlanta,
Denver, Detroit, Grand Rapids, Houston, New Orleans, Kansas City, Louisville,
Phoenix and Sacramento. The selling price for such assets was approximately $116
million in cash, there was no gain or loss recognized on the sale.
 
     The other 1997 acquisitions were financed, primarily, utilizing cash flows
from operations and borrowings under the company's senior credit facility.
 
UNAUDITED PRO FORMA INFORMATION
 
     The following table summarizes unaudited pro forma operating results for
the Company for the two years ended December 31, 1997, assuming that the 1997
Acquisitions had occurred at the beginning of the applicable year and after
giving effect to financing costs and purchase accounting adjustments.
 
<TABLE>
<CAPTION>
                                                                1996         1997
                                                              ---------    ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Consolidated net revenues...................................  $591,583     $605,894
                                                              ========     ========
Income before extraordinary loss............................  $ 12,308     $ 23,805
                                                              ========     ========
Net income (loss)...........................................  $ (5,472)    $ 23,805
                                                              ========     ========
Income (loss) attributable to common stockholders...........  $ (8,933)    $ 23,805
                                                              ========     ========
Basic net income per share..................................  $   (.09)    $    .20
                                                              ========     ========
Diluted net income per share................................  $   (.08)    $    .18
                                                              ========     ========
</TABLE>
 
     The pro forma amounts above include adjustments for the 1997 Acquisitions
only and do not include pro forma adjustments for the Gannet Outdoor Acquisition
which was completed on August 22, 1996.
 
3. PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at December 31:
 
<TABLE>
<CAPTION>
                                                                1996         1997
                                                              --------    ----------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>         <C>
Advertising structures......................................  $736,731    $1,647,518
Perpetual land easements....................................    24,428        54,607
Vehicles....................................................     5,796        11,902
Furniture and fixtures......................................     8,859        13,639
Buildings...................................................    15,934        19,084
Land........................................................    15,881        22,093
Other.......................................................     8,963         8,575
                                                              --------    ----------
Total.......................................................   816,592     1,777,418
Less accumulated depreciation...............................    74,448       179,407
                                                              --------    ----------
Property and equipment -- net...............................  $742,144    $1,598,011
                                                              ========    ==========
</TABLE>
 
                                       29
<PAGE>   32
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Included in advertising structures are costs allocated to display leases
totaling $163,704 and $528,819, at December 31, 1996 and 1997, respectively.
 
     The Company has granted a security interest in substantially all of its
assets to lenders in connection with the Senior Credit Facility.
 
4. ACCRUED EXPENSES AND OTHER LIABILITIES
 
     Accrued expenses and other liabilities are comprised of the following at
December 31:
 
<TABLE>
<CAPTION>
                                                                1996         1997
                                                              ---------    ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Accrued payroll, payroll taxes and severance................   $ 7,118      $ 7,466
Percentage lease payments...................................     2,206        1,990
Other liabilities assumed in Gannett acquisition............     3,272           --
Other liabilities assumed in 1997 Acquisitions..............        --        8,174
Customer deposits...........................................       958        7,388
Unearned revenue............................................       796        3,233
Taxes.......................................................       422        5,696
Other.......................................................     2,881       10,731
                                                               -------      -------
                                                               $17,653      $44,678
                                                               =======      =======
</TABLE>
 
5. LONG-TERM DEBT
 
     Long-term debt consists of the following at December 31:
 
<TABLE>
<CAPTION>
                                                                1996         1997
                                                              --------    ----------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>         <C>
Senior Credit Facility......................................  $356,348    $  693,034
8 7/8% Senior Subordinated Notes............................        --       496,124
9 3/8% Senior Subordinated Notes............................   250,000       250,000
Other.......................................................        61         4,992
                                                              --------    ----------
Total.......................................................   606,409     1,444,150
Less current maturities.....................................    28,000        50,600
                                                              --------    ----------
Long-term debt -- net.......................................  $578,409    $1,393,550
                                                              ========    ==========
</TABLE>
 
SENIOR CREDIT FACILITY
 
     The Senior Credit Facility, dated August 15, 1997, consists of 1) a U.S.
Dollar senior revolving line of credit facility of up to $350,000,000 including
a $35,000,000 letter of credit subfacility ("United States Revolver"), and a
Canadian Dollar ("C$") senior revolving line of credit facility ("Canadian
Revolver") of up to C$69,625,000 including a C$7,000,000 letter of credit
sub-facility; 2) a $450,000,000 Senior Secured U.S. Dollar Term Loan; and, 3)
$50,000,000 Senior Secured Canadian Term Loan. Letters of credit with stated
amounts totaling $28,958,000 have been issued for the Company's account at
December 31, 1997. Availability under the Senior Credit Facility totaled
approximately $178,008,000 at December 31, 1997.
 
     The commitment of the lenders under the United States Revolver will be
reduced annually on December 31st of each year (commencing on December 31, 1999)
through 2003 by $52,500,000 and by $87,500,000 on June 30, 2004. The commitment
under the Canadian Revolver will be reduced annually on December 31st of each
year (commencing on December 31, 1999) through 2003 by C$10,443,750 and by
 
                                       30
<PAGE>   33
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
C$17,406,250 on June 30, 2004. The United States Term Loan must be repaid in
equal quarterly installments commencing on March 31, 1998, with annual
amortization of $50,000,000 through 1999, $75,000,000 from 2000 through 2003 and
$50,000,000 in equal installments on March 31 and June 30, 2004. The Canadian
Term Loan must be repaid in equal quarterly installments commencing on March 31,
1998, with annual amortization of $1,000,000 through 2001, $8,000,000 during
2002, $15,000,000 during 2003 and $23,000,000 in equal installments on March 31
and June 30, 2004.
 
     The United States and Canadian Revolvers and United States and Canadian
Term Loans bear interest at the ABR or C$ Prime Rate (as defined in the Senior
Credit Facility's terms) (8.5% and 6.125%, respectively, at December 31, 1997)
plus 0.0% to 1.125% or Eurodollar Rate or Applicable BA Discount Rate (as
defined in the Senior Credit Facility's terms) (5.97% and 4.528%, respectively,
at December 31, 1997) plus 0.75% to 2.125%, based on the Company's total
leverage ratio.
 
     The Senior Credit Facility is secured by a first perfected lien on
substantially all of the present and future assets of the Company and a pledge
of the Company's equity interest in its subsidiaries provided that the Senior
Credit Facility is only secured by 65% of the stock of Mediacom. The U.S.
facilities are guaranteed by each of the Company's U.S. subsidiaries, and the
Canadian facilities are guaranteed by the Company and each of the Company's U.S.
subsidiaries.
 
     The Senior Credit Facility, among other things, places limitations on the
Company's acquisitions, dispositions, asset swaps and stock repurchases, and
requires the Company to comply with financial covenants concerning leverage,
interest coverage, fixed charges and minimum cash flows.
 
9 3/8% AND 8 7/8% SENIOR SUBORDINATED NOTES
 
     In October 1996, the Company completed the sale of $250,000,000 of 9 3/8%
Senior Subordinated Notes due 2006 (the "1996 Notes"). The net proceeds of the
1996 Notes were used to repay the Bridge Loan and to reduce amounts borrowed
under the Senior Credit Facility and to pay related fees and expenses. In July
1997, the Company completed the sale of $500,000,000 of 8 7/8% Senior
Subordinated Notes due 2007 (the "1997 Notes"). The net proceeds of the 1997
Notes were used in the 3M Media Acquisition.
 
     The 1996 Notes and 1997 Notes represent general unsecured obligations of
the Company and are subordinated to all existing and future senior indebtedness
of the Company and are senior to all subordinated indebtedness of the Company.
Under the 1996 Notes and 1997 Notes, among other things, the Company is
restricted in its ability to incur additional indebtedness, make certain
investments, create liens, enter into transactions with affiliates, issue stock
of a restricted subsidiary, enter into sale and leaseback transactions, merge or
consolidate the Company, and transfer or sell assets. The Company is prohibited
from paying cash dividends and distributions.
 
OTHER
 
     In November 1997, the Company issued a note for $4,950,000 in connection
with an acquisition in Los Angeles. The note bears interest at 10% per annum,
payable monthly. The principal is due 2003.
 
                                       31
<PAGE>   34
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The annual maturities of long-term debt at December 31, 1997 are as
follows:
 
<TABLE>
<CAPTION>
                                                              (DOLLARS IN THOUSANDS)
                                                              ----------------------
<S>                                                           <C>
1998........................................................        $   50,600
1999........................................................            50,584
2000........................................................            75,593
2001........................................................            84,307
2002........................................................           120,903
Thereafter..................................................         1,062,163
                                                                    ----------
          Total.............................................        $1,444,150
                                                                    ==========
</TABLE>
 
     At December 31, 1997, the percentage ownership and ordinary voting power by
Designated Holders (as defined in the Senior Credit Facility) was less than
required. On March 17, 1998, any Event of Default under the Senior Credit
Facility resulting from this provision was waived, and the Senior Credit
Facility was amended to permit percentage ownership and ordinary voting power by
Designated Holders to be at a minimum level which is less than the current
actual percentage ownership and ordinary voting power by Designated Holders.
 
6. EXTRAORDINARY LOSS ARISING FROM EARLY EXTINGUISHMENT OF DEBT
 
     The extraordinary loss arising from the early extinguishment of debt
consisted of the following:
 
<TABLE>
<CAPTION>
                                                                1996         1997
                                                              ---------    ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Redemption of subordinated debt subsequent to IPO...........   $ 1,415
Redemption of 10.75% Senior Notes:
  Tender offer..............................................    13,542
  Deferred debt costs.......................................     3,802
Bridge Redeemable Preferred Stock and Bridge Loan
  financing costs...........................................     8,856       11,288
                                                               -------      -------
Total.......................................................    27,615       11,288
Less related tax benefit....................................    (9,835)      (4,515)
                                                               -------      -------
          Total extraordinary loss..........................   $17,780      $ 6,773
                                                               =======      =======
</TABLE>
 
     In connection with the IPO, the Company redeemed $6,583,000 principal
amount of subordinated debt that had a carrying value of $6,099,000 for
$7,514,000 in cash, resulting in an extraordinary loss of $1,415,000.
 
     In order to facilitate the financing of the Gannett Outdoor Acquisition,
the Company purchased, pursuant to a tender offer (the "Debt Tender Offer"), all
but $15,000 aggregate principal amount of its outstanding 10.75% Senior Notes
due 2003 (the "10 3/4% Senior Notes"). The aggregate consideration paid by the
Company in the Debt Tender Offer of $1,116.25 per $1,000 principal amount of
10 3/4% Senior Notes, plus expenses associated therewith, resulted in an
extraordinary loss from debt extinguishment of $13,542,000.
 
     In connection with the Gannett Outdoor Acquisition, the Company entered
into long-term bridge financing commitments for the Bridge Loan and redeemable
preferred stock. Such commitment fees and bridge loan issuance costs aggregated
$8,949,000. The commitment on the redeemable preferred stock was canceled at the
date of the Gannett Outdoor Acquisition and the Bridge Loan was repaid with the
net proceeds of the offering of the 1996 Notes resulting in an extraordinary
loss of $8,856,000.
 
     In connection with the 3M Media Acquisition, the Company entered into a
bridge loan financing commitment. Commitment fees aggregated $11,288,000. The
bridge loan financing commitment was
 
                                       32
<PAGE>   35
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
cancelled in June 1997 after the Company completed the 1997 Notes Offering. No
amounts were borrowed under the Bridge Loan.
 
7. FINANCIAL INSTRUMENTS
 
     The carrying values of cash and cash equivalents, receivables, accounts
payable and accrued expenses approximate fair values due to the short-term
maturities of these instruments. The fair value of the 1996 Notes and 1997 Notes
were approximately $260,937,500 and $533,750,000, respectively at December 31,
1997. The fair value of the notes was determined based upon quotations from an
investment banker. The carrying amount of variable rate long-term debt
instruments is estimated to approximate fair values as the underlying agreements
have been recently negotiated and rates are tied to short-term indices.
 
8. OTHER EQUITY MATTERS
 
     At December 31, 1995, the Company's redeemable preferred stock totaled
$13,649,000. During 1996, in connection with the IPO, the Company redeemed all
of its outstanding preferred stock for approximately $16,369,000.
 
     In 1990, the Company issued common stock in connection with the financing
of an acquisition under which the Company was required to redeem the common
stock at a redemption price based upon the appraised value of the common stock
as of the redemption date. Because this common stock was subject to redemption
at the option of the holder, the Company accreted the stock to its estimated
appraised value over the redemption period based upon annual estimates of value
determined as a multiple of cash flow. Accretion was calculated on a
straight-line basis and was charged directly to stockholders' deficit. At the
date of the IPO, the common stock was sold by the holders and the related put
options were terminated. Accordingly, amounts aggregating $3,868,000 were
credited to paid-in capital.
 
9. STOCK OPTIONS
 
     The following is a summary of changes in outstanding options:
 
<TABLE>
<CAPTION>
                                                         NUMBER OF         EXERCISE
                                                           SHARES           PRICE
                                                         ----------    ----------------
<S>                                                      <C>           <C>
Outstanding at December 31, 1995.......................  10,071,459     $0.00 to $0.37
Granted................................................   4,646,909         $2.96
Cancelled or expired...................................          --           --
Exercised..............................................    (337,500)        $0.37
                                                         ----------
Outstanding at December 31, 1996.......................  14,380,868     $0.00 to $2.96
                                                         ----------
Granted................................................     116,625    $13.33 to $16.67
Cancelled or expired...................................      (9,493)   $2.96 to $13.33
Exercised..............................................    (398,197)    $0.37 to $2.96
                                                         ----------
Outstanding at December 31, 1997.......................  14,089,803    $0.00 to $16.67
                                                         ----------
Exercisable at December 31, 1997.......................  10,362,864    $0.02 to $14.72
                                                         ==========
</TABLE>
 
                                       33
<PAGE>   36
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table summarizes information concerning currently outstanding
and exercisable options:
 
<TABLE>
<CAPTION>
                                 OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE
                  -------------------------------------------------   ------------------------------
                                WEIGHTED AVERAGE
   RANGE OF         NUMBER         REMAINING       WEIGHTED AVERAGE     NUMBER      WEIGHTED AVERAGE
EXERCISE PRICES   OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
---------------   -----------   ----------------   ----------------   -----------   ----------------
<S>               <C>           <C>                <C>                <C>           <C>
        --           558,894(1)          N/A                --                --             --
    $ 0.02         7,795,589(2)          N/A            $ 0.02         7,795,589         $ 0.02
    $ 0.37         1,544,622(2)          N/A            $ 0.37         1,544,622         $ 0.37
    $ 2.96         4,078,572               9            $ 2.96         1,012,527         $ 2.96
    $13.33            99,000              10            $13.33                --         $13.33
    $14.72            10,126              10            $14.72            10,126         $14.72
    $16.67             3,000              10            $16.67                --         $16.67
                  ----------                                          ----------
                  14,089,803                                          10,362,864
                  ==========                                          ==========
</TABLE>
 
Notes:
 
     (1) These options have no exercise price, have no expiration date and are
         exercisable only upon termination.
 
     (2) These options are fully exercisable and have no expiration date.
 
     Had compensation cost for the Company's stock option plan been determined
based upon the fair value at the grant date for awards under this plan
consistent with the methodology prescribed in SFAS No. 123, the Company's net
income (loss) and basic and diluted income (loss) per share for the years ended
December 31, 1996 and 1997 would have been as follows:
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                                ----------------------
                                                                  1996         1997
                                                                ---------    ---------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                             <C>          <C>
Net income (loss) attributable to common stockholders -- as
  reported..................................................     $(6,905)     $15,438
Net income (loss) attributable to common stockholders -- pro
  forma.....................................................     $(8,271)     $15,302
Basic income (loss) per share -- as reported................     $  (.10)     $   .14
Basic income (loss) per share -- pro forma..................     $  (.12)     $   .14
Diluted income (loss) per share -- as reported..............        (.09)         .13
Diluted income (loss) per share -- pro forma................        (.10)         .12
ASSUMPTIONS:
Expected dividend yield.....................................           0%           0%
Expected stock price volatility.............................        62.0%        51.7%
Risk-free interest rate.....................................         6.0%         5.7%
Forfeiture rate.............................................           0%           0%
Average expected life.......................................     3 years      3 years
</TABLE>
 
10. BENEFIT PLANS
 
     The Company established an Incentive Plan (the "Plan") covering certain
managers and key employees. Incentive Awards ("Awards") were made under the Plan
in the form of shares of phantom stock based on the individual's performance.
Awards were valued each year based upon the estimated value of the Company. The
awards are vested at the date of grant and any increases in value vested over a
four year period. For the years ended December 31, 1995, 1996 and 1997, the
Company charged earnings for compensation expense of $304,000, $159,000 and
$169,000, respectively. In connection with the IPO, effective January 1, 1996,
the
 
                                       34
<PAGE>   37
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Company ceased allocating amounts to the accounts maintained under the Incentive
Plan. The Company offered to each current employee who is a participant in the
Incentive Plan the alternative of having their account settled in cash, in
shares of the common stock of the Company, or both, with actual distributions of
cash or common stock subject to both vesting requirements and terms and
conditions similar to those under which distributions would have been made under
the Incentive Plan. To the extent participants elected to settle their accounts
in common stock, the Company issued (subject to the vesting requirements and
distribution terms and conditions) to such participants options to purchase
common stock at the initial public offering price.
 
     The Company has a 401(k) savings plan under which it has the discretion of
making contributions as a percentage of employee contributions. For the years
ended December 31, 1995, 1996 and 1997, the Company's contributions to the
401(k) plan were $56,000, $63,000 and $75,700, respectively.
 
11. INCOME TAXES
 
     The provision (benefit) for income taxes is comprised of the following for
the years ended December 31,
 
<TABLE>
<CAPTION>
                                                           1995     1996       1997
                                                           ----    -------    -------
                                                             (DOLLARS IN THOUSANDS)
<S>                                                        <C>     <C>        <C>
Current:
  Federal................................................  $ 50    $   108    $   483
  State -- including franchise taxes.....................   177        182        384
  Foreign................................................    --         --      4,084
                                                           ----    -------    -------
Total current............................................   227        290      4,951
Deferred.................................................    91      9,910     13,534
                                                           ----    -------    -------
Total income tax provisions..............................  $318    $10,200    $18,485
                                                           ====    =======    =======
</TABLE>
 
     The Company has federal net operating loss carryforwards of approximately
$47,066,000 as of December 31, 1997. These net operating loss carryforwards
expire as follows: $1,131,000 (2003), $3,494,000 (2004), $4,308,000 (2005),
$4,104,000 (2006), $1,193,000 (2007), $3,243,000 (2008), $58,000 (2009), $7,000
(2010), $22,220,000 (2011) and $7,308,000 (2017).
 
     Although realization is not assured, the Company believes, based on
operating results in 1997, and its expectations for the future, that taxable
income of the Company will more likely than not be sufficient to utilize all of
the $47,066,000 net operating loss carryforwards prior to their ultimate
expiration in the year 2017. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced.
 
                                       35
<PAGE>   38
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Significant components of the Company's net deferred tax asset (liability)
as of December 31 are as follows:
 
<TABLE>
<CAPTION>
                                                     1996                   1997
                                              -------------------    -------------------
                                                           NON-                   NON-
                                              CURRENT    CURRENT     CURRENT    CURRENT
                                              -------    --------    -------    --------
                                                        (DOLLARS IN THOUSANDS)
<S>                                           <C>        <C>         <C>        <C>
Deferred tax assets:
  Financial statement expenses not currently
     deductible for income tax purposes.....  $1,637     $    435    $5,914     $    140
  Tax loss and other credit carryforwards...      --       13,059        --       10,716
Deferred tax liabilities:
  Excess of tax over book depreciation......      --      (15,777)       --      (26,425)
  Difference in book/tax basis of
     goodwill...............................      --           --        --       (4,568)
                                              ------     --------    ------     --------
          Total net asset (liability).......  $1,637     $ (2,283)   $5,914     $(20,137)
                                              ======     ========    ======     ========
</TABLE>
 
     The following is a reconciliation of the reported effective income tax
rates to the statutory rates:
 
<TABLE>
<CAPTION>
                                                               1995   1996   1997
                                                               ----   ----   ----
<S>                                                            <C>    <C>    <C>
Statutory rate..............................................    34%    35%    35%
Impact of adjustment to valuation allowance.................   (34)    --     --
State income taxes, franchise tax...........................     7      4      4
Other.......................................................     3      3      6
                                                               ---     --     --
Reported rate...............................................    10%    42%    45%
                                                               ===     ==     ==
</TABLE>
 
12. COMMITMENTS AND OTHER
 
LEASES
 
     The Company leases land and equipment under operating leases with various
terms expiring at various dates. Certain of the land leases provide for periodic
rental increases. At December 31, 1997, minimum annual rentals under all
operating leases for the next five years are as follows:
 
<TABLE>
<CAPTION>
                                                              (DOLLARS IN THOUSANDS)
                                                              ----------------------
<S>                                                           <C>
1998........................................................         $106,585
1999........................................................           68,775
2000........................................................           48,292
2001........................................................           38,712
2002........................................................           27,622
</TABLE>
 
     Operating lease expense was $13,533,000, $29,790,000 and $90,196,391 for
1995, 1996 and 1997, respectively.
 
                                       36
<PAGE>   39
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
TRANSIT AGREEMENTS
 
     The Company has signed agreements which provide an exclusive right to sell
advertising space in various airports, transit shelters and transit systems.
Under the various agreements, the Company must make minimum guarantee payments
for the next five years as follows:
 
<TABLE>
<CAPTION>
                                                               (DOLLARS IN THOUSANDS)
                                                               ----------------------
<S>                                                            <C>
1998........................................................          $10,530
1999........................................................            2,721
2000........................................................            2,424
2001........................................................            2,050
2002........................................................            1,943
</TABLE>
 
LITIGATION
 
     The Company is party either as plaintiff or defendant to various actions,
proceedings and pending claims, in the ordinary course of business. Litigation
is subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims referred to above could be decided against the
Company. Although the ultimate amount for which the Company or its subsidiaries
may be held liable with respect to matters where the Company is defendant is not
ascertainable, the Company believes that any resulting liability should not
materially affect the Company's financial position or results of operations.
 
13. FOREIGN OPERATIONS
 
     The assets and operations of the Company's Canadian subsidiary are included
in these financial statements subsequent to August 22, 1996 and are as follows:
 
<TABLE>
<CAPTION>
                                                                1996         1997
                                                              --------    ----------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>         <C>
Net revenues:
  United States.............................................  $150,970    $  410,008
  Canadian..................................................    22,146        60,996
                                                              --------    ----------
Total net revenues..........................................  $173,116    $  471,004
                                                              ========    ==========
Income from operations:
  United States.............................................  $ 52,150    $  117,070
  Canadian..................................................     4,875        12,869
                                                              --------    ----------
Total income from operations................................  $ 57,025    $  129,939
                                                              ========    ==========
Assets:
  United States.............................................  $800,184    $2,083,630
  Canadian..................................................   133,271       145,527
                                                              --------    ----------
Total assets................................................  $933,455    $2,229,157
                                                              ========    ==========
</TABLE>
 
                                       37
<PAGE>   40
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
14. BASIC AND DILUTED INCOME (LOSS) PER SHARE
 
     The weighted average number of shares outstanding for 1995, 1996 and 1997
is as follows:
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                             ------------------------------------------
                                                1995           1996            1997
                                             -----------    -----------    ------------
<S>                                          <C>            <C>            <C>
Basic weighted average number of shares
  outstanding at end of period.............   47,466,853     67,672,701     109,096,011
Dilutive effect of stock options(1)........    9,737,323     11,669,805      13,336,856
                                             -----------    -----------    ------------
Diluted weighted average number of shares
  outstanding..............................   57,204,176     79,342,506     122,432,867
                                             ===========    ===========    ============
</TABLE>
 
---------------
(1) Stock options were included in 1996 because the Company had net income
    before the extraordinary loss.
 
15. QUARTERLY DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                  QUARTER
                                         ---------------------------------------------------------
                                           FIRST          SECOND          THIRD          FOURTH
                                         ----------     ----------     -----------     -----------
                                          (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                      <C>            <C>            <C>             <C>
1996:
  Net revenues.........................   $16,945        $19,582        $ 41,769        $ 94,820
  Operating income.....................     5,447          7,457          18,153          25,797
  Net income (loss)....................       777          1,364          (7,220)          1,809
  Basic net income (loss) per share....       .00           (.01)           (.11)            .02
  Diluted net income (loss) per
     share.............................       .00           (.01)           (.10)            .02
 
1997:
  Net revenues.........................   $80,080        $99,564        $131,991        $159,369
  Operating income.....................    17,113         26,967          37,528          48,331
  Net (loss) income....................       691           (413)          7,743           7,417
  Basic net income (loss) per share....       .01           (.00)            .06             .07
  Diluted net income (loss) per
     share.............................       .01           (.00)            .06             .06
</TABLE>
 
     The third and fourth quarters of 1996 include the operating results from
the Gannett Outdoor Acquisition and an extraordinary loss from the early
extinguishment of debt of approximately $12.4 million and $4.5 million,
respectively, net of tax.
 
     The second quarter of 1997 includes an extraordinary loss from the early
extinguishment of debt of approximately $6.8 million, net of tax. The third and
fourth quarters of 1997 include the operating results from the 3M Media
Acquisition.
 
16. CONSOLIDATING FINANCIAL STATEMENTS
 
     The following represents consolidating condensed financial statements of
Outdoor Systems, Inc. and its subsidiaries (the "Subsidiaries") which are
presented because certain of the Subsidiaries have guaranteed the 1996 Notes and
the 1997 Notes. The Subsidiaries included in the consolidating condensed
financial statements presented below are all wholly-owned and constitute all of
the Company's direct and indirect subsidiaries. The 1996 Notes and 1997 Notes
are guaranteed by all of the Company's domestic subsidiaries (the "Guarantors").
The guarantees of the Guarantors of the 1996 Notes and 1997 Notes are full,
unconditional, and joint and several. The only subsidiary which has not
guaranteed the 1996 Notes and 1997 Notes (the "Non-Guarantor") is Mediacom,
Inc., located in Canada. Separate financial statements of the
 
                                       38
<PAGE>   41
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Guarantors are not presented because management has determined that they would
not be material to investors. There are no significant restrictions on the
Company's ability to obtain funds from the Guarantors. The Company did not have
any foreign subsidiaries prior to 1996.
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATING CONDENSED BALANCE SHEET
                               DECEMBER 31, 1996
 
<TABLE>
<CAPTION>
                                           THE       SUBSIDIARY                     ELIMINATION
                                         COMPANY     GUARANTORS    NON-GUARANTOR      ENTRIES     CONSOLIDATED
                                         --------   ------------   --------------   -----------   ------------
<S>                                      <C>        <C>            <C>              <C>           <C>
CURRENT ASSETS:
  Cash and cash equivalents............  $  9,566      $   24         $  2,297       $     --       $ 11,887
  Accounts receivable -- net...........    45,775         185           11,015             --         56,975
  Prepaid land leases..................     7,521          --            3,417             --         10,938
  Other current assets.................     9,195         114            6,428             --         15,737
  Deferred income taxes................     1,637          --               --             --          1,637
                                         --------      ------         --------       --------       --------
          Total current assets.........    73,694         323           23,157             --         97,174
PROPERTY AND EQUIPMENT -- Net..........   622,675       9,355          110,114             --        742,144
OTHER ASSETS...........................    10,116          39               --             --         10,155
DEFERRED FINANCING COSTS...............    24,151          --               --             --         24,151
GOODWILL -- Net........................    59,831          --               --             --         59,831
INVESTMENT IN SUBSIDIARY...............    46,118          --               --        (46,118)            --
                                         --------      ------         --------       --------       --------
          TOTAL........................  $836,585      $9,717         $133,271       $(46,118)      $933,455
                                         ========      ======         ========       ========       ========
CURRENT LIABILITIES:
  Accounts payable.....................  $  6,686      $   16         $  1,621       $     --       $  8,323
  Accrued interest.....................     6,806          --              250             --          7,056
  Accrued expenses and other
     liabilities.......................    13,094         514            4,045             --         17,653
  Current maturities of long-term
     debt..............................    28,000          --               --             --         28,000
                                         --------      ------         --------       --------       --------
          Total current liabilities....    54,586         530            5,916             --         61,032
LONG-TERM DEBT.........................   496,015          46           82,348             --        578,409
OTHER LONG-TERM OBLIGATIONS............     2,349       1,203               --             --          3,552
DEFERRED INCOMES TAXES.................    (4,544)         --            6,827             --          2,283
                                         --------      ------         --------       --------       --------
          Total liabilities............   548,406       1,779           95,091             --        645,276
                                         --------      ------         --------       --------       --------
COMMON STOCKHOLDERS' EQUITY............   288,179       7,938           38,180        (46,118)       288,179
                                         --------      ------         --------       --------       --------
          Total........................  $836,585      $9,717         $133,271       $(46,118)      $933,455
                                         ========      ======         ========       ========       ========
</TABLE>
 
                                       39
<PAGE>   42
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1996
 
<TABLE>
<CAPTION>
                                              THE       SUBSIDIARY       NON-      ELIMINATION
                                            COMPANY     GUARANTORS    GUARANTOR      ENTRIES     CONSOLIDATED
                                            --------   ------------   ----------   -----------   ------------
<S>                                         <C>        <C>            <C>          <C>           <C>
REVENUES:
  Outdoor advertising.....................  $172,797       $744        $21,492       $  (850)      $194,183
  Less: Lease agency commissions..........    24,322         27          2,787            --         27,136
                                            --------       ----        -------       -------       --------
          Total...........................   148,475        717         18,705          (850)       167,047
  Lease, printing and other revenues......     1,778         --          4,291            --          6,069
                                            --------       ----        -------       -------       --------
          Net revenues....................   150,253        717         22,996          (850)       173,116
                                            --------       ----        -------       -------       --------
OPERATING EXPENSES:
  Direct advertising......................    74,015        278         14,150          (850)        87,593
  General and administrative..............    11,768         71          1,619            --         13,458
  Depreciation and amortization...........    19,894        138          2,523            --         22,555
                                            --------       ----        -------       -------       --------
          Total operating expenses........   105,677        487         18,292          (850)       123,606
                                            --------       ----        -------       -------       --------
GAIN ON ATLANTA AND DENVER DISPOSITIONS...     7,344         --             --            --          7,344
                                            --------       ----        -------       -------       --------
OPERATING INCOME..........................    51,920        230          4,704            --         56,854
OTHER:
  Foreign currency translation (gain)
     loss.................................        --         --           (171)           --           (171)
  Interest expense........................    31,240          2          1,247            --         32,489
                                            --------       ----        -------       -------       --------
INCOME BEFORE INCOME TAXES AND
  EXTRAORDINARY LOSS......................    20,680        228          3,628            --         24,536
INCOME TAXES..............................     8,273         91          1,836            --         10,200
                                            --------       ----        -------       -------       --------
INCOME BEFORE EXTRAORDINARY LOSS..........    12,407        137          1,792            --         14,336
EXTRAORDINARY LOSS........................   (17,780)        --             --            --        (17,780)
                                            --------       ----        -------       -------       --------
(LOSS) INCOME BEFORE INCOME FROM
  SUBSIDIARY..............................    (5,373)       137          1,792            --         (3,444)
INCOME FROM SUBSIDIARY....................     1,929         --             --        (1,929)            --
                                            --------       ----        -------       -------       --------
NET INCOME (LOSS).........................    (3,444)       137          1,792        (1,929)        (3,444)
LESS STOCK DIVIDENDS, ACCRETIONS AND
  DISCOUNT ON REDEMPTIONS.................     3,461         --             --            --          3,461
                                            --------       ----        -------       -------       --------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
  STOCKHOLDERS............................  $ (6,905)      $137        $ 1,792       $(1,929)      $ (6,905)
                                            ========       ====        =======       =======       ========
</TABLE>
 
                                       40
<PAGE>   43
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATING CONDENSED BALANCE SHEET
                               DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                                     THE        SUBSIDIARY                     ELIMINATION
                                   COMPANY      GUARANTORS    NON-GUARANTOR      ENTRIES     CONSOLIDATED
                                  ----------   ------------   --------------   -----------   ------------
<S>                               <C>          <C>            <C>              <C>           <C>
CURRENT ASSETS
  Cash and cash equivalents.....  $    2,556     $ 1,234         $  2,107                     $    5,897
  Accounts receivable -- net....     108,735         953           10,057                        119,745
  Prepaid land leases...........      25,518                        3,141                         28,659
  Other current assets..........       9,540          84            7,062                         16,686
  Deferred income taxes.........       5,914                                                       5,914
                                  ----------     -------         --------       --------      ----------
          Total current
            assets..............     152,263       2,271           22,367                        176,901
PROPERTY AND EQUIPMENT -- Net...   1,460,397      14,454          123,160                      1,598,011
OTHER ASSETS....................      13,551          14                                          13,565
DEFERRED FINANCING COSTS........      40,520                                                      40,520
GOODWILL -- Net.................     405,695      (5,535)                                        400,160
INVESTMENT IN SUBSIDIARY........      49,390                                    $(49,390)
                                  ----------     -------         --------       --------      ----------
          TOTAL.................  $2,121,816     $11,204         $145,527       $(49,390)     $2,229,157
                                  ==========     =======         ========       ========      ==========
CURRENT LIABILITIES
  Accounts payable..............  $    8,501     $   148         $  2,805                     $   11,454
  Accrued interest..............       8,551                          389                          8,940
  Accrued expenses and other
     liabilities................      45,320         495           (1,137)                        44,678
  Current maturities of
     long-term debt.............      49,600                        1,000                         50,600
                                  ----------     -------         --------       --------      ----------
          Total current
            liabilities.........     111,972         643            3,057       $     --         115,672
LONG-TERM DEBT: ................   1,297,497          28           96,034                      1,393,559
OTHER LONG-TERM OBLIGATIONS.....       4,318                                                       4,318
DEFERRED INCOME TAXES...........      12,558       1,203            6,376                         20,137
                                  ----------     -------         --------       --------      ----------
          Total liabilities.....   1,426,345       1,874          105,467             --       1,533,686
                                  ----------     -------         --------       --------      ----------
COMMON STOCKHOLDERS' EQUITY: ...     695,471       9,330           40,060        (49,390)        695,471
                                  ----------     -------         --------       --------      ----------
          TOTAL.................  $2,121,816     $11,204         $145,527       $(49,390)     $2,229,157
                                  ==========     =======         ========       ========      ==========
</TABLE>
 
                                       41
<PAGE>   44
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
                CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
 
                          YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                                            THE      SUBSIDIARY     NON-      ELIMINATION
                                          COMPANY    GUARANTORS   GUARANTOR     ENTRIES     CONSOLIDATED
                                          --------   ----------   ---------   -----------   ------------
<S>                                       <C>        <C>          <C>         <C>           <C>
REVENUES:
  Outdoor advertising...................  $466,497     $3,294      $62,060      $(4,304)      $527,547
  Less: Lease agency commissions........    63,392        295        8,111                      71,798
                                          --------     ------      -------      -------       --------
     Total..............................   403,105      2,999       53,949       (4,304)       455,749
  Lease, printing and other revenues....     3,904                  11,351                      15,255
                                          --------     ------      -------      -------       --------
       Net revenues.....................   407,009      2,999       65,300       (4,304)       471,004
                                          --------     ------      -------      -------       --------
OPERATING EXPENSES:
  Direct advertising....................   200,335      1,336       39,808       (4,304)       237,175
  General and administrative............    23,904        159        4,500                      28,563
  Depreciation and amortization.........    65,717      1,487        8,123                      75,327
                                          --------     ------      -------      -------       --------
          Total operating expenses......   289,956      2,982       52,431       (4,304)       341,065
                                          --------     ------      -------      -------       --------
OPERATING INCOME........................   117,053         17       12,869           --        129,939
OTHER:
  Foreign currency translation (gain)
     loss...............................                             2,093                       2,093
  Interest Expense......................    80,578          2        6,570                      87,150
                                          --------     ------      -------      -------       --------
INCOME BEFORE INCOME TAXES AND
  EXTRAORDINARY LOSS....................    36,475         15        4,206           --         40,696
INCOME TAXES............................    14,776                   3,709                      18,485
                                          --------     ------      -------      -------       --------
INCOME BEFORE EXTRAORDINARY LOSS........    21,699         15          497           --         22,211
EXTRAORDINARY LOSS......................    (6,773)                                             (6,773)
                                          --------     ------      -------      -------       --------
NET INCOME (LOSS) BEFORE INCOME FROM
  SUBSIDIARY............................    14,926         15          497           --         15,438
INCOME FROM SUBSIDIARY..................       512                                 (512)            --
                                          --------     ------      -------      -------       --------
NET INCOME (LOSS).......................  $ 15,438     $   15      $   497      $  (512)      $ 15,438
                                          ========     ======      =======      =======       ========
</TABLE>
 
                                       42
<PAGE>   45
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
     None.
 
                                   PART III.
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     (a) The information regarding the directors of the Company is incorporated
         herein by reference to the information set forth in the table captioned
         "Director and Director Nominee Information" and under "Election of
         Directors" in the definitive proxy statement of the Registrant for the
         Registrant's annual meeting of stockholders to be held on May 21, 1998.
 
     (b) Pursuant to Form 10-K General Instruction G(3), the information
         regarding executive officers of the Company has been included in Part I
         of this Report under the caption "Executive Officers of the Company."
 
ITEM 11.  EXECUTIVE COMPENSATION
 
     The information required by this Item 11 is incorporated herein by
reference to the information set forth under the captions "Executive
Compensation" and "Compensation of Directors" in the definitive proxy statement
of the Registrant for the Registrant's annual meeting of stockholders to be held
on May 21, 1998.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information required by this Item 12 is incorporated herein by
reference to the information set forth in the table captioned "Beneficial
Ownership of Common Stock" in the definitive proxy statement of the Registrant
for the Registrant's annual meeting of stockholders to be held on May 21, 1998.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by this Item 13 is incorporated herein by
reference to the information set forth in the table captioned "Certain
Transactions" in the definitive proxy statement of the Registrant for the
Registrant's annual meeting of stockholders to be held on May 21, 1998.
 
                                    PART IV.
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (a) The following documents are incorporated by reference in or are filed
as a part of this report:
 
        1. Financial statements (included under Item 8).
 
        2. Financial statement schedules.
           S-1 Independent Auditors' Report on Schedule
           S-2 Schedule II -- Valuation and Qualifying Accounts
 
        3. Exhibits.
 
                                       43
<PAGE>   46
 
     The following exhibits are incorporated by reference in or filed as a part
of this report:
 
     (b) Reports on Form 8-K.
 
         None
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
 3.1       --  Fourth Amended and Restated Certificate of Incorporation
               (filed as Exhibit 99.2 to the Registrant's Current Report on
               Form 8-K filed on June 4, 1997 (File No. 0-28256) and
               incorporated herein by reference).
 3.2       --  Amended and Restated Bylaws (filed as Exhibit 3.2 to the
               Registrant's Amendment No. 2 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
 4.1       --  Specimen Common Stock Certificate of the Registrant (filed
               as Exhibit 4.1 to the Registrant's Amendment No. 2 to Form
               S-1 Registration Statement (Reg. No. 333-1582) and
               incorporated herein by reference).
 4.2       --  Indenture (filed as Exhibit 4.2 to the Registrant's Form S-1
               Registration Statement No. 33-64638 and incorporated herein
               by reference).
 4.3       --  Indenture dated October 15, 1996, (the "1996 Indenture"), by
               and among the Registrant, its United States subsidiaries and
               The Bank of New York, as trustee (filed as Exhibit 99.1 to
               the Registrant's Current Report on Form 8-K dated October 9,
               1996 and incorporated herein by reference).
 4.4       --  Indenture dated as of June 23, 1997 (the "1997 Indenture")
               among the Registrant, its United States subsidiaries and The
               Bank of New York, as trustee, relating to the 8 7/8% Senior
               Subordinated Notes due 2007 (filed as Exhibit 4.2 to the
               Registrant's Registration Statement on Form S-4 (Reg. No.
               333-30957) and incorporated herein by reference).
 4.5       --  First Supplemental Indenture to the 1996 Indenture, dated as
               of June 23, 1997, by and among the Registrant, the
               Guarantors named therein, the Additional Guarantors named
               therein and The Bank of New York, as trustee, relating to
               the 9 3/8% Senior Subordinated Notes due 2006 (filed as
               Exhibit 2.3 to the Registrant's Registration Statement on
               Form 8-A (File No. 001-13275) and incorporated herein by
               reference).
 4.6       --  Second Supplemental Indenture to the 1996 Indenture, dated
               as of September 30, 1997, by and among the Registrant, the
               Guarantors named therein, the Additional Guarantors named
               therein and The Bank of New York, as trustee, relating to
               the 9 3/8% Senior Subordinated Notes due 2006 (filed as
               Exhibit 2.4 to the Registrant's Registration Statement on
               Form 8-A (File No. 001-13275) and incorporated herein by
               reference).
 4.7       --  Third Supplemental Indenture to the 1996 Indenture dated
               January 22, 1998 among the Registrant, the Guarantors named
               therein, the Additional Guarantor named therein and The Bank
               of New York, as trustee, relating to the 9 3/8% Senior
               Subordinated Notes due 2006.
 4.8       --  First Supplemental Indenture to the 1997 Indenture, dated as
               of September 30, 1997, by and among the Registrant, the
               Guarantors named therein, the Additional Guarantors named
               therein and The Bank of New York, as trustee, relating to
               the 8 7/8% Senior Subordinated Notes due 2007 (filed as
               Exhibit 2.7 to the Registrant's Registration Statement on
               Form 8-A (File No. 001-13275) and incorporated herein by
               reference).
 4.9       --  Second Supplemental Indenture to the 1997 Indenture dated
               January 22, 1998 among the Registrant, the Guarantors named
               therein, the Additional Guarantor named therein and The Bank
               of New York, as trustee, relating to the 8 7/8% Senior
               Subordinated Notes due 2007.
 9.1       --  Voting Agreement dated May 4, 1990, effective April 2, 1989,
               between William S. Levine and Rubin Sabin (filed as Exhibit
               9.1 to the Registrant's Form S-1 Registration Statement No.
               33-64638 and incorporated herein by reference).
 9.2       --  Irrevocable Proxy dated as of April 2, 1989, between William
               S. Levine and Rubin Sabin (filed as Exhibit 9.2 to the
               Registrant's Form S-1 Registration Statement No. 33-64638
               and incorporated herein by reference).
</TABLE>
 
                                       44
<PAGE>   47
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
 9.3       --  Amended and Restated Voting Agreement dated as of August 17,
               1993, entered into among the Registrant, William S. Levine
               and Gregory Riggle (filed as Exhibit 9.3 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
 9.4       --  Stockholders' Agreement dated as of April 15, 1996, between
               William S. Levine, Arte Moreno and MK-Link Investments
               Limited Partnership (filed as Exhibit 9.4 to the
               Registrant's Amendment No. 2 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
10.1       --  Fourth Amended and Restated Credit Agreement, dated as of
               October 22, 1996, entered into among the Registrant, the
               several lenders from time to time parties thereto and CIBC
               Inc., as agent (filed as Exhibit 10.1 to the Registrant's
               Quarterly Report on Form 10-Q for the period ended September
               30, 1996 and incorporated herein by reference).
10.2       --  Amended and Restated Securities Purchase Agreement dated as
               of August 17, 1993, entered into among the Registrant, TCW
               Special Placements Fund II and TCW Capital, as Investment
               Manager pursuant to an Investment Agreement dated as of June
               30, 1987 (filed as Exhibit 10.2 to the Registrant's Form S-1
               Registration Statement No. 33-64638 and incorporated herein
               by reference).
10.3       --  Junior Subordinated Exchange Note dated effective as of
               January 1, 1992, issued by the Registrant to Rubin Sabin
               (filed as Exhibit 10.3 to the Registrant's Form S-1
               Registration Statement No. 33-64638 and incorporated herein
               by reference).
10.4       --  Intercreditor and Subordination Agreement dated as of May 4,
               1990, among the Registrant, OS Advertising Company of Texas,
               Inc., Outdoor Today, Inc., National Westminster Bank USA, as
               Agent, Rubin Sabin and Elaine Sabin (filed as Exhibit 10.4
               to the Registrant's Form S-1 Registration Statement No.
               33-64638 and incorporated herein by reference).
10.5       --  Amended and Restated Intercreditor and Subordination
               Agreement dated as of August 17, 1993, entered into between
               the Registrant, Gregory Riggle, CIBC Inc. and United States
               Trust Company of New York, as trustee (filed as Exhibit 10.5
               to the Registrant's Form S-1 Registration Statement No.
               33-64638 and incorporated herein by reference).
10.6       --  Administrative Services Agreement dated as of June 1, 1993,
               between the Registrant and Camelback Services, Inc. (filed
               as Exhibit 10.6 to the Registrant's Form S-1 Registration
               Statement No. 33-64638 and incorporated herein by
               reference).
10.7       --  Services Agreement dated as of May 1, 1993, between the
               Registrant, Williams Manufacturing, Inc. and J & L
               Industries, Inc. as amended by the First Amendment thereto
               dated April 15, 1996, to be effective as of July 1, 1995
               (filed as Exhibit 10.7 to the Registrant's Amendment No. 2
               to Form S-1 Registration Statement No. 333-1582 and
               incorporated herein by reference).
10.8       --  Amended and Restated Incentive Plan dated effective as of
               January 1, 1988, adopted by the Registrant as amended to
               date (filed as Exhibit 10.8 to the Registrant's Amendment
               No. 2 to Form S-1 Registration Statement No. 333-1582 and
               incorporated herein by reference).
10.9       --  Assets Purchase Agreement dated March 15, 1991, among the
               Registrant, Naegele Outdoor Advertising, Inc., OS
               Advertising Company of Georgia, Inc., and Morris
               Communications Corporation, as amended by the First
               Amendment to Assets Purchase Agreement dated as of December
               23, 1991, among the Registrant, Naegele Outdoor Advertising,
               Inc., OS Advertising Company of Georgia, Inc., Morris
               Communications Corporation, and OS Advertising Company of
               Kentucky, Inc. (filed as Exhibit 10.17 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
10.10      --  Agreement and grant of Option dated as of April 3, 1989,
               between the Registrant and Arthur Moreno, as amended by the
               First Amendment to Agreement and Grant of Option dated as of
               January 1, 1991 (filed as Exhibit 10.23 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
10.10.1    --  Letter Agreement between Registrant and Arte Moreno
               regarding Agreement and Grant of Option dated as of April 3,
               1989, and First Amendment to Agreement and Grant of Option
               dated as of January 1, 1991 (filed as Exhibit 10.10.1 to the
               Registrant's Amendment No. 3 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
</TABLE>
 
                                       45
<PAGE>   48
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.11      --  Option Agreement dated as of January 1, 1991, between the
               Registrant and Wally Kelly (filed as Exhibit 10.24 to the
               Registrant's Form S-1 Registration Statement No. 33-64638
               and incorporated herein by reference).
10.12      --  Senior Note Intercreditor Agreement dated as of August 17,
               1993, entered into among TCW Special Placements Fund II, TCW
               Capital, acting solely as investment manager pursuant to an
               Investment Management Agreement, the Registrant and United
               States Trust Company of New York as trustee (filed as
               Exhibit 10.26 to the Registrant's Form S-1 Registration
               Statement No. 33-64638 and incorporated herein by
               reference).
10.13      --  Bank Intercreditor Agreement dated as of August 17, 1993,
               entered into among TCW Special Placements Fund II, TCW
               Capital acting solely as investment manager pursuant to an
               Investment Management Agreement, the Registrant and CIBC
               Inc. as agent (filed as Exhibit 10.26 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
10.14      --  Option Purchase Agreement among the Registrant and OS
               Advertising Company of Georgia, Inc. and Capitol Outdoor
               Acquisition Co., Inc. and Capitol Outdoor Leasing Co., Inc.,
               dated as of July 27, 1994, as amended by the First Amendment
               to Option Purchase Agreement dated as of December 14, 1994
               (filed as Exhibit 1 to the Registrant's Current Report on
               Form 8-K dated December 19, 1994 and incorporated herein by
               reference).
10.15      --  Asset Purchase Agreement between the Registrant and Eller
               Outdoor Advertising Company of Atlanta, dated November 21,
               1994 (filed as Exhibit 2 to the Registrant's Current Report
               on Form 8-K dated December 19, 1994 and incorporated herein
               by reference).
10.16      --  The Registrant's 1996 Omnibus Plan (filed as Exhibit 10.16
               to the Registrant's Amendment No. 2 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
10.17      --  Form of Incentive Stock Option Grant to be awarded to each
               of Wally C. Kelly and Bill M. Beverage pursuant to the terms
               of the Registrant's 1996 Omnibus Plan (filed as Exhibit
               10.17 to the Registrant's Amendment No. 2 to Form S-1
               Registration Statement No. 333-1582 and incorporated herein
               by reference).
10.18      --  Form of Stock Option Grant to be awarded to each of Arte
               Moreno, Wally C. Kelly and Bill M. Beverage pursuant to the
               terms of the Registrant's 1996 Omnibus Plan (filed as
               Exhibit 10.18 to the Registrant's Amendment No. 2 to Form
               S-1 Registration Statement No. 333-1582 and incorporated
               herein by reference).
10.19      --  Form of Incentive Plan Settlement Participant Election
               Agreement to be entered into by each of Wally C. Kelly and
               Bill M. Beverage pursuant to the conversion of interests in
               the Incentive Plan (filed as Exhibit 10.19 to the
               Registrant's Amendment No. 3 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
10.20      --  Asset Purchase Agreement dated July 9, 1996, by and between
               the Registrant and Gannett Co., Inc., together with the
               Promissory Note and related Guaranty. The Exhibit contains a
               list briefly identifying the contents of Schedules and
               Exhibits, some of which have been omitted. The Registrant
               agrees to furnish supplementally a copy of any omitted
               Schedule or Exhibit to the Commission upon request (filed as
               Exhibit 99.1 to the Registrant's Current Report on Form 8-K
               dated July 10, 1996 and incorporated herein by reference).
10.21      --  Amendment No. 1 to Asset Purchase Agreement among Gannett
               Co., Inc., Combined Communications Corporation, Gannett
               Transit, Inc., Shelter Media Communications, Inc., Gannett
               International Communications, Inc., and the Registrant dated
               as of August 12, 1996 (filed as Exhibit 99.1 to the
               Registrant's Current Report on Form 8-K dated August 27,
               1996 and incorporated herein by reference).
10.22      --  Amendment No. 2 to Asset Purchase Agreement among Gannett
               Co., Inc., Combined Communications Corporation, Gannett
               Transit, Inc., Shelter Media Communications, Inc., Gannett
               International Communications, Inc., and the Registrant dated
               as of August 19, 1996 (filed as Exhibit 99.2 to the
               Registrant's Current Report on Form 8-K dated August 27,
               1996 and incorporated herein by reference).
</TABLE>
 
                                       46
<PAGE>   49
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.23      --  Form of Option by Gannett Outdoor Co. of Texas, Inc., in
               favor of the Registrant together with the form of Asset
               Purchase Agreement by and between the Registrant and Gannett
               Outdoor Co. of Texas, Inc. (filed as Exhibit 99.2 to the
               Registrant's Current Report on Form 8-K dated July 10, 1996
               and incorporated herein by reference).
10.24      --  Senior Subordinated Credit Agreement dated July 9, 1996, by
               and among the Registrant, the guarantors named therein, the
               lenders named therein, and Canadian Imperial Bank of
               Commerce together with the forms of Bridge Note and Term
               Note. The Exhibit contains a list briefly identifying the
               contents of Schedules and Exhibits, some of which have been
               omitted. The Registrant agrees to furnish supplementally a
               copy of any omitted Schedule or Exhibit to the Commission
               upon request (filed as Exhibit 99.4 to the Registrant's
               Current Report on Form 8-K dated July 10, 1996 and
               incorporated herein by reference).
10.25      --  Form of Indenture by and among the Registrant, the
               subsidiary guarantors named therein, and a trustee to be
               selected by the Registrant (filed as Exhibit 99.5 to the
               Registrant's Current Report on Form 8-K dated July 10, 1996
               and incorporated herein by reference).
10.26      --  First Supplemental Indenture dated as of August 22, 1996, by
               and between the Registrant and United States Trust Company
               of New York (filed as Exhibit 99.5 to the Registrant's
               Current Report on Form 8-K dated August 27, 1996 and
               incorporated herein by reference).
10.27      --  Securities Purchase Agreement dated July 9, 1996, by and
               between the Registrant and CIBC WG Argosy Merchant Fund 2,
               L.L.C. The Exhibit contains a list briefly identifying the
               contents of Schedules and Exhibits which have been omitted.
               The Registrant agrees to furnish supplementally a copy of
               any omitted Schedule or Exhibit to the Commission upon
               request (filed as Exhibit 99.6 to the Registrant's Current
               Report on Form 8-K dated July 10, 1996 and incorporated
               herein by reference).
10.28      --  Form of Certificate of Designations of Senior Increasing
               Rate Cumulative Preferred Stock, Series A (filed as Exhibit
               99.7 to the Registrant's Current Report on Form 8-K dated
               July 10, 1996 and incorporated herein by reference).
10.29      --  Form of Warrant Agreement by and between the Registrant and
               a Warrant Agent to be selected by the Registrant (filed as
               Exhibit 99.8 to the Registrant's Current Report on Form 8-K
               dated July 10, 1996 and incorporated herein by reference).
10.30      --  Form of Registration Rights Agreement by and among the
               Registrant, the guarantors names therein, and the holders
               name therein (filed as Exhibit 99.9 to the Registrant's
               Current Report on Form 8-K dated July 10, 1996 and
               incorporated herein by reference).
10.31      --  Form of Common Stock Registration Rights Agreement by and
               between the Registrant and CIBC WG Argosy Merchant Form 2,
               L.L.C. (filed as Exhibit 99.10 to the Registrant's Current
               Report on Form 8-K dated July 10, 1996 and incorporated
               herein by reference).
10.32      --  Underwriting Agreement dated August 19, 1996 by and among
               the Registrant and Alex. Brown & Sons Incorporated, CIBC
               Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette
               Securities Corporation (filed as Exhibit 99.3 to the
               Registrant's Current Report on Form 8-K dated August 27,
               1996 and incorporated herein by reference).
10.33      --  Asset Purchase Agreement between RailCom, Ltd. and the
               Registrant dated May 8, 1996 (filed as Exhibit 2.1 to the
               Registrant's Current Report on Form 8-K dated May 22, 1996
               and incorporated herein by reference).
10.34      --  Purchase and Sales Agreement Between CSX Realty Development
               Corporation, The Three Rivers Railway Company, The Atlantic
               Land and Improvement Company, Winston-Salem Southbound
               Railway Company, Gainesville Midland Railroad Company, and
               Richmond, Fredericksburg and Potomac Railway Company and
               RailCom, Ltd. dated January 23, 1996, as amended March 29,
               1996, and May 21, 1996 (filed as Exhibit 2.2.1 to the
               Registrant's Current Report on Form 8-K dated May 22, 1996
               and incorporated herein by reference).
10.35      --  Amendment to Purchase Agreement, dated March 29, 1996 (filed
               as Exhibit 2.2.2 to the Registrant's Current Report on Form
               8-K dated May 22, 1996 and incorporated herein by
               reference).
</TABLE>
 
                                       47
<PAGE>   50
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.36      --  Second Amendment to Purchase Agreement dated May 21, 1996
               (filed as Exhibit 2.2.3 to the Registrant's Current Report
               on Form 8-K dated May 22, 1996 and incorporated herein by
               reference).
10.37      --  Grant of Easement and Agreement dated May 21, 1996 (filed as
               Exhibit 2.3 to the Registrant's Current Report on Form 8-K
               dated May 22, 1996 and incorporated herein by reference).
10.38      --  Assignment of License Agreements, dated May 21, 1996 (filed
               as Exhibit 2.4 to the Registrant's Current Report on Form
               8-K dated May 22, 1996 and incorporated herein by
               reference).
10.39      --  Assignment and Assumption Agreement dated May 22, 1996
               (filed as Exhibit 2.5 to the Registrant's Current Report on
               Form 8-K dated May 22, 1996 and incorporated herein by
               reference).
10.41      --  Underwriting Agreement dated October 9, 1996 by and among
               the Registrant, its United States subsidiaries, CIBC Wood
               Gundy Securities Corp. and Alex. Brown & Sons Incorporated
               (filed as Exhibit 99.2 to the Registrant's Current Report on
               Form 8-K dated October 9, 1996 and incorporated herein by
               reference).
10.42      --  Agreement of Purchase and Sale dated April 30, 1997 by and
               between the Registrant and Minnesota Mining and
               Manufacturing Company. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.1 to the
               Registrant's Form S-3 Registration Statement (Reg. No. 333-
               26407) and incorporated herein by reference).
10.43      --  Stock Purchase Agreement dated April 11, 1997 by and among
               the Registrant, Van Wagner Communications, Inc., Richard M.
               Schaps and Jason Perline. The Exhibit contains a list
               briefly identifying the contents of Schedules and Exhibits,
               some of which have been omitted. The Registrant agrees to
               furnish supplementally a copy of any omitted Schedule or
               Exhibit to the Commission upon request (filed as Exhibit
               99.2 to the Registrant's Form S-3 Registration Statement
               (Reg. No. 333-26407) and incorporated herein by reference).
10.44      --  Signboard Easements Sale Agreement dated March 21, 1997
               between the Registrant and the Burlington Northern and Santa
               Fe Railway Company. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.3 to the
               Registrant's Form S-3 Registration Statement (Reg. No.
               333-26407) and incorporated herein by reference).
10.45      --  Asset Purchase Agreement dated as of February 24, 1997 by
               and between the Registrant and GRTP, Ltd. The Exhibit
               contains a list briefly identifying the contents of
               Schedules and Exhibits, some of which have been omitted. The
               Registrant agrees to furnish supplementally a copy of any
               omitted Schedule or Exhibit to the Commission upon request
               (filed as Exhibit 99.4 to the Registrant's Form S-3
               Registration Statement (Reg. No. 333-26407) and incorporated
               herein by reference).
10.46      --  Joint Venture Asset Purchase Agreement dated as of February
               28, 1997 by and between the Registrant and Reynolds/Tower
               Outdoor Sign Joint Venture. The Exhibit contains a list
               briefly identifying the contents of Schedules and Exhibits,
               some of which have been omitted. The Registrant agrees to
               furnish supplementally a copy of any omitted Schedule or
               Exhibit to the Commission upon request (filed as Exhibit
               99.5 to the Registrant's Form S-3 Registration Statement
               (Reg. No. 333-26407) and incorporated herein by reference).
10.47      --  Joint Venture Asset Purchase Agreement dated as of February
               28, 1997 by and between the Registrant and Reynolds/McCrary
               Joint Venture. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.6 to the
               Registrant's Form S-3 Registration Statement (Reg. No. 333-
               26407) and incorporated herein by reference).
</TABLE>
 
                                       48
<PAGE>   51
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.48      --  Joint Venture Asset Purchase Agreement dated as of February
               28, 1997 by and between the Registrant and RV Outdoor Sign
               Joint Venture. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant Agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.7 to the
               Registrant's Registration Statement on Form S-3 (Reg. No.
               333-26407) and incorporated herein by reference).
10.49      --  Asset Purchase Agreement dated as of January 21, 1997 by and
               among the Registrant and Scadron Enterprises, Robert B.
               Scadron, Jeffrey Scadron and Barry Scadron. The Exhibit
               contains a list briefly identifying the contents of
               Schedules and Exhibits, some of which have been omitted. The
               Registrant Agrees to furnish supplementally a copy of any
               omitted Schedule or Exhibit to the Commission upon request
               (filed as Exhibit 99.8 to the Registrant's Registration
               Statement on Form S-3 (Reg. No. 333-26407) and incorporated
               herein by reference).
10.50      --  Asset Purchase Agreement dated as of December 27, 1996 by
               and among the Registrant, Villepigue Outdoor Advertising
               Corporation, Villepigue International Advertising, Inc.,
               S.B. Properties, Inc., Third & Eighth Realty Corp. and
               Mobile Outdoor Media, Inc. The Exhibit contains a list
               briefly identifying the contents of Schedules and Exhibits,
               some of which have been omitted. The Registrant Agrees to
               furnish supplementally a copy of any omitted Schedule or
               Exhibit to the Commission upon request (filed as Exhibit
               99.9 to the Registrant's Registration Statement on Form S-3
               (Reg. No. 333-26407) and incorporated herein by reference).
10.51      --  Amendment dated as of March 12, 1997 to the Fourth amended
               and Restated Credit Agreement dated as of October 22, 1996,
               among the Registrant, Mediacom Inc., the several banks and
               other financial institutions parties thereto and Canadian
               Imperial Bank of Commerce as administrative agent (filed as
               Exhibit 99.10 to the Registrant's Registration Statement on
               Form S-3 (Reg. No. 333-26407) and incorporated herein by
               reference).
10.52      --  Second Amendment dated as of May 9, 1997 to the Fourth
               Amended and Restated Credit Agreement dated as of October
               22, 1996, as amended, among the Registrant, Mediacom Inc.,
               the several banks and other financial institutions parties
               thereto and Canadian Imperial Bank of Commerce as
               administrative agent (filed as Exhibit 99.11 to the
               Registrant's Registration Statement on Form S-3 (Reg. No.
               333-26407) and incorporated herein by reference).
10.53      --  Amendment No. 1 dated as of May 22, 1997 to Stock Purchase
               Agreement dated April 11, 1997 by and among Richard M.
               Schaps, Jason Perline, Van Wagner Communications, Inc. and
               the Registrant (filed as Exhibit 99.1 to the Registrant's
               Current Report on Form 8-K dated May 28, 1997 and
               incorporated herein by reference).
10.54      --  Underwriting Agreement dated May 22, 1997 by and among the
               Registrant, the selling stockholders named therein, Alex.
               Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette
               Securities Corporation, CIBC Wood Gundy Securities Corp.,
               Montgomery Securities and Prudential Securities Corporation
               (filed as Exhibit 99.2 to the Registrant's Current Report on
               Form 8-K dated May 28, 1997 and incorporated herein by
               reference).
10.55      --  Amendment No. 1 dated June 2, 1997 to Underwriting Agreement
               dated May 22, 1997 by and among the Registrant, the selling
               stockholders named therein, Alex. Brown & Sons Incorporated,
               Donaldson, Lufkin & Jenrette Securities Corporation, CIBC
               Wood Gundy Securities Corp., Montgomery Securities and
               Prudential Securities Corporation (filed as Exhibit 99.1 to
               the Registrant's Current Report on Form 8-K dated June 4,
               1997 and incorporated herein by reference).
10.56      --  Purchase Agreement dated June 17, 1997 among the Registrant,
               its United States subsidiaries, CIBC Wood Gundy Securities
               Corp., Alex. Brown & Sons Incorporated and Donaldson, Lufkin
               & Jenrette Securities Corporation (filed as Exhibit 99.1 to
               the Registrant's Registration Statement on Form S-4 (Reg.
               No. 333-30957) and incorporated herein by reference).
10.57      --  Registration Rights Agreement dated June 17, 1997 among the
               Registrant, the Guarantors named therein, CIBC Wood Gundy
               Securities Corp., Alex. Brown & Sons Incorporated and
               Donaldson, Lufkin & Jenrette Securities Corporation (filed
               as Exhibit 99.2 to the Registrant's Registration Statement
               on Form S-4 (Reg. No. 333-30957) and incorporated herein by
               reference).
</TABLE>
 
                                       49
<PAGE>   52
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.58      --  Asset Purchase Agreement dated August 15, 1997, by and
               between the Registrant and The Lamar Corporation (filed as
               Exhibit 99.2 to the Registrant's Current Report on Form 8-K
               dated August 29, 1997 and incorporated herein by reference).
10.59      --  Fifth Amended and Restated Credit Agreement, dated as of
               August 15, 1997, among the Registrant, Mediacom Inc., the
               several lenders parties thereto and Canadian Imperial Bank
               of Commerce, as agent (filed as Exhibit 99.3 to the
               Registrant's Current Report on Form 8-K dated August 29,
               1997 and incorporated herein by reference).
10.60      --  1966 Non-Employee Director Stock Option Plan (filed as
               Exhibit 99.3 to the Registrant's Registration Statement on
               Form S-8 (Reg. No. 333-38589) and incorporated herein by
               reference).
10.61      --  Stock Purchase Agreement dated November 7, 1997 among the
               Registrant, Salm Enterprises, Inc., Joslyn Stuart and
               Hillary Salm. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request.
10.62      --  Asset Purchase Agreement dated November 25, 1997 by and
               between the Registrant and Outdoor Media Group, Inc. The
               Exhibit contains a list briefly identifying the contents of
               Schedules and Exhibits, some of which have been omitted. The
               Registrant agrees to furnish supplementally a copy of any
               omitted Schedule or Exhibit to the Commission upon request.
21.1       --  Subsidiaries of the Registrant
23.1       --  Consent of Deloitte & Touche LLP
27         --  Financial Data Schedule
</TABLE>
 
                                       50
<PAGE>   53
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Phoenix, State of Arizona, on the 18th
day of March 1998.
 
                                          OUTDOOR SYSTEMS, INC.
 
                                          By: /s/   WILLIAM S. LEVINE
                                            ------------------------------------
                                                     William S. Levine
                                                   Chairman of the Board
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
 
                             OUTDOOR SYSTEMS, INC.
 
<TABLE>
<C>                                                <S>
          By: /s/ ARTURO R. MORENO                 Date: March 18, 1998
--------------------------------------------
              Arturo R. Moreno
           President and Director
       (Principal Executive Officer)
 
         By: /s/ WILLIAM S. LEVINE                 Date: March 18, 1998
--------------------------------------------
             William S. Levine
           Chairman and Director
 
          By: /s/ BILL M. BEVERAGE                 Date: March 18, 1998
--------------------------------------------
              Bill M. Beverage
  Secretary, Treasurer and Chief Financial
                  Officer
(Principal Financial and Accounting Officer)
 
         By: /s/ BRIAN J. O'CONNOR                 Date: March 18, 1998
--------------------------------------------
             Brian J. O'Connor
                  Director
 
       By: /s/ STEPHEN F. BUTTERFIELD              Date: March 18, 1998
--------------------------------------------
           Stephen F. Butterfield
                  Director
</TABLE>
<PAGE>   54
 
                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors and Stockholders of
Outdoor Systems, Inc.
Phoenix, Arizona
 
     We have audited the consolidated financial statements of Outdoor Systems,
Inc. as of December 31, 1996 and 1997, and for each of the three years in the
period ended December 31, 1997, and have issued our report thereon dated
February 3, 1998, except for the last paragraph of Note 5, for which the date is
March 17, 1998; such consolidated financial statements and report are included
elsewhere in this Form 10-K. Our audits also included the financial statement
schedule of Outdoor Systems, Inc., listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
 
DELOITTE & TOUCHE LLP
 
Phoenix, Arizona
March 17, 1998
 
                                       S-1
<PAGE>   55
 
                     OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                        DECEMBER 31, 1995, 1996 AND 1997
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                      ADDITIONS
                                                 --------------------
                                   BALANCE AT    CHARGED TO                                   BALANCE
                                   BEGINNING     COSTS AND                                    AT END
           DESCRIPTION             OF PERIOD      EXPENSES     OTHER        DEDUCTIONS       OF PERIOD
           -----------             ----------    ----------    ------       ----------       ---------
<S>                                <C>           <C>           <C>          <C>              <C>
1995
  Allowance for Doubtful
     Accounts....................    $1,016        $  761      $   --        $  (767)(1)      $ 1,010
                                     ======        ======      ======        =======          =======
1996
  Allowance for Doubtful
     Accounts....................    $1,010        $2,492      $2,726(2)     $  (830)(1)      $ 5,398
                                     ======        ======      ======        =======          =======
1997
  Allowance for Doubtful
     Accounts....................    $5,398        $4,129      $5,677(2)     $(1,354)(1)      $13,850
                                     ======        ======      ======        =======          =======
</TABLE>
 
---------------
(1)  Represents accounts receivable write-offs.
 
(2)  Amount represents reserve at date of acquisition related to accounts
     receivable in the working capital of companies acquired.
 
                                       S-2
<PAGE>   56
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
 3.1       --  Fourth Amended and Restated Certificate of Incorporation
               (filed as Exhibit 99.2 to the Registrant's Current Report on
               Form 8-K filed on June 4, 1997 (File No. 0-28256) and
               incorporated herein by reference).
 3.2       --  Amended and Restated Bylaws (filed as Exhibit 3.2 to the
               Registrant's Amendment No. 2 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
 4.1       --  Specimen Common Stock Certificate of the Registrant (filed
               as Exhibit 4.1 to the Registrant's Amendment No. 2 to Form
               S-1 Registration Statement (Reg. No. 333-1582) and
               incorporated herein by reference).
 4.2       --  Indenture (filed as Exhibit 4.2 to the Registrant's Form S-1
               Registration Statement No. 33-64638 and incorporated herein
               by reference).
 4.3       --  Indenture dated October 15, 1996, (the "1996 Indenture"), by
               and among the Registrant, its United States subsidiaries and
               The Bank of New York, as trustee (filed as Exhibit 99.1 to
               the Registrant's Current Report on Form 8-K dated October 9,
               1996 and incorporated herein by reference).
 4.4       --  Indenture dated as of June 23, 1997 (the "1997 Indenture")
               among the Registrant, its United States subsidiaries and The
               Bank of New York, as trustee, relating to the 8 7/8% Senior
               Subordinated Notes due 2007 (filed as Exhibit 4.2 to the
               Registrant's Registration Statement on Form S-4 (Reg. No.
               333-30957) and incorporated herein by reference).
 4.5       --  First Supplemental Indenture to the 1996 Indenture, dated as
               of June 23, 1997, by and among the Registrant, the
               Guarantors named therein, the Additional Guarantors named
               therein and The Bank of New York, as trustee, relating to
               the 9 3/8% Senior Subordinated Notes due 2006 (filed as
               Exhibit 2.3 to the Registrant's Registration Statement on
               Form 8-A (File No. 001-13275) and incorporated herein by
               reference).
 4.6       --  Second Supplemental Indenture to the 1996 Indenture, dated
               as of September 30, 1997, by and among the Registrant, the
               Guarantors named therein, the Additional Guarantors named
               therein and The Bank of New York, as trustee, relating to
               the 9 3/8% Senior Subordinated Notes due 2006 (filed as
               Exhibit 2.4 to the Registrant's Registration Statement on
               Form 8-A (File No. 001-13275) and incorporated herein by
               reference).
 4.7       --  Third Supplemental Indenture to the 1996 Indenture dated
               January 22, 1998 among the Registrant, the Guarantors named
               therein, the Additional Guarantor named therein and the Bank
               of New York, as trustee, relating to the 9 3/8% Senior
               Subordinated Notes due 2006.
 4.8       --  First Supplemental Indenture to the 1997 Indenture, dated as
               of September 30, 1997, by and among the Registrant, the
               Guarantors named therein, the Additional Guarantors named
               therein and the Bank of New York, as trustee, relating to
               the 8 7/8% Senior Subordinated Notes due 2007 (filed as
               Exhibit 2.7 to the Registrant's Registration Statement on
               Form 8-A (File No. 001-13275) and incorporated herein by
               reference).
 4.9       --  Second Supplemental Indenture to the 1997 Indenture dated
               January 22, 1998 among the Registrant, the Guarantors named
               therein, the Additional Guarantor named therein and the Bank
               of New York, as trustee, relating to the 8 7/8% Senior
               Subordinated Notes due 2007.
 9.1       --  Voting Agreement dated May 4, 1990, effective April 2, 1989,
               between William S. Levine and Rubin Sabin (filed as Exhibit
               9.1 to the Registrant's Form S-1 Registration Statement No.
               33-64638 and incorporated herein by reference).
 9.2       --  Irrevocable Proxy dated as of April 2, 1989, between William
               S. Levine and Rubin Sabin (filed as Exhibit 9.2 to the
               Registrant's Form S-1 Registration Statement No. 33-64638
               and incorporated herein by reference).
 9.3       --  Amended and Restated Voting Agreement dated as of August 17,
               1993, entered into among the Registrant, William S. Levine
               and Gregory Riggle (filed as Exhibit 9.3 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
</TABLE>
<PAGE>   57
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
 9.4       --  Stockholders' Agreement dated as of April 15, 1996, between
               William S. Levine, Arte Moreno and MK-Link Investments
               Limited Partnership (filed as Exhibit 9.4 to the
               Registrant's Amendment No. 2 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
10.1       --  Fourth Amended and Restated Credit Agreement, dated as of
               October 22, 1996, entered into among the Registrant, the
               several lenders from time to time parties thereto and CIBC
               Inc., as agent (filed as Exhibit 10.1 to the Registrant's
               Quarterly Report on Form 10-Q for the period ended September
               30, 1996 and incorporated herein by reference).
10.2       --  Amended and Restated Securities Purchase Agreement dated as
               of August 17, 1993, entered into among the Registrant, TCW
               Special Placements Fund II and TCW Capital, as Investment
               Manager pursuant to an Investment Agreement dated as of June
               30, 1987 (filed as Exhibit 10.2 to the Registrant's Form S-1
               Registration Statement No. 33-64638 and incorporated herein
               by reference).
10.3       --  Junior Subordinated Exchange Note dated effective as of
               January 1, 1992, issued by the Registrant to Rubin Sabin
               (filed as Exhibit 10.3 to the Registrant's Form S-1
               Registration Statement No. 33-64638 and incorporated herein
               by reference).
10.4       --  Intercreditor and Subordination Agreement dated as of May 4,
               1990, among the Registrant, OS Advertising Company of Texas,
               Inc., Outdoor Today, Inc., National Westminster Bank USA, as
               Agent, Rubin Sabin and Elaine Sabin (filed as Exhibit 10.4
               to the Registrant's Form S-1 Registration Statement No.
               33-64638 and incorporated herein by reference).
10.5       --  Amended and Restated Intercreditor and Subordination
               Agreement dated as of August 17, 1993, entered into between
               the Registrant, Gregory Riggle, CIBC Inc. and United States
               Trust Company of New York, as trustee (filed as Exhibit 10.5
               to the Registrant's Form S-1 Registration Statement No.
               33-64638 and incorporated herein by reference).
10.6       --  Administrative Services Agreement dated as of June 1, 1993,
               between the Registrant and Camelback Services, Inc. (filed
               as Exhibit 10.6 to the Registrant's Form S-1 Registration
               Statement No. 33-64638 and incorporated herein by
               reference).
10.7       --  Services Agreement dated as of May 1, 1993, between the
               Registrant, Williams Manufacturing, Inc. and J & L
               Industries, Inc. as amended by the First Amendment thereto
               dated April 15, 1996, to be effective as of July 1, 1995
               (filed as Exhibit 10.7 to the Registrant's Amendment No. 2
               to Form S-1 Registration Statement No. 333-1582 and
               incorporated herein by reference).
10.8       --  Amended and Restated Incentive Plan dated effective as of
               January 1, 1988, adopted by the Registrant as amended to
               date (filed as Exhibit 10.8 to the Registrant's Amendment
               No. 2 to Form S-1 Registration Statement No. 333-1582 and
               incorporated herein by reference).
10.9       --  Assets Purchase Agreement dated March 15, 1991, among the
               Registrant, Naegele Outdoor Advertising, Inc., OS
               Advertising Company of Georgia, Inc., and Morris
               Communications Corporation, as amended by the First
               Amendment to Assets Purchase Agreement dated as of December
               23, 1991, among the Registrant, Naegele Outdoor Advertising,
               Inc., OS Advertising Company of Georgia, Inc., Morris
               Communications Corporation, and OS Advertising Company of
               Kentucky, Inc. (filed as Exhibit 10.17 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
10.10      --  Agreement and grant of Option dated as of April 3, 1989,
               between the Registrant and Arthur Moreno, as amended by the
               First Amendment to Agreement and Grant of Option dated as of
               January 1, 1991 (filed as Exhibit 10.23 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
10.10.1    --  Letter Agreement between Registrant and Arte Moreno
               regarding Agreement and Grant of Option dated as of April 3,
               1989, and First Amendment to Agreement and Grant of Option
               dated as of January 1, 1991 (filed as Exhibit 10.10.1 to the
               Registrant's Amendment No. 3 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
10.11      --  Option Agreement dated as of January 1, 1991, between the
               Registrant and Wally Kelly (filed as Exhibit 10.24 to the
               Registrant's Form S-1 Registration Statement No. 33-64638
               and incorporated herein by reference).
</TABLE>
<PAGE>   58
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.12      --  Senior Note Intercreditor Agreement dated as of August 17,
               1993, entered into among TCW Special Placements Fund II, TCW
               Capital, acting solely as investment manager pursuant to an
               Investment Management Agreement, the Registrant and United
               States Trust Company of New York as trustee (filed as
               Exhibit 10.26 to the Registrant's Form S-1 Registration
               Statement No. 33-64638 and incorporated herein by
               reference).
10.13      --  Bank Intercreditor Agreement dated as of August 17, 1993,
               entered into among TCW Special Placements Fund II, TCW
               Capital acting solely as investment manager pursuant to an
               Investment Management Agreement, the Registrant and CIBC
               Inc. as agent (filed as Exhibit 10.26 to the Registrant's
               Form S-1 Registration Statement No. 33-64638 and
               incorporated herein by reference).
10.14      --  Option Purchase Agreement among the Registrant and OS
               Advertising Company of Georgia, Inc. and Capitol Outdoor
               Acquisition Co., Inc. and Capitol Outdoor Leasing Co., Inc.,
               dated as of July 27, 1994, as amended by the First Amendment
               to Option Purchase Agreement dated as of December 14, 1994
               (filed as Exhibit 1 to the Registrant's Current Report on
               Form 8-K dated December 19, 1994 and incorporated herein by
               reference).
10.15      --  Asset Purchase Agreement between the Registrant and Eller
               Outdoor Advertising Company of Atlanta, dated November 21,
               1994 (filed as Exhibit 2 to the Registrant's Current Report
               on Form 8-K dated December 19, 1994 and incorporated herein
               by reference).
10.16      --  The Registrant's 1996 Omnibus Plan (filed as Exhibit 10.16
               to the Registrant's Amendment No. 2 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
10.17      --  Form of Incentive Stock Option Grant to be awarded to each
               of Wally C. Kelly and Bill M. Beverage pursuant to the terms
               of the Registrant's 1996 Omnibus Plan (filed as Exhibit
               10.17 to the Registrant's Amendment No. 2 to Form S-1
               Registration Statement No. 333-1582 and incorporated herein
               by reference).
10.18      --  Form of Stock Option Grant to be awarded to each of Arte
               Moreno, Wally C. Kelly and Bill M. Beverage pursuant to the
               terms of the Registrant's 1996 Omnibus Plan (filed as
               Exhibit 10.18 to the Registrant's Amendment No. 2 to Form
               S-1 Registration Statement No. 333-1582 and incorporated
               herein by reference).
10.19      --  Form of Incentive Plan Settlement Participant Election
               Agreement to be entered into by each of Wally C. Kelly and
               Bill M. Beverage pursuant to the conversion of interests in
               the Incentive Plan (filed as Exhibit 10.19 to the
               Registrant's Amendment No. 3 to Form S-1 Registration
               Statement No. 333-1582 and incorporated herein by
               reference).
10.20      --  Asset Purchase Agreement dated July 9, 1996, by and between
               the Registrant and Gannett Co., Inc., together with the
               Promissory Note and related Guaranty. The Exhibit contains a
               list briefly identifying the contents of Schedules and
               Exhibits, some of which have been omitted. The Registrant
               agrees to furnish supplementally a copy of any omitted
               Schedule or Exhibit to the Commission upon request (filed as
               Exhibit 99.1 to the Registrant's Current Report on Form 8-K
               dated July 10, 1996 and incorporated herein by reference).
10.21      --  Amendment No. 1 to Asset Purchase Agreement among Gannett
               Co., Inc., Combined Communications Corporation, Gannett
               Transit, Inc., Shelter Media Communications, Inc., Gannett
               International Communications, Inc., and the Registrant dated
               as of August 12, 1996 (filed as Exhibit 99.1 to the
               Registrant's Current Report on Form 8-K dated August 27,
               1996 and incorporated herein by reference).
10.22      --  Amendment No. 2 to Asset Purchase Agreement among Gannett
               Co., Inc., Combined Communications Corporation, Gannett
               Transit, Inc., Shelter Media Communications, Inc., Gannett
               International Communications, Inc., and the Registrant dated
               as of August 19, 1996 (filed as Exhibit 99.2 to the
               Registrant's Current Report on Form 8-K dated August 27,
               1996 and incorporated herein by reference).
10.23      --  Form of Option by Gannett Outdoor Co. of Texas, Inc., in
               favor of the Registrant together with the form of Asset
               Purchase Agreement by and between the Registrant and Gannett
               Outdoor Co. of Texas, Inc. (filed as Exhibit 99.2 to the
               Registrant's Current Report on Form 8-K dated July 10, 1996
               and incorporated herein by reference).
</TABLE>
<PAGE>   59
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.24      --  Senior Subordinated Credit Agreement dated July 9, 1996, by
               and among the Registrant, the guarantors named therein, the
               lenders named therein, and Canadian Imperial Bank of
               Commerce together with the forms of Bridge Note and Term
               Note. The Exhibit contains a list briefly identifying the
               contents of Schedules and Exhibits, some of which have been
               omitted. The Registrant agrees to furnish supplementally a
               copy of any omitted Schedule or Exhibit to the Commission
               upon request (filed as Exhibit 99.4 to the Registrant's
               Current Report on Form 8-K dated July 10, 1996 and
               incorporated herein by reference).
10.25      --  Form of Indenture by and among the Registrant, the
               subsidiary guarantors named therein, and a trustee to be
               selected by the Registrant (filed as Exhibit 99.5 to the
               Registrant's Current Report on Form 8-K dated July 10, 1996
               and incorporated herein by reference).
10.26      --  First Supplemental Indenture dated as of August 22, 1996, by
               and between the Registrant and United States Trust Company
               of New York (filed as Exhibit 99.5 to the Registrant's
               Current Report on Form 8-K dated August 27, 1996 and
               incorporated herein by reference).
10.27      --  Securities Purchase Agreement dated July 9, 1996, by and
               between the Registrant and CIBC WG Argosy Merchant Fund 2,
               L.L.C. The Exhibit contains a list briefly identifying the
               contents of Schedules and Exhibits which have been omitted.
               The Registrant agrees to furnish supplementally a copy of
               any omitted Schedule or Exhibit to the Commission upon
               request (filed as Exhibit 99.6 to the Registrant's Current
               Report on Form 8-K dated July 10, 1996 and incorporated
               herein by reference).
10.28      --  Form of Certificate of Designations of Senior Increasing
               Rate Cumulative Preferred Stock, Series A (filed as Exhibit
               99.7 to the Registrant's Current Report on Form 8-K dated
               July 10, 1996 and incorporated herein by reference).
10.29      --  Form of Warrant Agreement by and between the Registrant and
               a Warrant Agent to be selected by the Registrant (filed as
               Exhibit 99.8 to the Registrant's Current Report on Form 8-K
               dated July 10, 1996 and incorporated herein by reference).
10.30      --  Form of Registration Rights Agreement by and among the
               Registrant, the guarantors names therein, and the holders
               name therein (filed as Exhibit 99.9 to the Registrant's
               Current Report on Form 8-K dated July 10, 1996 and
               incorporated herein by reference).
10.31      --  Form of Common Stock Registration Rights Agreement by and
               between the Registrant and CIBC WG Argosy Merchant Form 2,
               L.L.C. (filed as Exhibit 99.10 to the Registrant's Current
               Report on Form 8-K dated July 10, 1996 and incorporated
               herein by reference).
10.32      --  Underwriting Agreement dated August 19, 1996 by and among
               the Registrant and Alex. Brown & Sons Incorporated, CIBC
               Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette
               Securities Corporation (filed as Exhibit 99.3 to the
               Registrant's Current Report on Form 8-K dated August 27,
               1996 and incorporated herein by reference).
10.33      --  Asset Purchase Agreement between RailCom, Ltd. and the
               Registrant dated May 8, 1996 (filed as Exhibit 2.1 to the
               Registrant's Current Report on Form 8-K dated May 22, 1996
               and incorporated herein by reference).
10.34      --  Purchase and Sales Agreement Between CSX Realty Development
               Corporation, The Three Rivers Railway Company, The Atlantic
               Land and Improvement Company, Winston-Salem Southbound
               Railway Company, Gainesville Midland Railroad Company, and
               Richmond, Fredericksburg and Potomac Railway Company and
               RailCom, Ltd. dated January 23, 1996, as amended March 29,
               1996, and May 21, 1996 (filed as Exhibit 2.2.1 to the
               Registrant's Current Report on Form 8-K dated May 22, 1996
               and incorporated herein by reference).
10.35      --  Amendment to Purchase Agreement, dated March 29, 1996 (filed
               as Exhibit 2.2.2 to the Registrant's Current Report on Form
               8-K dated May 22, 1996 and incorporated herein by
               reference).
10.36      --  Second Amendment to Purchase Agreement dated May 21, 1996
               (filed as Exhibit 2.2.3 to the Registrant's Current Report
               on Form 8-K dated May 22, 1996 and incorporated herein by
               reference).
10.37      --  Grant of Easement and Agreement dated May 21, 1996 (filed as
               Exhibit 2.3 to the Registrant's Current Report on Form 8-K
               dated May 22, 1996 and incorporated herein by reference).
</TABLE>
<PAGE>   60
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.38      --  Assignment of License Agreements, dated May 21, 1996 (filed
               as Exhibit 2.4 to the Registrant's Current Report on Form
               8-K dated May 22, 1996 and incorporated herein by
               reference).
10.39      --  Assignment and Assumption Agreement dated May 22, 1996
               (filed as Exhibit 2.5 to the Registrant's Current Report on
               Form 8-K dated May 22, 1996 and incorporated herein by
               reference).
10.41      --  Underwriting Agreement dated October 9, 1996 by and among
               the Registrant, its United States subsidiaries, CIBC Wood
               Gundy Securities Corp. and Alex. Brown & Sons Incorporated
               (filed as Exhibit 99.2 to the Registrant's Current Report on
               Form 8-K dated October 9, 1996 and incorporated herein by
               reference).
10.42      --  Agreement of Purchase and Sale dated April 30, 1997 by and
               between the Registrant and Minnesota Mining and
               Manufacturing Company. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.1 to the
               Registrant's Form S-3 Registration Statement (Reg. No. 333-
               26407) and incorporated herein by reference).
10.43      --  Stock Purchase Agreement dated April 11, 1997 by and among
               the Registrant, Van Wagner Communications, Inc., Richard M.
               Schaps and Jason Perline. The Exhibit contains a list
               briefly identifying the contents of Schedules and Exhibits,
               some of which have been omitted. The Registrant agrees to
               furnish supplementally a copy of any omitted Schedule or
               Exhibit to the Commission upon request (filed as Exhibit
               99.2 to the Registrant's Form S-3 Registration Statement
               (Reg. No. 333-26407) and incorporated herein by reference).
10.44      --  Signboard Easements Sale Agreement dated March 21, 1997
               between the Registrant and the Burlington Northern and Santa
               Fe Railway Company. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.3 to the
               Registrant's Form S-3 Registration Statement (Reg. No.
               333-26407) and incorporated herein by reference).
10.45      --  Asset Purchase Agreement dated as of February 24, 1997 by
               and between the Registrant and GRTP, Ltd. The Exhibit
               contains a list briefly identifying the contents of
               Schedules and Exhibits, some of which have been omitted. The
               Registrant agrees to furnish supplementally a copy of any
               omitted Schedule or Exhibit to the Commission upon request
               (filed as Exhibit 99.4 to the Registrant's Form S-3
               Registration Statement (Reg. No. 333-26407) and incorporated
               herein by reference).
10.46      --  Joint Venture Asset Purchase Agreement dated as of February
               28, 1997 by and between the Registrant and Reynolds/Tower
               Outdoor Sign Joint Venture. The Exhibit contains a list
               briefly identifying the contents of Schedules and Exhibits,
               some of which have been omitted. The Registrant agrees to
               furnish supplementally a copy of any omitted Schedule or
               Exhibit to the Commission upon request (filed as Exhibit
               99.5 to the Registrant's Form S-3 Registration Statement
               (Reg. No. 333-26407) and incorporated herein by reference).
10.47      --  Joint Venture Asset Purchase Agreement dated as of February
               28, 1997 by and between the Registrant and Reynolds/McCrary
               Joint Venture. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.6 to the
               Registrant's Form S-3 Registration Statement (Reg. No. 333-
               26407) and incorporated herein by reference).
10.48      --  Joint Venture Asset Purchase Agreement dated as of February
               28, 1997 by and between the Registrant and RV Outdoor Sign
               Joint Venture. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant Agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request (filed as Exhibit 99.7 to the
               Registrant's Registration Statement on Form S-3 (Reg. No.
               333-26407) and incorporated herein by reference).
</TABLE>
<PAGE>   61
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.49      --  Asset Purchase Agreement dated as of January 21, 1997 by and
               among the Registrant and Scadron Enterprises, Robert B.
               Scadron, Jeffrey Scadron and Barry Scadron. The Exhibit
               contains a list briefly identifying the contents of
               Schedules and Exhibits, some of which have been omitted. The
               Registrant Agrees to furnish supplementally a copy of any
               omitted Schedule or Exhibit to the Commission upon request
               (filed as Exhibit 99.8 to the Registrant's Registration
               Statement on Form S-3 (Reg. No. 333-26407) and incorporated
               herein by reference).
10.50      --  Asset Purchase Agreement dated as of December 27, 1996 by
               and among the Registrant, Villepigue Outdoor Advertising
               Corporation, Villepigue International Advertising, Inc.,
               S.B. Properties, Inc., Third & Eighth Realty Corp. and
               Mobile Outdoor Media, Inc. The Exhibit contains a list
               briefly identifying the contents of Schedules and Exhibits,
               some of which have been omitted. The Registrant Agrees to
               furnish supplementally a copy of any omitted Schedule or
               Exhibit to the Commission upon request (filed as Exhibit
               99.9 to the Registrant's Registration Statement on Form S-3
               (Reg. No. 333-26407) and incorporated herein by reference).
10.51      --  Amendment dated as of March 12, 1997 to the Fourth amended
               and Restated Credit Agreement dated as of October 22, 1996,
               among the Registrant, Mediacom Inc., the several banks and
               other financial institutions parties thereto and Canadian
               Imperial Bank of Commerce as administrative agent (filed as
               Exhibit 99.10 to the Registrant's Registration Statement on
               Form S-3 (Reg. No. 333-26407) and incorporated herein by
               reference).
10.52      --  Second Amendment dated as of May 9, 1997 to the Fourth
               Amended and Restated Credit Agreement dated as of October
               22, 1996, as amended, among the Registrant, Mediacom Inc.,
               the several banks and other financial institutions parties
               thereto and Canadian Imperial Bank of Commerce as
               administrative agent (filed as Exhibit 99.11 to the
               Registrant's Registration Statement on Form S-3 (Reg. No.
               333-26407) and incorporated herein by reference).
10.53      --  Amendment No. 1 dated as of May 22, 1997 to Stock Purchase
               Agreement dated April 11, 1997 by and among Richard M.
               Schaps, Jason Perline, Van Wagner Communications, Inc. and
               the Registrant (filed as Exhibit 99.1 to the Registrant's
               Current Report on Form 8-K dated May 28, 1997 and
               incorporated herein by reference).
10.54      --  Underwriting Agreement dated May 22, 1997 by and among the
               Registrant, the selling stockholders named therein, Alex.
               Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette
               Securities Corporation, CIBC Wood Gundy Securities Corp.,
               Montgomery Securities and Prudential Securities Corporation
               (filed as Exhibit 99.2 to the Registrant's Current Report on
               Form 8-K dated May 28, 1997 and incorporated herein by
               reference).
10.55      --  Amendment No. 1 dated June 2, 1997 to Underwriting Agreement
               dated May 22, 1997 by and among the Registrant, the selling
               stockholders named therein, Alex. Brown & Sons Incorporated,
               Donaldson, Lufkin & Jenrette Securities Corporation, CIBC
               Wood Gundy Securities Corp., Montgomery Securities and
               Prudential Securities Corporation (filed as Exhibit 99.1 to
               the Registrant's Current Report on Form 8-K dated June 4,
               1997 and incorporated herein by reference).
10.56      --  Purchase Agreement dated June 17, 1997 among the Registrant,
               its United States subsidiaries, CIBC Wood Gundy Securities
               Corp., Alex. Brown & Sons Incorporated and Donaldson, Lufkin
               & Jenrette Securities Corporation (filed as Exhibit 99.1 to
               the Registrant's Registration Statement on Form S-4 (Reg.
               No. 333-30957) and incorporated herein by reference).
10.57      --  Registration Rights Agreement dated June 17, 1997 among the
               Registrant, the Guarantors named therein, CIBC Wood Gundy
               Securities Corp., Alex. Brown & Sons Incorporated and
               Donaldson, Lufkin & Jenrette Securities Corporation (filed
               as Exhibit 99.2 to the Registrant's Registration Statement
               on Form S-4 (Reg. No. 333-30957) and incorporated herein by
               reference).
10.58      --  Asset Purchase Agreement dated August 15, 1997, by and
               between the Registrant and The Lamar Corporation (filed as
               Exhibit 99.2 to the Registrant's Current Report on Form 8-K
               dated August 29, 1997 and incorporated herein by reference).
10.59      --  Fifth Amended and Restated Credit Agreement, dated as of
               August 15, 1997, among the Registrant, Mediacom Inc., the
               several lenders parties thereto and Canadian Imperial Bank
               of Commerce, as agent (filed as Exhibit 99.3 to the
               Registrant's Current Report on Form 8-K dated August 29,
               1997 and incorporated herein by reference).
</TABLE>
<PAGE>   62
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
10.60      --  1966 Non-Employee Director Stock Option Plan (filed as
               Exhibit 99.3 to the Registrant's Registration Statement on
               Form S-8 (Reg. No. 333-38589) and incorporated herein by
               reference).
10.61      --  Stock Purchase Agreement dated November 7, 1997 among the
               Registrant, Salm Enterprises, Inc., Joslyn Stuart and
               Hillary Salm. The Exhibit contains a list briefly
               identifying the contents of Schedules and Exhibits, some of
               which have been omitted. The Registrant agrees to furnish
               supplementally a copy of any omitted Schedule or Exhibit to
               the Commission upon request.
10.62      --  Asset Purchase Agreement dated November 25, 1997 by and
               between the Registrant and Outdoor Media Group, Inc. The
               Exhibit contains a list briefly identifying the contents of
               Schedules and Exhibits, some of which have been omitted. The
               Registrant agrees to furnish supplementally a copy of any
               omitted Schedule or Exhibit to the Commission upon request.
21.1       --  Subsidiaries of the Registrant
23.1       --  Consent of Deloitte & Touche LLP
27         --  Financial Data Schedule
</TABLE>