1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31,June 30, 2000
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 0-30242
Lamar Advertising Company
Commission File Number 1-12407
Lamar Media Corp.
(Exact name of registrants as specified in its charter)
Delaware 72-1449411
Delaware 72-1205791
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
organization) Identification No.)
5551 Corporate Blvd., Baton Rouge, LA 70808
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (225) 926-1000
Indicate by check mark whether each 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 ( )
The number of shares of Lamar Advertising Company's Class A common stock
outstanding as of May 5,August 10, 2000: 71,566,57274,945,628
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of May 5,August 10, 2000: 17,000,000
The number of shares of Lamar Media Corp. common stock outstanding as of May 5,August
10, 2000: 100
This combined Form 10-Q is separately filed by (i) Lamar Advertising Company and
(ii) Lamar Media Corp. (which is a wholly-owned subsidiary of Lamar Advertising
Company). Lamar Media Corp. meets the conditions set forth in general
instruction H(1) (a) and (b) of Form 10-Q and is, therefore, filing this form
with the reduced disclosure format permitted by such instruction.
2
Corporate Restructuring
On July 20, 1999, Lamar Advertising Company completed a corporate
reorganization to create a new holding company structure. The reorganization
was accomplished through a merger under section 251(g) of the Delaware General
Corporation Law. At the effective time of the merger, all stockholders of Lamar
Advertising Company became stockholders in a new holding company and Lamar
Advertising Company became a wholly-owned subsidiary of the new holding
company. The new holding company took the Lamar Advertising Company name and
the old Lamar Advertising Company was renamed Lamar Media Corp. In the merger,
all outstanding shares of old Lamar Advertising Company's capital stock were
converted into shares of the new holding company with the same voting powers,
designations, preferences and rights, and the same qualifications, restrictions
and limitations, as the shares of old Lamar Advertising Company. Following the
restructuring, the Class A common stock of the new holding company trades under
the symbol "LAMR" on the Nasdaq National Market with the same CUSIP number as
the old Lamar Advertising Company's Class A common stock.
In this annual report, "Lamar," the "Company," "we," "us" and "our" refer to
Lamar Advertising Company and its consolidated subsidiaries with respect to
periods following the reorganization and to old Lamar Advertising Company with
respect to periods prior to the reorganization, except where we make it clear
that we are only referring to Lamar Media Corp. or a particular subsidiary.
In addition, "Lamar Media" and "Media" refer to Lamar Media Corp. and its
consolidated subsidiaries with respect to periods following the reorganization
and to old Lamar Advertising Company with respect to periods prior to the
reorganization, except where we make it clear that we are only referring to
Lamar Media Corp. or a particular subsidiary.
3
CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of
March 31,June 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations for the three
months ended March 31,June 30, 2000 and March 31,June 30, 1999 and six months
ended June 30, 2000
and June 30, 1999 2
Condensed Consolidated Statements of Cash Flows
for the threesix months ended March 31,June 30, 2000 and
March 31,June 30, 1999 3
Notes to Condensed Consolidated Financial
Statements 4 - 67
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of
March 31,June 30, 2000 and December 31, 1999 78
Condensed Consolidated Statements of Operations for the three
months ended March 31,June 30, 2000 and March 31,June 30, 1999 8and six months
ended June 30, 2000 and June 30, 1999 9
Condensed Consolidated Statements of Cash Flows
for the threesix months ended March 31,June 30, 2000 and
March 31,June 30, 1999 910
Notes to Condensed Consolidated Financial
Statements 1011
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 1112 - 1315
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risks 1416
ITEM 4. Submission of Matters to a Vote of Security Holders 1417
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 1518 - 1619
Signatures 1619
43
PART I - FINANCIAL INFORMATION
ITEM 1.- FINANCIAL STATEMENTS
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
March 31,June 30, December 31,
Assets 2000 1999
----------- ----------------------- ------------
Current assets:
Cash and cash equivalents $ 9,90511,561 $ 8,401
Receivables, net 81,27593,114 81,226
Prepaid expenses 28,73530,005 21,524
Other current assets 14,86214,948 14,342
----------- ----------------------- ------------
Total current assets 134,777149,628 125,493
----------- ----------------------- ------------
Property, plant and equipment 1,441,8251,568,531 1,412,605
Less accumulated depreciation and amortization (244,502)(297,364) (218,893)
----------- ----------------------- ------------
Net property plant and equipment 1,197,3231,271,167 1,193,712
----------- ----------------------- ------------
Intangible assets 1,914,1102,068,268 1,874,177
Other assets - non-current 17,82722,982 13,563
----------- ----------------------- ------------
Total assets $ 3,264,0373,512,045 $ 3,206,945
=========== ======================= ============
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 9,9929,967 $ 11,492
Current maturities of long-term debt 4,3124,599 4,318
Accrued expenses 26,71138,643 57,653
Deferred income 12,20010,654 11,243
----------- ----------------------- ------------
Total current liabilities 53,21563,863 84,706
Long-term debt 1,703,5981,835,627 1,611,463
Deferred income taxes 104,821137,143 112,412
Deferred income 1,221 1,222
Other liabilities 7,371 5,613
----------- -----------8,234 6,835
------------ ------------
Total liabilities 1,870,2262,044,867 1,815,416
----------- ----------------------- ------------
Stockholders' equity:
Series AA preferred stock, par value $.001, $63.80 cumulative dividends,
authorized 1,000,000 shares;
5,719.49 shares issued and outstanding at 2000 and 1999 -- --
Class A common stock, par value $.001, 125,000,000175,000,000 shares
authorized, 71,566,32273,904,086 shares and 70,576,251 shares
issued and outstanding at 2000 and 1999, respectively 7274 71
Class B common stock, par value $.001, 37,500,000 shares
authorized, 17,000,000 shares and 17,449,997 shares
issued and outstanding at 2000 and 1999, respectively 17 17
Additional paid-in capital 1,510,2621,604,116 1,478,916
Accumulated deficit (116,540)(137,029) (87,475)
----------- ----------------------- ------------
Stockholders' equity 1,393,8111,467,178 1,391,529
----------- ----------------------- ------------
Total liabilities and stockholders' equity $ 3,264,0373,512,045 $ 3,206,945
=========== ======================= ============
See accompanying notes to consolidated financial statements.
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54
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three months ended
March 31,Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net revenues $ 151,267172,953 $ 85,76697,809 $ 324,220 $ 183,575
------------ ------------ ------------ ------------
Operating expenses:
Direct advertising expenses 52,512 29,76453,626 30,481 106,138 60,245
General and administrative expenses 34,204 20,09935,261 20,754 69,465 40,853
Depreciation and amortization 72,970 31,56176,230 32,652 149,200 64,213
------------ ------------ 159,686 81,424------------ ------------
165,117 83,887 324,803 165,311
------------ ------------ ------------ ------------
Operating income (loss) (8,419) 4,3427,836 13,922 (583) 18,264
------------ ------------ ------------ ------------
Other expense (income):
Interest income (327) (686)(369) (269) (696) (955)
Interest expense 32,890 18,145
(Gain) loss36,401 18,234 69,291 36,379
Gain on disposition of assets 1 (336)(105) (141) (104) (477)
------------ ------------ 32,564 17,123------------ ------------
35,927 17,824 68,491 34,947
------------ ------------ ------------ ------------
Loss before income taxes and cumulative
effect of a change in accounting
principle (40,983) (12,781)(28,091) (3,902) (69,074) (16,683)
Income tax benefit (12,009) (2,842)expense (benefit) (7,693) 1,076 (19,702) (1,766)
------------ ------------ ------------ ------------
Loss before cumulative effect of a
change in accounting principle (28,974) (9,939)(20,398) (4,978) (49,372) (14,917)
------------ ------------ ------------ ------------
Cumulative effect of a change in
accounting principle -- -- -- (767)
------------ ------------ ------------ ------------
Net loss (28,974) (10,706)(20,398) (4,978) (49,372) (15,684)
Preferred stock dividends (91) (91)91 183 182 274
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (29,065)(20,489) $ (10,797)(5,161) $ (49,554) $ (15,958)
============ ============ ============ ============
Loss per common share - basic and diluted:
Loss before accounting change $ (.33)(.23) $ (.17)(.08) $ (.56) $ (.25)
Cumulative effect of a change in
accounting principle --(--) (--) (--) (.01)
------------ ------------ ------------ ------------
Net loss $ (.33)(.23) $ (.18)(.08) $ (.56) $ (.26)
============ ============ ============ ============
Weighted average common shares
outstanding 88,466,644 61,143,35189,512,428 61,227,406 88,989,536 61,185,610
Incremental common shares from dilutive
stock options -- -- -- --
Incremental common shares from
convertible debt -- -- -- --
------------ ------------ ------------ ------------
Weighted average common shares assuming
dilution 88,466,644 61,143,35189,512,428 61,227,406 88,989,536 61,185,610
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
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65
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
ThreeSix Months Ended
March 31,June 30,
2000 March 31, 1999
-------------- ------------------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (28,974)(49,372) $ (10,706)(15,684)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 72,970 31,561
(Gain) loss149,200 64,213
Cumulative effect of a change in accounting
principle -- 767
Gain on disposition of assets 1 (336)(104) (477)
Deferred tax benefit (12,527) (2,319)taxes (20,279) (4,469)
Provision for doubtful accounts 1,183 9412,329 500
Changes in operating assets and liabilities:
Decrease (Increase) decrease in:
Receivables (785) (1,923)(10,438) (6,945)
Prepaid expenses (7,273) (11)(7,635) (150)
Other assets (508) (1,915)(207) 1,023
Increase (decrease)(Decrease) in:
Trade accounts payable (1,531) (194)(1,524) 67
Accrued expenses (11,208) (6,432)(3,456) (4,441)
Deferred income 955 675(920) (1,373)
Other liabilities 33 37
-------------- --------------52 36
---------- ----------
Net cash provided by operating activities 12,336 9,378
-------------- --------------57,646 33,067
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (3,351) (1,184)(1,590)
Acquisition of new markets (82,082) (74,930)(230,652) (139,064)
Capital expenditures (19,004) (12,581)(43,700) (30,274)
Proceeds from disposition of assets 531 749
-------------- --------------1,122 1,602
---------- ----------
Net cash used in investing activities (103,906) (87,946)
-------------- --------------(276,581) (169,326)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs (1,448) --
Net proceeds from issuance of common stock 1,213 1,3121,893 2,194
Principal payments on long-term debt (1,048) (45,939)
Proceeds from issuance of notes payable -- 2,860(2,168) (47,009)
Net borrowings under credit agreements 93,000 --224,000 57,000
Dividends (91) (91)
-------------- --------------(182) (274)
---------- ----------
Net cash provided by (used in)
financing activities 93,074 (41,858)
-------------- --------------222,095 11,911
---------- ----------
Net increase (decrease) in cash and cash equivalents 1,504 (120,426)3,160 (124,348)
Cash and cash equivalents at beginning of period 8,401 128,597
-------------- ------------------------ ----------
Cash and cash equivalents at end of period $ 9,90511,561 $ 8,171
============== ==============4,249
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 36,50469,047 $ 18,835
============== ==============36,196
========== ==========
Cash paid for state and federal income taxes $ 8861,616 $ 570
============== ==============1,485
========== ==========
Common stock issuance related to acquisitions $ 122,031 $ 475
========== ==========
See accompanying notes to consolidated financial statementsstatements.
-3-
76
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
1. Significant Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position and results of operations for the interim periods presented
have been reflected herein. The results of operations for interim periods are
not necessarily indicative of the results to be expected for the entire year.
These condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K.
Certain amounts in the prior year's consolidated financial statements have been
reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported results of operations.
2. Acquisitions
On January 14, 2000, the Company purchased the stock of Aztec Group, Inc. for a
purchase price of approximately $34,826. The purchase price consisted of
approximately $5,600 cash and the issuance of 481,481 shares of Lamar
Advertising Company common stock valued at approximately $29,226.
On March 31, 2000, the Company purchased the assets of an outdoor company in the
Company's northeast region for a cash purchase price of approximately $33,600.
During the three months ended March 31, 2000, the Company completed 24
additional acquisitions of outdoor advertising assets for a cash purchase price
of approximately $24,552.
Each of these acquisitions were accounted for under the purchase method of
accounting, and, accordingly, the accompanying financial statements include the
results of operations of each acquired entity from the date of acquisition. The
acquisition costs have been allocated to assets acquired and liabilities
assumed based on fair market value at the dates of acquisition. The following
is a summary of the preliminary allocation of the acquisition costs in the
above transactions.
Property
Current Plant & Other Other Current Long-term
Assets Equipment Goodwill Intangibles Assets Liabilities Liabilities
----------------------------------------------------------------------------------------------
Aztec Group, Inc. 487 8,335 21,799 10,526 -- 708 5,645
Northeast region
acquisition -- 3,406 16,116 14,082 -- -- --
Other 44 6,895 16,870 1,953 3 35 189
----------------------------------------------------------------------------------------------
531 18,636 54,785 26,561 3 743 5,834
==============================================================================================
Summarized below are certain unaudited pro forma statement of operations data
for the three months ended March 31, 2000 and 1999 as if each of the above
acquisitions and the acquisitions occurring in 1999, which were fully described
in the Company's December 31, 1999 Annual Report on Form 10K, had been
consummated as of January 1, 1999. This
-4-
8
pro forma information does not purport to represent what the Company's results
of operations actually would have been had such transactions occurred on the
date specified or to project the Company's results of operations for any future
periods.
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Net revenues $ 152,326 $ 141,762
============== ==============
Net loss applicable to
common stock $ (29,516) $ (29,596)
============== ==============
Net loss per common share - basic $ (.33) $ (.34)
============== ==============
Net loss per common share - diluted $ (.33) $ (.34)
============== ==============
3. Summarized Financial Information of Subsidiaries
Separate financial statements of each of the Company's direct or indirect
wholly owned subsidiaries that have guaranteed the Company's obligations with
respect to its publicly issued notes (collectively, the "Guarantors") are not
included herein because the Guarantors are jointly and severally liable under
the guarantees, and the aggregate assets, liabilities, earnings and equity of
the Guarantors are substantially equivalent to the assets, liabilities,
earnings and equity of the Company on a consolidated basis.
Summarized financial information for Missouri Logos, a Partnership, a 66 2/3%
owned subsidiary of the Company and the only subsidiary of the Company that is
not a Guarantor, is set forth below:
Balance Sheet Information: March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
Current assets 239 288
Total assets 283 333
Total liabilities 10 6
Venturers' equity 273 327
Income Statement Information: Three months ended Three months ended
March 31, 2000 March 31, 1999
-------------- --------------
(Unaudited) (Unaudited)
Revenues 254 274
Net income 164 214
4. New Accounting Pronouncements
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-Up
Activities. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, and requires that the costs of start-up
activities, including organizational costs, be expensed as incurred. The effect
of SOP 98-5 is recorded as a cumulative effect of a change in accounting
principle as described in Accounting Principles Board Opinion No. 20
"Accounting Changes" in the amount of $767, net of tax, for the three months
ended March 31, 1999.
-5-
9
5. Earnings Per Share
Earnings per share are computed in accordance with SFAS No. 128, "Earnings Per
Share." The calculations of basic earnings per share excludes any dilutive
effect of stock options and convertible debt while diluted earnings per share
includes the dilutive effect of stock options and convertible debt. The
following information is disclosed for purposes of calculating the antidilutive
earnings per share for the periods presented:
March 31, March 31,
2000 1999
------------ ------------
Net loss applicable to common stock $ (29,065) $ (10,797)
Income impact of assumed conversions 2,302 --
------------ ------------
Loss available to common shareholders
assuming conversion $ (26,763) $ (10,797)
============ ============
Weighted average common shares
outstanding 88,466,644 61,143,351
Shares issuable upon exercise of
stock options 842,550 598,848
Incremental shares from convertible debt 6,216,210 --
------------ ------------
Weighted average common shares plus
dilutive potential common shares 95,525,404 61,742,199
============ ============
Net loss per common share - diluted $ (.28) $ (.17)
============ ============
6. Subsequent Events
Lamar acquired the assets of Outdoor West, Inc for a total cash purchase price
of approximately $40,000 and will be accounted for under the purchase method of
accounting.
In addition, Lamar has signed a Definitive Agreement and Plan of Merger with
Advantage Outdoor Company, Inc. ("Advantage"). At the effective time of the
merger, all of the outstanding shares of Advantage common stock will be
converted into between 2,000,000 and 2,300,000 shares of Lamar's Class A common
stock depending on the average closing sales price of Lamar's common stock over
a period prior to closing. In connection with the merger, Lamar will assume up
to $79,000 of Advantage's obligations. This merger will add approximately 5,100
displays. Advantage has the right to terminate the merger agreement if the
average closing sales price of Lamar's Class A common Stock over a 30 day
period prior to closing is less than $42.00 per share. This merger is subject
to approval under the Hart-Scott-Rodino Antitrust Improvements Act and the
satisfaction of other customary closing conditions.
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LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
March 31, December 31,
Assets 2000 1999
----------- -----------
Current assets:
Cash and cash equivalents $ 9,905 $ 8,401
Receivables, net 81,315 80,671
Prepaid expenses 28,735 21,524
Other current assets 24,146 25,193
----------- -----------
Total current assets 144,101 135,789
----------- -----------
Property, plant and equipment 1,441,825 1,412,605
Less accumulated depreciation and amortization (244,502) (218,893)
----------- -----------
Net property plant and equipment 1,197,323 1,193,712
----------- -----------
Intangible assets 1,892,188 1,851,965
Other assets - non-current 17,827 13,563
----------- -----------
Total assets $ 3,251,439 $ 3,195,029
=========== ===========
Liabilities and Stockholder's Equity
Current liabilities:
Trade accounts payable $ 9,992 $ 11,492
Current maturities of long-term debt 4,312 4,318
Accrued expenses 23,387 54,031
Deferred income 12,200 11,243
----------- -----------
Total current liabilities 49,891 81,084
Long-term debt 1,703,598 1,611,463
Deferred income taxes 105,580 112,776
Deferred income 1,221 1,222
Other liabilities 7,371 5,613
----------- -----------
Total liabilities 1,867,661 1,812,158
----------- -----------
Stockholder's equity:
Common stock, $.01 par value, authorized 3,000 shares;
issued and outstanding 100 shares at March 31, 2000 and
December 31, 1999 -- --
Additional paid-in capital 1,498,832 1,469,606
Accumulated deficit (115,054) (86,735)
----------- -----------
Stockholder's equity 1,383,778 1,382,871
----------- -----------
Total liabilities and stockholder's equity $ 3,251,439 $ 3,195,029
=========== ===========
See accompanying notes to consolidated financial statements.
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LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three Months ended
March 31,
2000 1999
----------- -----------
Net revenues $ 151,267 $ 85,766
----------- -----------
Operating expenses:
Direct advertising expenses 52,512 29,764
General and administrative expenses 33,818 20,099
Depreciation and amortization 72,307 31,561
----------- -----------
158,637 81,424
----------- -----------
Operating income (loss) (7,370) 4,342
----------- -----------
Other expense (income):
Interest income (327) (686)
Interest expense 32,890 18,145
(Gain) loss on disposition of assets 1 (336)
----------- -----------
32,564 17,123
----------- -----------
Loss before income taxes and cumulative effect of a change in
accounting principle (39,934) (12,781)
Income tax benefit (11,615) (2,842)
----------- -----------
Loss before cumulative effect of a change in accounting principle (28,319) (9,939)
Cumulative effect of a change in accounting principle -- (767)
----------- -----------
Net loss (28,319) (10,706)
Preferred stock dividends -- (91)
----------- -----------
Net loss applicable to common stock $ (28,319) $ (10,797)
=========== ===========
See accompanying notes to consolidated financial statements.
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12
LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months ended
March 31,
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (28,319) $ (10,706)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 72,307 31,561
Gain (loss) on disposition of assets 1 (336)
Deferred tax benefit (12,133) (2,319)
Provision for doubtful accounts 1,183 941
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (1,389) (1,923)
Prepaid expenses (7,273) (11)
Other assets 2,907 (1,915)
Increase (decrease) in:
Trade accounts payable (1,531) (194)
Accrued expenses (13,656) (6,432)
Deferred income 955 675
Other liabilities 33 37
----------- -----------
Net cash provided by operating activities 13,085 9,378
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (3,351) (1,184)
Acquisition of new markets (81,709) (74,930)
Capital expenditures (19,004) (12,581)
Proceeds from disposition of assets 531 749
----------- -----------
Net cash used in investing activities (103,533) (87,946)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock -- 1,312
Principal payments on long-term debt (1,048) (45,939)
Proceeds from issuance of long-term debt 93,000 2,860
Dividends -- (91)
----------- -----------
Net cash provided by (used in) financing activities 91,952 (41,858)
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,504 (120,426)
Cash and cash equivalents at beginning of period 8,401 128,597
----------- -----------
Cash and cash equivalents at end of period $ 9,905 $ 8,171
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 36,504 $ 18,835
=========== ===========
Cash paid for state and federal income taxes $ 886 $ 570
=========== ===========
See accompanying notes to consolidated financial statements.
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LAMAR MEDIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
1. Significant Accounting Policies
On July 20, 1999, Lamar Advertising Company reorganized into a new holding
company structure. As a result of this reorganization (1) the former Lamar
Advertising Company became a wholly-owned subsidiary of a newly formed holding
company, (2) the name of the former Lamar Advertising Company was changed to
Lamar Media Corp., (3) the name of the new holding company became Lamar
Advertising Company, (4) the outstanding shares of capital stock of the former
Lamar Advertising Company, including the Class A common stock, were
automatically converted, on a share for share basis, into identical shares of
capital stock of the new holding company and (5) the Class A common stock of the
new holding company commenced trading on the Nasdaq National Market under the
symbol "LAMR" instead of the Class A common stock of the former Lamar
Advertising Company. In addition, following the holding company reorganization,
substantially all of the former Lamar Advertising Company's debt obligations,
including the bank credit facility and other long-term debt remained the
obligations of Lamar Media. Under Delaware law, the reorganization did not
require the approval of the stockholders of the former Lamar Advertising
Company. The purpose of the reorganization was to provide Lamar Advertising
Company with a more flexible capital structure and to enhance its financing
options. The business operations of the former Lamar Advertising Company and its
subsidiaries have not changed as a result of the reorganization.
Certain footnotes are not provided forIn this quarterly report, "Lamar," the accompanying financial statements as
the information in notes 2, 3, 4"Company," "we," "us" and 6"our" refer to the consolidated financial statements
of
Lamar Advertising Company included elsewhere in this report is substantially
equivalentand its consolidated subsidiaries with respect to
periods following the reorganization and to old Lamar Advertising Company with
respect to periods prior to the reorganization, except where we make it clear
that required for the consolidated financial statements ofwe are only referring to Lamar Media Corp. Earnings per share data is not provided for the operating results
ofor a particular subsidiary.
In addition, "Lamar Media" and "Media" refer to Lamar Media Corp. as it is a wholly-owned subsidiary ofand its
consolidated subsidiaries with respect to periods following the reorganization
and to old Lamar Advertising Company.Company with respect to periods prior to the
reorganization, except where we make it clear that we are only referring to
Lamar Media Corp. or a subsidiary.
2. Significant Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position and results of operations for the interim periods presented
have been reflected herein. The results of operations for interim periods are
not necessarily indicative of the results to be expected for the entire year.
These condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K.
Certain amounts in the prior year's consolidated financial statements have been
reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported results of operations.
-4-
7
3. Acquisitions
On January 14, 2000, the Company purchased the stock of Aztec Group, Inc. for a
purchase price of approximately $34,826. The purchase price consisted of
approximately $5,600 cash and the issuance of 481,481 shares of Lamar
Advertising Company common stock valued at approximately $29,226.
On March 31, 2000, the Company purchased the assets of an outdoor company in the
Company's Northeastern Region for a cash purchase price of approximately
$33,600.
Effective May 1, 2000, the Company purchased all of the outstanding common stock
of Outdoor West, Inc. for a total cash purchase price of approximately $39,900.
In addition, on May 24, 2000, the Company purchased all of the outstanding
common stock of Advantage Outdoor Company, Inc. for a cash purchase price of
approximately $76,900 and the issuance of 2,300,000 shares of Lamar's Class A
common stock valued at approximately $92,805.
During the six months ended June 30, 2000, the Company completed 43 additional
acquisitions of outdoor advertising assets for a cash purchase price of
approximately $52,200.
Each of these acquisitions were accounted for under the purchase method of
accounting, and, accordingly, the accompanying financial statements include the
results of operations of each acquired entity from the date of acquisition. The
acquisition costs have been allocated to assets acquired and liabilities assumed
based on fair market value at the dates of acquisition. The following is a
summary of the preliminary allocation of the acquisition costs in the above
transactions.
Property
Current Plant & Other Other Current Long-term
Assets Equipment Goodwill Intangibles Assets Liabilities Liabilities
---------- ---------- ---------- ----------- ---------- ----------- -----------
Aztec Group, Inc. $ 487 $ 8,335 $ 21,786 $ 10,526 $ -- $ 708 $ 5,632
Northeast Region 480 2,604 16,804 14,102 -- 385 --
Acquisition
Outdoor West 1,025 10,539 21,340 17,222 -- 1,192 9,040
Advantage Outdoor 3,647 64,488 80,851 58,108 167 6,074 31,445
Other 277 14,097 25,496 13,209 -- 727 162
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 5,916 $ 100,063 $ 166,277 $ 113,167 $ 167 $ 9,086 $ 46,279
========== ========== ========== ========== ========== ========== ==========
Summarized below are certain unaudited pro forma statement of operations data
for the three months ended June 30, 2000 and 1999 and the six months ended June
30, 2000 and 1999 as if each of the above acquisitions and the acquisitions
occurring in 1999, which were fully described in the Company's December 31, 1999
Annual Report on Form 10K, had been consummated as of January 1, 1999. This pro
forma information does not purport to represent what the Company's results of
operations actually would have been had such transactions occurred on the date
specified or to project the Company's results of operations for any future
periods.
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net revenues $ 176,954 $ 159,771 $ 336,093 $ 308,225
============ ============ ============ ============
Net loss applicable to
common stock $ (23,337) $ (27,808) $ (56,276) $ (62,020)
============ ============ ============ ============
Net loss per common share - basic $ (.26) $ (.31) $ (.62) $ (.69)
============ ============ ============ ============
Net loss per common share - diluted $ (.26) $ (.31) $ (.62) $ (.69)
============ ============ ============ ============
-5-
8
4. Summarized Financial Information of Subsidiaries
Separate financial statements of each of the Company's direct or indirect
wholly-owned subsidiaries that have guaranteed the Company's obligations with
respect to its publicly issued notes (collectively, the "Guarantors") are not
included herein because the Guarantors are jointly and severally liable under
the guarantees, and the aggregate assets, liabilities, earnings and equity of
the Guarantors are substantially equivalent to the assets, liabilities, earnings
and equity of the Company on a consolidated basis.
Summarized financial information for Missouri Logos, a Partnership, a 66 2/3%
owned subsidiary of the Company and the only subsidiary of the Company that is
not a Guarantor, is set forth below:
Balance Sheet Information:
June 30, 2000 December 31, 1999
------------- -----------------
Current assets $109 $288
Total assets 155 333
Total liabilities 10 6
Venturers' equity 145 327
Income Statement Information:
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues $311 $258 $565 $532
Net income 172 106 336 320
5. Change in Accounting Principle
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP 98-5"), Reporting on the Costs of Start-Up
Activities. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, and requires that the costs of start-up
activities, including organizational costs, be expensed as incurred. The effect
of SOP 98-5 is recorded as a cumulative effect of a change in accounting
principle as described in Accounting Principles Board Opinion No. 20 "Accounting
Changes" in the amount of $767, net of tax, for the six months ended June 30,
1999.
6. Earnings Per Share
Earnings per share are computed in accordance with SFAS No. 128, "Earnings Per
Share." The calculations of basic earnings per share exclude any dilutive effect
of stock options and convertible debt while diluted earnings per share includes
the dilutive effect of stock options and convertible debt. The number of
potentially dilutive shares excluded from the calculation because of their
anti-dilutive effect are 6,818,549 and 555,558 for the three months ended June
30, 2000 and 1999 and, 6,936,816 and 579,170 for the six months ended June 30,
2000 and 1999, respectively.
7. Stockholders' Equity
On May 25, 2000, the stockholders approved a resolution to amend the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Class A common stock from 125,000,000 shares to 175,000,000 shares
which increased the total authorized capital stock from 163,510,000 shares to
213,510,000 shares. In addition, the shareholders also approved an amendment to
the Company's 1996 Equity Incentive Plan
-6-
9
to increase the number of shares of the Company's Class A common stock available
for issuance to an aggregate of 5,000,000 shares from 4,000,000 shares.
On May 25, 2000, the stockholders approved the 2000 Employee Stock Purchase Plan
whereby 500,000 shares of the Company's Class A common stock have been reserved
for issuance under the Plan. Under this plan, eligible employees may purchase
stock at 85% of the fair market value of a share on the offering commencement
date or the respective purchase date whichever is lower. Purchases are limited
to ten percent of an employee's total compensation. The initial offering under
the Plan commenced on April 1, 2000 with a single purchase date on June 30,
2000. Subsequent offerings shall commence each year on July 1 with a termination
date of December 31 and purchase dates on September 30 and December 31; and on
January 1 with a termination date on June 30 and purchase dates on March 31 and
June 30.
8. Long-Term Debt
In August 1999, Lamar Media Corp. entered into a new bank credit agreement,
replacing its existing bank credit facility, with The Chase Manhattan Bank
serving as administrative agent. The $1,000,000 bank credit facility consists of
(1) a $350,000 revolving bank credit facility, (2) a $650,000 term facility with
two tranches, a $450,000 Term A facility and a $200,000 Term B facility. In
addition, the new bank credit facility provided for an uncommitted $400,000
incremental facility available at the discretion of the lenders. In June 2000,
Lamar Media finalized an incremental loan agreement with its lenders in which
Lamar Media received commitments for $250,000 of the previously uncommitted
$400,000 incremental facility. The incremental facility consists of (1) $20,000
Series A-1 facility, (2)$130,000 Series A-2 facility and (3) a $100,000 Series
B-1 facility. Proceeds of this facility were used to pay down the revolving bank
debt facility. As of June 30, 2000, Lamar Media had $1,000,000 outstanding under
the bank credit facility.
-7-
10
LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
June 30, December 31,
Assets 2000 1999
------------ ------------
Current assets:
Cash and cash equivalents $ 11,561 $ 8,401
Receivables, net 93,104 80,671
Prepaid expenses 30,005 21,524
Other current assets 22,772 25,193
------------ ------------
Total current assets 157,442 135,789
------------ ------------
Property, plant and equipment 1,568,531 1,412,605
Less accumulated depreciation and amortization (297,364) (218,893)
------------ ------------
Net property plant and equipment 1,271,167 1,193,712
------------ ------------
Intangible assets 2,048,154 1,851,965
Other assets - non-current 22,982 13,563
------------ ------------
Total assets $ 3,499,745 $ 3,195,029
============ ============
Liabilities and Stockholder's Equity
Current liabilities:
Trade accounts payable $ 9,967 $ 11,492
Current maturities of long-term debt 4,599 4,318
Accrued expenses 35,051 54,031
Deferred income 10,654 11,243
------------ ------------
Total current liabilities 60,271 81,084
Long-term debt 1,835,627 1,611,463
Deferred income taxes 138,478 112,776
Other liabilities 8,234 6,835
------------ ------------
Total liabilities 2,042,610 1,812,158
------------ ------------
Stockholder's equity:
Common stock, $.01 par value, authorized 3,000
shares; issued and outstanding 100 shares at
June 30, 2000 and December 31, 1999 -- --
Additional paid-in capital 1,591,637 1,469,606
Accumulated deficit (134,502) (86,735)
------------ ------------
Stockholder's equity 1,457,135 1,382,871
------------ ------------
Total liabilities and stockholder's equity $ 3,499,745 $ 3,195,029
============ ============
See accompanying notes to consolidated financial statements.
-8-
11
LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net revenues $ 172,953 $ 97,809 $ 324,220 $ 183,575
------------ ------------ ------------ ------------
Operating expenses:
Direct advertising expenses 53,626 30,481 106,138 60,245
General and administrative expenses 34,775 20,754 68,593 40,853
Depreciation and amortization 75,189 32,652 147,496 64,213
------------ ------------ ------------ ------------
163,590 83,887 322,227 165,311
------------ ------------ ------------ ------------
Operating income 9,363 13,922 1,993 18,264
------------ ------------ ------------ ------------
Other expense (income):
Interest income (369) (269) (696) (955)
Interest expense 36,401 18,234 69,291 36,379
Gain on disposition of assets (105) (141) (104) (477)
------------ ------------ ------------ ------------
35,927 17,824 68,491 34,947
------------ ------------ ------------ ------------
Loss before income taxes and cumulative
effect of a change in accounting
principle (26,564) (3,902) (66,498) (16,683)
Income tax expense (benefit) (7,116) 1,076 (18,731) (1,766)
------------ ------------ ------------ ------------
Loss before cumulative effect of a
change in accounting principle (19,448) (4,978) (47,767) (14,917)
------------ ------------ ------------ ------------
Cumulative effect of a change in
accounting principle -- -- -- (767)
------------ ------------ ------------ ------------
Net loss (19,448) (4,978) (47,767) (15,684)
Preferred stock dividends -- 183 -- 274
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (19,448) $ (5,161) $ (47,767) $ (15,958)
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
-9-
12
LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (47,767) $ (15,684)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 147,496 64,213
Cumulative effect of a change in accounting
principle -- 767
Gain on disposition of assets (104) (477)
Deferred taxes (19,308) (4,469)
Provision for doubtful accounts 2,329 500
Changes in operating assets and liabilities:
Decrease (Increase) in:
Receivables (10,992) (6,945)
Prepaid expenses (7,635) (150)
Other assets 3,902 1,023
Increase (Decrease) in:
Trade accounts payable (1,524) 67
Accrued expenses (6,172) (4,441)
Deferred income (920) (1,373)
Other liabilities 52 36
------------ ------------
Net cash provided by operating activities 59,357 33,067
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (3,351) (1,590)
Acquisition of new markets (230,652) (139,064)
Capital expenditures (43,700) (30,274)
Proceeds from disposition of assets 1,122 1,602
------------ ------------
Net cash used in investing activities (276,581) (169,326)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs (1,448) --
Net proceeds from issuance of common stock -- 2,194
Principal payments on long-term debt (2,168) (47,009)
Net borrowings under credit agreements 224,000 57,000
Dividends -- (274)
------------ ------------
Net cash provided by financing activities 220,384 11,911
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,160 (124,348)
Cash and cash equivalents at beginning of period 8,401 128,597
------------ ------------
Cash and cash equivalents at end of period $ 11,561 $ 4,249
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 69,047 $ 36,196
============ ============
Cash paid for state and federal income taxes $ 1,616 $ 1,485
============ ============
Common stock issuance related to acquisitions $ -- $ 475
============ ============
Parent company stock contributed for acquisitions $ 122,031 $ --
============ ============
See accompanying notes to consolidated financial statements.
-10- 13
LAMAR MEDIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
1. Significant Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of Lamar Media's
financial position and results of operations for the interim periods presented
have been reflected herein. The results of operations for interim periods are
not necessarily indicative of the results to be expected for the entire year.
These condensed consolidated financial statements should be read in conjunction
with Lamar Media's consolidated financial statements and the notes thereto
included in Lamar Media's Annual Report on Form 10-K.
Certain amounts in the prior year's consolidated financial statements have been
reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported results of operations.
Certain footnotes are not provided for the accompanying financial statements as
the information in notes 1, 3, 4, 5, 7 and 8 to the consolidated financial
statements of Lamar Advertising Company included elsewhere in this report is
substantially equivalent to that required for the consolidated financial
statements of Lamar Media Corp. Earnings per share data is not provided for the
operating results of Lamar Media Corp. as it is a wholly-owned subsidiary of
Lamar Advertising Company.
-11-
14
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this quarterly report, "Lamar," the "Company," "we," "us" and "our" refer to
Lamar Advertising Company and its consolidated subsidiaries with respect to
periods following the reorganization and to old Lamar Advertising Company with
respect to periods prior to the reorganization, except where we make it clear
that we are only referring to Lamar Media Corp. or a particular subsidiary.
In addition, "Lamar Media" and "Media" refer to Lamar Media Corp. and its
consolidated subsidiaries with respect to periods following the reorganization
and to old Lamar Advertising Company with respect to periods prior to the
reorganization, except where we make it clear that we are only referring to
Lamar Media Corp. or a subsidiary.
LAMAR ADVERTISING COMPANY
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the six month and three monthsmonth periods
ended March 31,June 30, 2000 and 1999. This discussion should be read in conjunction with
the consolidated financial statements of the Company and the related notes.
The following discussion is a summary of the key factors management considers
necessary in reviewing the Company's results of operations, liquidity and
capital resources. The future operating results of the Company may differ
materially from the results described below. For a discussion of certain factors
which may affect the Company's future operating performance, please refer to
Exhibit 99.1 hereto entitled "Factors Affecting Future Operating Results".
RESULTS OF OPERATIONS
ThreeSix Months Ended March 31,June 30, 2000 Compared to ThreeSix Months Ended March 31,June 30, 1999
Net revenues increased $65.5$140.6 million or 76.4%76.6% to $151.3$324.2 million for the threesix
months ended March 31,June 30, 2000 as compared to the same period in 1999. This increase
was attributable to the Company's acquisitions during 19992000 and 20001999 and internal
growth within the Company's existing markets.
Operating expenses, exclusive of depreciation and amortization, increased $36.9$74.5
million or 73.9%73.7% for the threesix months ended March 31,June 30, 2000 as compared to the same
period in 1999. This was primarily the result of the additional operating
expenses related to the operations of acquired outdoor advertising assets and
the continued development of the logo sign program.
Depreciation and amortization expense increased $41.4$85.0 million or 131.2%132.4% from
$31.6$64.2 million for the threesix months ended March 31,June 30, 1999 to $73.0$149.2 million for the
threesix months ended March 31,June 30, 2000 as a result of an increase in capitalized assets
resulting from the Company's recent acquisition activity.
Due to the above factors, operating income decreased $12.8$18.9 million or 103.2% to
an operating loss of $8.4$0.6 million for threesix months ended March 31,June 30, 2000 from
operating income of $4.3$18.3 million for the same period in 1999.
Interest expense increased $14.8$32.9 million from $18.1$36.4 million for the threesix months
ended March 31,June 30, 1999 to $32.9$69.3 million for the same period in 2000 as a result of
additional borrowings under the Company's bank credit facility to fund increased
acquisition activity and the issuance of $287.5 million
convertible notes in August 1999.increasing interest rates.
There was an income tax benefit of $12.0$19.7 million for the threesix months ended March 31,June
30, 2000 as compared to an income tax benefit of $2.8$1.8 million for the same
period in 1999. The effective tax rate for the threesix months ended March
31,June 30, 2000 is
approximately 29.0%28.5%,
-12-
15
which is less than statutory rates due to permanent differences resulting from
non-deductible amortization of goodwill.
-11-
15
Due to the adoption of SOP 98-5 "Reporting on the Costs of Start-Up Activities",
which requires costs of start-up activities and organization costs to be
expensed as incurred, the Company recognized an expense of $.8 million as a
cumulative effect of a change in accounting principle for the threesix months ended
March 31,June 30, 1999. This expense is a one time adjustment to recognize start-up
activities and organization costs that were capitalized in prior periods.
As a result of the above factors, the Company recognized a net loss for the threesix
months ended March 31,June 30, 2000 of $29.0$49.4 million, as compared to a net loss of $10.7$15.7
million for the same period in 1999.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Revenues for the three months ended June 30, 2000 increased $75.2 million or
76.8% to $173.0 million from $97.8 million for the same period in 1999.
Operating expenses, exclusive of depreciation and amortization, for the three
months ended June 30, 2000 increased $37.7 million or 73.5% over the same period
in 1999.
Depreciation and amortization expense increased $43.5 million or 133.5% from
$32.7 million for three months ended June 30, 1999 to $76.2 million for the
three months ended June 30, 2000.
Operating income decreased $6.1 million or 43.7% to $7.8 million for the three
months ended June 30, 2000 as compared to $13.9 million for the same period in
1999.
Interest expense increased $18.2 million from $18.2 million for the three months
ended June 30, 1999 to $36.4 million for the same period in 2000.
The Company recognized a net loss for the three months ended June 30, 2000 of
$20.4 million as compared to a net loss of $5.0 million for the same period in
1999.
The results for the three months ended June 30, 2000 were affected by the same
factors as the six months ended June 30, 2000. Reference is made to the
discussion of the six month results.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and revolving credit borrowings. Its acquisitions have been
financed primarily with borrowed funds and the issuance of Class A common
stock.debt and equity
securities.
During the threesix months ended March 31,June 30, 2000, the Company financed the cash portion
of its acquisition activity of approximately $93.9$230.7 million with borrowings
under the Company's bank credit facility. At March 31,June 30, 2000, following these
acquisitions, the Company had $130$249 million available under the Revolving
Facility and believes that this availability coupled with internally generated
funds will be sufficient for the foreseeable future to satisfy all debt service
obligations and to finance additional acquisition activity and current
operations.
The Company's net cash provided by operating activities increased $3.0$24.5 million
from $33.1 million for the threesix months ended March 31,June 30, 1999 to $57.6 million for
the six months ended June 30, 2000 due primarily to an increase in noncash items
of $31.8$71.6 million, which includes an increase in depreciation and amortization of
$41.4$85.0 million offset by a decrease in deferred taxes of $15.8 million and an
increase in the income tax benefitprovision for doubtful accounts of $10.2$1.8 million. The increase in
noncash items was offset by a decrease in net earnings of $33.7 million, an
increase in net
lossreceivables of $18.3$3.5 million, a decreasean increase in accruedprepaid expenses of $4.8$7.5
million and an increase in receivablesaccrued expenses of $7.3$1.0 million. Net cash used in
investing activities increased $16.0$107.3
-13-
16
million from $87.9$169.3 million for the threesix months ended March 31,June 30, 1999 to $103.9$276.6
million for the same period in 2000. This increase was due to a $7.2$91.6 million
increase in acquisitionsacquisition of new markets a $2.2 million increase
in notes receivable, and a $6.4 millionan increase in capital expenditures.expenditures
of $13.4 million. Net cash provided by financing activities for the threesix months
ended March 31,June 30, 2000 is $93.1$222.1 million due significantly to $93.0$224.0 million in net
borrowings under credit agreements which was used primarily to finance
acquisitions.
In June 2000, Lamar Media Corp. finalized an incremental loan agreement with its
lenders in which Media received commitments for $250 million of the previously
uncommitted $400 million incremental facility. The proceeds of this facility
were used to finance acquisition activity duringpay down the period.revolving bank credit facility.
LAMAR MEDIA CORP.
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Media for the six month and three monthsmonth periods
ended March 31,June 30, 2000 and 1999. This discussion should be read in conjunction with
the consolidated financial statements of Lamar Media and the related notes.
The following discussion is a summary of the key factors management considers
necessary in reviewing Lamar Media's results of operations, liquidity and
capital resources.operations. The future operating
results of Lamar Media may differ materially from the results described below.
For a discussion of certain factors which may affect Lamar Media's future
operating performance, please refer to Exhibit 99.1 hereto entitled "Factors
Affecting Future Operating Results".
-12-
16
RESULTS OF OPERATIONS
ThreeSix Months Ended March 31,June 30, 2000 Compared to ThreeSix Months Ended March 31,June 30, 1999
Net revenues increased $65.5$140.6 million or 76.4%76.6% to $151.3$324.2 million for the threesix
months ended March 31,June 30, 2000 as compared to the same period in 1999. This increase
was attributable to Lamar Media's acquisitions during 19992000 and 20001999 and internal
growth within Lamar Media's existing markets.
Operating expenses, exclusive of depreciation and amortization, increased $36.5$73.6
million or 73.1%72.8% for the threesix months ended March 31,June 30, 2000 as compared to the same
period in 1999. This was primarily the result of the additional operating
expenses related to the operations of acquired outdoor advertising assets and
the continued development of the logo sign program.
Depreciation and amortization expense increased $40.7$83.3 million or 129.1%129.7% from
$31.6$64.2 million for the threesix months ended March 31,June 30, 1999 to $72.3$147.5 million for the
threesix months ended March 31,June 30, 2000 as a result of an increase in capitalized assets
resulting from Lamar Media's recent acquisition activity.
Due to the above factors, operating income decreased $11.7$16.3 million or 89.1% to
an operating lossincome of $7.4$2.0 million for threesix months ended March 31,June 30, 2000 from
operating income of $4.3$18.3 million for the same period in 1999.
Interest expense increased $14.7$32.9 million from $18.2$36.4 million for the threesix months
ended March 31,June 30, 1999 to $32.9$69.3 million for the same period in 2000 as a result of
additional borrowings under Lamar Media's bank credit facility to fund increased
acquisition activity and the issuance of $287.5 million
convertible notes in August 1999.increasing interest rates.
There was an income tax benefit of $11.6$18.7 million for the threesix months ended March 31,June
30, 2000 as compared to an income tax benefit of $2.8$1.8 million for the same
period in 1999. The effective tax rate for the threesix months ended March
31,June 30, 2000 is
approximately 29.1%28.2% which is less than statutory rates due to permanent
differences resulting from non-deductible amortization of goodwill.
-14-
17
Due to the adoption of SOP 98-5 "Reporting on the Costs of Start-Up Activities"
which requires costs of start-up activities and organization costs to be
expensed as incurred, Lamar Media recognized an expense of $.8 million as a
cumulative effect of a change in accounting principle for the threesix months ended
March 31,June 30, 1999. This expense is a one time adjustment to recognize start-up
activities and organization costs that were capitalized in prior periods.
As a result of the above factors, Lamar Media recognized a net loss for the threesix
months ended March 31,June 30, 2000 of $28.3$47.8 million, as compared to a net loss of $10.7$15.7
million for the same period in 1999.
-13-Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Revenues for the three months ended June 30, 2000 increased $75.2 million or
76.8% to $173.0 million from $97.8 million for the same period in 1999.
Operating expenses, exclusive of depreciation and amortization, for the three
months ended June 30, 2000 increased $37.2 million or 72.5% over the same period
in 1999.
Depreciation and amortization expense increased $42.5 million or 130.3% from
$32.7 million for three months ended June 30, 1999 to $75.2 million for the
three months ended June 30, 2000.
Operating income decreased $4.5 million or 32.7% to $9.4 million for the three
months ended June 30, 2000 as compared to $13.9 million for the same period in
1999.
Interest expense increased $18.2 million from $18.2 million for the three
months ended June 30, 1999 to $36.4 million for the same period in 2000.
Lamar Media recognized a net loss for the three months ended June 30, 2000 of
$19.4 million as compared to a net loss of $5.0 million for the same period in
1999.
The results for the three months ended June 30, 2000 were affected by the same
factors as the six months ended June 30, 2000. Reference is made to the
discussion of the six month results.
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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to interest rate risk in connection with variable rate
debt instruments issued by the Company. The Company does not enter into market
risk sensitive instruments for trading purposes. The information below
summarizes the Company's interest rate risk associated with its principal
variable rate debt instruments outstanding at March 31,June 30, 2000.
Loans under Lamar Media's New Bank Credit Agreementbank credit facility bear interest at variable rates
equal to the Chase Prime Rate plus the applicable margin or LIBOR plus the
applicable margin. Because the Chase Prime Rate or LIBOR may increase or
decrease at any time, the Company and Lamar Media areis exposed to market risk as a result of the
impact that changes in these base rates may have on the interest rate
applicable to borrowings under the New Bank Credit Agreement.bank credit facility. Increases in the
interest rates applicable to borrowings under the New Bank Credit Agreementbank credit facility would
result in increased interest expense and a reduction in the Company's and Lamar Media's
net
income and after tax cash flow.
At March 31,June 30, 2000, there was approximately $869 million$1.0 billion of aggregate indebtedness
outstanding under the New Bank Credit Agreement,Lamar Media's bank credit facility, or approximately 50.9%54.5% of
the Company's and Lamar Media's outstanding long-term debt on that date, bearing interest at
variable rates. The aggregate interest expense for the threesix months ended March 31,June 30,
2000 with respect to borrowings under the Bank
Credit Agreementbank credit facility was $16.4$35.9 million
and the weighted average interest rate applicable to borrowings under these
credit facilities during the threesix months ended March 31,June 30, 2000 was 8.0%8.3%. Assuming
that the weighted average interest rate was 200-basis points higher (that is
10.0%10.3% rather than 8.0%8.3%), then the Company's
and Lamar Media's March 31, 2000 interest expense would have
been approximately $4.0$8.6 million higher resulting in a $2.5$5.3 million decreaseincrease in
the Company's and
Lamar Media's threesix months ended March 31,June 30, 2000 net incomeloss and a related decrease in
after tax cash flow.
The Company attempts to mitigate the interest rate risk resulting from its
variable interest rate long-term debt instruments by also issuing fixed rate
long-term debt instruments and maintaining a balance over time between the
amount of the Company's variable rate and fixed rate indebtedness. In addition,
the Company has the capability under the New Bank Credit Agreementbank credit facility to fix the
interest rates applicable to its borrowings at an amount equal to LIBOR plus the
applicable margin for periods of up to twelve months, which would allow the
Company to mitigate the impact of short-term fluctuations in market interest
rates. In the event of an increase in interest rates, the Company may take
further actions to mitigate its exposure. The Company cannot guarantee, however,
that the actions that it may take to mitigate this risk will be feasible or
that, if these actions are taken, that they will be effective.
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ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-14-HOLDERS.
The Company held its annual meeting of stockholders on Thursday, May 25, 2000.
The following represents the results of the proposals submitted to a vote of
security holders:
Proposal to Elect Directors
The following persons were elected to the Company's Board of Directors for a
term of office expiring at the Company's 2001 Annual Meeting of Stockholders:
Votes Cast For Votes Withheld
-------------- --------------
Kevin P. Reilly, Jr. 211,506,097 145,881
Sean E. Reilly 211,538,427 113,488
Keith A. Istre 211,538,427 113,488
Charles W. Lamar, III 211,538,427 113,488
Gerald H. Marchand 211,538,427 113,488
Wendell S. Reilly 211,458,427 193,488
T. Everett Stewart 211,538,427 113,488
Stephen P. Mumblow 211,538,427 113,488
R. Steven Hicks 211,538,427 113,488
Thomas O. Hicks 211,538,427 113,488
Approval of the Amendment to the Company's 1996 Equity Incentive Plan
FOR AGAINST ABSTAIN
--- ------- -------
200,583,680 9,212,727 31,423
Approval of the Amendment to the Company's Restated Certificate of Incorporation
FOR AGAINST ABSTAIN
--- ------- -------
211,303,051 321,224 27,640
Approval of the Assumption of Lamar Advertising Company's 1996 Equity Incentive
Plan
FOR AGAINST ABSTAIN
--- ------- -------
201,109,477 8,688,830 29,523
Approval of the 2000 Employee Stock Purchase Plan
FOR AGAINST ABSTAIN
--- ------- -------
209,281,296 545,144 1,390
The Company's 2001 annual meeting of stockholders has been scheduled for May 24,
2001.
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PART II - OTHER INFORMATION
ItemITEM 6. Exhibits and Reports on FormEXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
2.1 Agreement and Plan of Merger dated as of July 20, 1999 among Lamar
Media Corp., Lamar New Holding Co., and Lamar Holdings Merge Co.
Previously filed as exhibit 2.1 to the Company's Current Report on
Form 8-K filed on July 22, 1999 (File No. 0-30242) and incorporated
herein by reference.
3.1 Certificate of Incorporation of Lamar New Holding Co. Previously filed
as exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1999 (File No. 0-20833) filed on August 16, 1999
and incorporated herein by reference.
3.2 Certificate of Amendment of Certificate of Incorporation of Lamar New
Holding Co. (whereby the name of Lamar New Holding Co. was changed to
Lamar Advertising Company). Previously filed as exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the period ended JuneJun 30,
1999 (File No. 0-20833) filed on August 16, 1999 and incorporated
herein by reference.
3.3 Certificate of Amendment of Certificate of Incorporation of the
Company. Filed herewith.
3.4 Bylaws of the Company. Previously filed as exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1999 (File No. 0-20833) filed on August 16, 1999 and incorporated
herein by reference.
3.43.5 Amended and Restated Bylaws of Lamar Media Corp. Previously filed as
exhibit 3.1 to Lamar Media's Quarterly Report on Form 10-Q for the
period ended September 30, 1999 (File No. 1-12407) filed on November
12 1999 and incorporated herein by reference.
4.1 Supplemental Indenture to the Indenture dated November 15, 1996 among
Lamar Media Corp., certain of its subsidiaries and State Street Bank
and Trust Company, as Trustee, dated March 2,June 1, 2000 delivered by Lamar Advan,Outdoor
West, Inc. of Georgia and Outdoor West, Inc. of Tennessee and, in
substantially identical agreements, by the scheduledschedule additional
subsidiary guarantors. Filed herewith.
4.2 Supplemental Indenture to the Indenture dated August 15, 1997 among
Outdoor Communications, Inc., certain of its subsidiaries and First
Union National Bank, as Trustee, dated March 2,June 1, 2000 delivered by
Lamar
Advan,Outdoor West, Inc. of Georgia and Outdoor West, Inc. of Tennessee and,
in substantially identical agreements, by the scheduled additional
subsidiary guarantors. Filed herewith.
4.3 Supplemental Indenture to the Indenture dated September 25, 1997 among
Lamar Media Corp., certain of its subsidiaries and State Street Bank
and Trust Company, as Trustee, dated March 2,June 1, 2000 delivered by Lamar Advan,Outdoor
West, Inc. of Georgia and Outdoor West, Inc. of Tennessee and, in
substantially identical agreements, by the scheduled additional
subsidiary guarantors. Filed herewith.
-15-
19
10.1 Joinder Agreement to the Lamar Media Corp. Credit Agreement dateddate
August 13, 1999 by Lamar Advan,Outdoor West, Inc. of Georgia and Outdoor West,
Inc. of Tennessee and, in substantially identical agreements, by the
scheduled additional subsidiary guarantors, in favor of The Chase
Manhattan Bank, as Administrative Agent dated March 2,June 1, 2000. Filed
herewith.
-18-
21
10.2 1996 Equity Incentive Plan, as amended. Filed herewith.
10.3 2000 Employee Stock Purchase Plan. Filed herewith.
10.4 Series A-1 Incremental Loan Agreement among Lamar Advertising Company,
Lamar Media Corp. and certain of its subsidiaries, the Series A-1
Lenders and the Chase Manhattan Bank, as Administrative Agent, dated
as of May 31, 2000. Filed herewith.
10.5 Series A-2 and Series B-1 Incremental Loan Agreement among Lamar
Advertising Company, Lamar Media Corp. and certain of its
subsidiaries, the Series A-2 and B-1 Lenders and the Chase Manhattan
Bank, as Administrative Agent, dated as of June 22, 2000. Filed
herewith.
27.1 Financial Data Schedule for the Company. Filed herewith.
27.2 Financial Data Schedule for Lamar Media Corp. Filed herewith.
99.1 Factors Affecting Future Operating Results of the Company and Lamar
Media. Filed herewith.
(b) Reports on Form 8-K
Reports on Form 8-K were filed with the Commission during the first
quarter of 2000 to report the following items as of the dates
indicated:
On February 9, 2000, the Company filed a report on Form 8-K
in order to update the financial statements filed on November
23, 1999, Lamar Advertising Company filed the report to
include updated pro forma financial information of Lamar
Advertising Company giving effect to the acquisition of
Chancellor Media Corporation.None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAMAR ADVERTISING COMPANY
DATED: May 12,August 11, 2000 BY: /s/ KEITH A. ISTRE
---------------------------------Keith Istre
---------------
Keith A. Istre
Chief Financial and Accounting
Officer Treasurer and Director
LAMAR MEDIA CORP.
DATED: August 11, 2000 BY: /s/ KEITH A. ISTRE
---------------------------------Keith Istre
---------------
Keith A. Istre
Chief Financial and Accounting
Officer Treasurer and Director
-16--19-
2022
EXHIBIT INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- ------- -----------
2.1 Agreement and Plan of Merger dated as of July 20, 1999 among Lamar
Media Corp., Lamar New Holding Co., and Lamar Holdings Merge Co.
Previously filed as exhibit 2.1 to the Company's Current Report on
Form 8-K filed on July 22, 1999 (File No. 0-30242) and incorporated
herein by reference.
3.1 Certificate of Incorporation of Lamar New Holding Co. Previously filed
as exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1999 (File No. 0-20833) filed on August 16, 1999
and incorporated herein by reference.
3.2 Certificate of Amendment of Certificate of Incorporation of Lamar New
Holding Co. (whereby the name of Lamar New Holding Co. was changed to
Lamar Advertising Company). Previously filed as exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the period ended JuneJun 30,
1999 (File No. 0-20833) filed on August 16, 1999 and incorporated
herein by reference.
3.3 Certificate of Amendment of Certificate of Incorporation of the
Company. Filed herewith.
3.4 Bylaws of the Company. Previously filed as exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1999 (File No. 0-20833) filed on August 16, 1999 and incorporated
herein by reference.
3.43.5 Amended and Restated Bylaws of Lamar Media Corp. Previously filed as
exhibit 3.1 to Lamar Media's Quarterly Report on Form 10-Q for the
period ended September 30, 1999 (File No. 1-12407) filed on November
12 1999 and incorporated herein by reference.
4.1 Supplemental Indenture to the Indenture dated November 15, 1996 among
Lamar Media Corp., certain of its subsidiaries and State Street Bank
and Trust Company, as Trustee, dated March 2,June 1, 2000 delivered by Lamar Advan,Outdoor
West, Inc. of Georgia and Outdoor West, Inc. of Tennessee and, in
substantially identical agreements, by the scheduledschedule additional
subsidiary guarantors. Filed herewith.
4.2 Supplemental Indenture to the Indenture dated August 15, 1997 among
Outdoor Communications, Inc., certain of its subsidiaries and First
Union National Bank, as Trustee, dated March 2,June 1, 2000 delivered by
Lamar
Advan,Outdoor West, Inc. of Georgia and Outdoor West, Inc. of Tennessee and,
in substantially identical agreements, by the scheduled additional
subsidiary guarantors. Filed herewith.
4.3 Supplemental Indenture to the Indenture dated September 25, 1997 among
Lamar Media Corp., certain of its subsidiaries and State Street Bank
and Trust Company, as Trustee, dated March 2,June 1, 2000 delivered by Lamar Advan,Outdoor
West, Inc. of Georgia and Outdoor West, Inc. of Tennessee and, in
substantially identical agreements, by the scheduled additional
subsidiary guarantors. Filed herewith.
10.1 Joinder Agreement to the Lamar Media Corp. Credit Agreement dateddate
August 13, 1999 by Lamar Advan,Outdoor West, Inc. of Georgia and Outdoor West,
Inc. of Tennessee and, in substantially identical agreements, by the
scheduled additional subsidiary guarantors, in favor of The Chase
Manhattan Bank, as Administrative Agent dated March 2,June 1, 2000. Filed
herewith.
23
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.2 1996 Equity Incentive Plan, as amended. Filed herewith.
10.3 2000 Employee Stock Purchase Plan. Filed herewith.
10.4 Series A-1 Incremental Loan Agreement among Lamar Advertising Company,
Lamar Media Corp. and certain of its subsidiaries, the Series A-1
Lenders and the Chase Manhattan Bank, as Administrative Agent, dated
as of May 31, 2000. Filed herewith.
10.5 Series A-2 and Series B-1 Incremental Loan Agreement among Lamar
Advertising Company, Lamar Media Corp. and certain of its
subsidiaries, the Series A-2 and B-1 Lenders and the Chase Manhattan
Bank, as Administrative Agent, dated as of June 22, 2000. Filed
herewith.
27.1 Financial Data Schedule for the Company. Filed herewith.
27.2 Financial Data Schedule for Lamar Media Corp. Filed herewith.
99.1 Factors Affecting Future Operating Results of the Company and Lamar
Media. Filed herewith.