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 June 30, 20002001
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)their charters)
Delaware 72-1449411
Delaware 72-1205791
(State or other jurisdiction of incorporation or (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 August 10, 2000: 74,945,6288, 2001: 82,524,145
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of August 10, 2000: 17,000,0008, 2001: 16,638,136
The number of shares of Lamar Media Corp. common stock outstanding as of
August 10, 2000:8, 2001: 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
CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of
June 30, 20002001 and December 31, 19992000............................................... 1
Condensed Consolidated Statements of Operations for the three
months ended June 30, 20002001 and June 30, 19992000 and six months
ended June 30, 20002001 and June 30, 19992000............................................. 2
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 20002001 and
June 30, 19992000..................................................................... 3
Notes to Condensed Consolidated Financial
StatementsStatements........................................................................ 4 - 76
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of
June 30, 20002001 and December 31, 1999 82000............................................... 7
Condensed Consolidated Statements of Operations for the three
months ended June 30, 20002001 and June 30, 19992000 and six months
ended June 30, 20002001 and June 30, 1999 92000............................................. 8
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 20002001 and
June 30, 1999 102000..................................................................... 9
Notes to Condensed Consolidated Financial
Statements 11Statements........................................................................ 10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12Operations.................................... 11 - 15
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risks 16Risks..........................................................................16
PART II - OTHER INFORMATION
ITEM 4. Submission of Mattersmatters to a Votevote of Security Holders 17
PART II - OTHER INFORMATIONsecurity holders...................................17
ITEM 6. Exhibits and Reports on Form 8-K 188-K.................................................18 - 19
Signatures 19Signatures............................................................................19
3
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)
June 30, December 31,
Assets2001 2000
1999
------------ ---------------------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 11,5612,770 $ 8,40172,340
Receivables, net 93,114 81,226108,224 91,674
Prepaid expenses 30,005 21,52436,703 23,164
Other current assets 14,948 14,342
------------ ------------9,820 8,738
----------- -----------
Total current assets 149,628 125,493
------------ ------------157,517 195,916
----------- -----------
Property, plant and equipment 1,568,531 1,412,6051,733,409 1,630,866
Less accumulated depreciation and amortization (297,364) (218,893)
------------ ------------(393,238) (335,991)
----------- -----------
Net property, plant and equipment 1,271,167 1,193,712
------------ ------------1,340,171 1,294,875
----------- -----------
Intangible assets 2,068,268 1,874,1772,222,404 2,129,733
Other assets - non-current 22,982 13,563
------------ ------------19,661 17,249
----------- -----------
Total assets $ 3,512,0453,739,753 $ 3,206,945
============ ============
Liabilities and Stockholders' Equity3,637,773
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 9,96712,005 $ 11,4929,918
Accrued expenses 33,300 40,724
Current maturities of long-term debt 4,599 4,318
Accrued expenses 38,643 57,65397,641 66,814
Deferred income 10,654 11,243
------------ ------------11,945 11,005
----------- -----------
Total current liabilities 63,863 84,706154,891 128,461
Long-term debt 1,835,627 1,611,4631,719,386 1,671,466
Deferred income taxes 137,143 112,412141,406 140,452
Other liabilities 8,234 6,835
------------ ------------8,341 7,939
----------- -----------
Total liabilities 2,044,867 1,815,416
------------ ------------2,024,024 1,948,318
----------- -----------
Stockholders' equity:Equity:
Series AA preferred stock, par value $.001, $63.80
cumulative dividends, authorized 1,000,0005,720 shares;
5,719.49 shares issued and outstanding at 2001 and 2000 -- --
Class A preferred stock, par value $638, $63.80
cumulative dividends, 10,000 shares authorized;
0 shares issued and 1999outstanding at 2001 and 2000 -- --
Class A common stock, $.001 par value, $.001, 175,000,000 shares
authorized, 73,904,086authorized; 82,524,045 shares and 70,576,25180,101,793
shares issued and outstanding at 2001 and 2000, and 1999, respectively 74 7183 80
Class B common stock, $.001 par value, $.001, 37,500,000 shares
authorized,authorized; 16,638,136 and 17,000,000 shares and 17,449,997 shares issued and
outstanding at 20002001 and 1999,2000, respectively 17 17
Additional paid-in capital 1,604,116 1,478,916paid-in-capital 1,952,446 1,871,303
Accumulated deficit (137,029) (87,475)
------------ ------------(236,817) (181,945)
----------- -----------
Stockholders' equity 1,467,178 1,391,529
------------ ------------1,715,729 1,689,455
----------- -----------
Total liabilities and stockholders' equity $ 3,512,0453,739,753 $ 3,206,945
============ ============3,637,773
=========== ===========
See accompanying notes to condensed consolidated financial statements.
-1-
4
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2001 2000 19992001 2000 1999
------------ ------------ ------------ ------------
Net revenues $ 191,788 $ 172,953 $ 97,809362,173 $ 324,220 $ 183,575
------------ ------------ ------------ ------------
Operating expenses:expenses (income):
Direct advertising expenses 61,315 53,626 30,481122,851 106,138 60,245
General and administrative expenses 36,436 35,261 20,75474,132 69,465 40,853
Depreciation and amortization 88,823 76,230 32,652174,230 149,200
64,213Gain on disposition of assets (803) (105) (1,019) (104)
------------ ------------ ------------ ------------
165,117 83,887 324,803 165,311185,771 165,012 370,194 324,699
------------ ------------ ------------ ------------
Operating income (loss) 7,836 13,922 (583) 18,2646,017 7,941 (8,021) (479)
------------ ------------ ------------ ------------
Other expense (income):
Interest income (178) (369) (269)(422) (696) (955)
Interest expense 32,972 36,401 18,23468,752 69,291 36,379
Gain on disposition of assets (105) (141) (104) (477)
------------ ------------ ------------ ------------
35,927 17,824 68,491 34,94732,794 36,032 68,330 68,595
------------ ------------ ------------ ------------
Loss before income taxes and cumulative
effect of a change in accounting
principletax benefit (26,777) (28,091) (3,902)(76,351) (69,074) (16,683)
Income tax expense (benefit)benefit (6,377) (7,693) 1,076(21,661) (19,702) (1,766)
------------ ------------ ------------ ------------
Loss before cumulative effect of a
change in accounting principle (20,398) (4,978) (49,372) (14,917)
------------ ------------ ------------ ------------
Cumulative effect of a change in
accounting principle -- -- -- (767)
------------ ------------ ------------ ------------
Net loss (20,400) (20,398) (4,978)(54,690) (49,372) (15,684)
Preferred stock dividends 91 18391 182 274182
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (20,491) $ (20,489) $ (5,161)(54,872) $ (49,554)
$ (15,958)
============------------ ============ ============ ============
Loss per common share - basic and diluted:
Loss before accounting changediluted $ (.21) $ (.23) $ (.08)(.56) $ (.56) $ (.25)
Cumulative effect of a change in
accounting principle (--) (--) (--) (.01)
------------ ------------ ------------ ------------
Net loss $ (.23) $ (.08) $ (.56) $ (.26)
============ ============ ============ ============
Weighted average common shares outstanding 98,209,271 89,512,428 61,227,40697,903,588 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 98,209,271 89,512,428 61,227,40697,903,588 88,989,536 61,185,610
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
-2-
5
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
-----------------------
2001 2000 1999
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (49,372)(54,690) $ (15,684)(49,372)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 174,230 149,200 64,213
Cumulative effect of a change in accounting
principle -- 767
Gain on disposition of assets (1,019) (104)
(477)
Deferred taxestax benefit (22,013) (20,279) (4,469)
Provision for doubtful accounts 3,602 2,329 500
Changes in operating assets and liabilities:
Decrease (Increase) decrease in:
Receivables (10,438) (6,945)(18,238) (13,789)
Prepaid expenses (11,436) (7,635) (150)
Other assets 471 (207)
1,023
Increase (Decrease)(decrease) in:
Trade accounts payable 2,088 (1,524) 67
Accrued expenses (10,657) (3,456)
(4,441)Other liabilities 145 52
Deferred income 196 (920)
(1,373)
Other liabilities 52 36
---------- ------------------- ---------
Net cash provided by operating activities 57,646 33,067
---------- ----------62,679 54,295
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (3,351) (1,590)
Acquisition of new markets (227,318) (230,652) (139,064)
Capital expenditures (36,925) (43,700) (30,274)
Proceeds from disposition of assets 3,334 1,122
1,602
---------- ------------------- ---------
Net cash used in investing activities (276,581) (169,326)
---------- ----------(260,909) (273,230)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs -- (1,448) --
Net proceeds from issuance of common stock 50,217 1,893 2,194
Principal payments on long-term debt (2,375) (2,168) (47,009)
Net borrowings under credit agreements 81,000 224,000 57,000
Dividends (182) (274)
---------- ----------(182)
--------- ---------
Net cash provided by financing activities 128,660 222,095
11,911
---------- ------------------- ---------
Net (decrease) increase (decrease) in cash and cash equivalents (69,570) 3,160 (124,348)
Cash and cash equivalents at beginning of period 72,340 8,401
128,597
---------- ------------------- ---------
Cash and cash equivalents at end of period $ 2,770 $ 11,561
$ 4,249
========== =================== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
---------
Cash paid for interest $ 67,301 $ 69,047
$ 36,196
========== =================== =========
Cash paid for state and federal income taxes $ 781 $ 1,616
$ 1,485
========== =================== =========
Common stock issuance related to acquisitions $ 29,000 $ 122,031
$ 475
========== =================== =========
See accompanying notes to condensed consolidated financial statements.
-3-
6
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
1. General
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.
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.
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.net earnings.
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, 2000,1, 2001, the Company purchased the assets of antwo outdoor company in the
Company's Northeastern Regionadvertising
companies, American Outdoor Advertising, LLC and Appalachian Outdoor Advertising
Co., Inc. for a total cash purchase price of approximately $33,600.
Effective May$31,500 and $20,000,
respectively.
On February 1, 2000,2001, the Company purchased all of the outstanding common stock
of Bowlin Outdoor West,Advertising and Travel Centers, Inc. for a total cash purchase
price of approximately $39,900.
In addition, on May 24, 2000,$44,400. The purchase price consisted of approximately
$15,100 cash and the issuance of 725,000 shares of Lamar Advertising Company
valued at $29,000.
Effective April 1, 2001, the Company purchased all of the outstanding common
stock of AdvantageDeLite Outdoor Company,Advertising, LLC and DeLite Outdoor Advertising, Inc.
for a cash purchase price of approximately $76,900 and$43,000.
On April 1, 2001, the issuanceCompany purchased certain assets of 2,300,000 sharesPNE Media, LLC for
a cash purchase price of Lamar's Class A
common stock valued at approximately $92,805.$21,000.
During the six months ended June 30, 2000,2001, the Companycompany completed 4364 additional
acquisitions of outdoor advertising and transit assets for aan aggregate cash
purchase price of approximately $52,200.$96,800.
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 havepurchase price has 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 costspurchase price in the above transactions.
-4-
7
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Current 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 $American Outdoor 557 1,185 18,682 11,112 -- $ 708 $ 5,632
Northeast Region 480 2,604 16,804 14,102 -- 385 --
AcquisitionAppalachian Outdoor West 1,025 10,539 21,340 17,222325 5,822 2,666 11,512 -- 1,192 9,040
Advantage325 --
Bowlin Outdoor 3,647 64,488 80,851 58,108 167 6,074 31,4452,041 29,173 6,788 23,889 -- 3,307 14,178
PNE 180 4,879 4,500 11,344 -- -- --
Delite 1,159 10,864 20,033 19,435 -- 543 7,968
Other 277 14,097 25,496 13,209 -- 727 162
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 5,916 $ 100,063 $ 166,277 $ 113,167 $ 167 $ 9,086 $ 46,279
========== ========== ========== ========== ========== ========== ==========1,009 28,004 31,116 36,408 2,450 482 1,681
----------------------------------------------------------------------------------------------
5,271 79,927 83,785 113,700 2,450 4,657 23,827
==============================================================================================
Summarized below are certain unaudited pro forma statementstatements of operations data
for the three months ended June 30, 2000 and 1999 and the six months ended June 30, 20002001 and 1999June 30, 2000 as if
each of the above acquisitions and the acquisitions occurring in 1999,2000, which
were fully described in the Company's December 31, 19992000 Annual Report on Form
10K,10-K, had been consummated as of January 1, 1999.2000. 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,
----------------------- ----------------------
2001 2000 19992001 2000
1999
------------ ------------ ------------ --------------------- ----------- ----------- ---------
Net revenues $ 176,954191,788 $ 159,771188,137 $ 336,093 $ 308,225
============ ============ ============ ============365,199 $358,458
========= ========== ========== ========
Net loss applicable to
common stock $ (23,337)(20,491) $ (27,808)(26,057) $ (56,276) $ (62,020)
============ ============ ============ ============(55,192) $(62,594)
========= ========== ========== ========
Net loss per common share -
basic $ (.26) $ (.31) $ (.62) $ (.69)
============ ============ ============ ============
Net loss per common share -and diluted $ (.26)(.21) $ (.31)(.28) $ (.62)(.56) $ (.69)
============ ============ ============ ============(.68)
========= ========== ========== ========
-5-
8
4.3. Summarized Financial Information of Subsidiaries
Separate financial statements of each of the Company's direct or indirect wholly-ownedwholly
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 Guarantorsguarantees are jointlyfull and severally liable under
the guarantees,unconditional and the aggregate assets, liabilities, earningsjoint 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 Companyseveral
and the only subsidiary of the Company that is not a Guarantor,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,considered minor. Lamar
Media's ability to make distributions to Lamar Advertising is restricted under
the American Instituteterms of Certified Public Accountants issued
Statement of Position ("SOP 98-5"), Reporting onits bank credit facility and 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.indenture relating to Lamar
Media's outstanding notes.
-5-
8
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. 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 earningsearning 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 6,683,547 and 6,818,549 and 555,558 for the three months ended June 30,
2001 and 2000, and 19996,705,656 and 6,936,816 and 579,170 for the six months ended June 30,
2001 and 2000, and 1999, respectively.
7. Stockholders' Equity
On May 25,5. New Accounting Pronouncements
In June 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 approvedFASB issued SFAS No. 138, "Accounting for Derivative
Instruments and Hedging Activities -- an amendment of FASB No. 133", which
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
assets or liabilities in the statement of financial position and measure those
instruments at fair value. On January 1, 2001, the Company adopted SFAS No. 133.
The Company's adoption of SFAS No. 133 did not have any affect on the financial
position or results of operations in 2001.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Company's 1996 Equity Incentive PlanImpairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company is required to adopt the provisions of Statement 141 immediately,
and Statement 142 effective January 1, 2002. Furthermore, goodwill and
intangible assets determined to have an indefinite useful life acquired in a
purchase business combination completed after June 30, 2001, but before
Statement 142 is adopted in full will not be amortized but will continue to be
evaluated for impairment in accordance with the appropriate pre-Statement 142
literature. The Company is currently assessing the impact of Statements 141 and
142 on its financial condition and results of operations.
-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.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
June 30, December 31,
Assets 2001 2000
1999
------------ ------------
Current assets:----------- -----------
Current assets:
Cash and cash equivalents $ 11,5612,770 $ 8,40172,340
Receivables, net 93,104 80,671107,155 91,628
Prepaid expenses 30,005 21,52436,703 23,164
Other current assets 22,772 25,193
------------ ------------15,587 15,966
----------- -----------
Total current assets 157,442 135,789
------------ ------------162,215 203,098
----------- -----------
Property, plant and equipment 1,568,531 1,412,6051,733,409 1,630,866
Less accumulated depreciation and amortization (297,364) (218,893)
------------ ------------(393,238) (335,991)
----------- -----------
Net property, plant and equipment 1,271,167 1,193,712
------------ ------------1,340,171 1,294,875
----------- -----------
Intangible assets 2,048,154 1,851,9652,199,372 2,106,493
Other assets - non-current 22,982 13,563
------------ ------------18,937 17,249
----------- -----------
Total assets $ 3,499,7453,720,695 $ 3,195,029
============ ============3,621,715
=========== ===========
Liabilities and Stockholder's Equity
Current liabilities:
Trade accounts payable $ 9,96712,005 $ 11,4929,918
Accrued expenses 23,244 35,765
Current maturities of long-term debt 4,599 4,318
Accrued expenses 35,051 54,03197,641 66,814
Deferred income 10,654 11,243
------------ ------------11,945 11,005
----------- -----------
Total current liabilities 60,271 81,084144,835 123,502
Long-term debt 1,835,627 1,611,4631,431,886 1,671,466
Deferred income taxes 138,478 112,776146,150 142,052
Other liabilities 8,234 6,835
------------ ------------8,342 7,939
----------- -----------
Total liabilities 2,042,610 1,812,158
------------ ------------1,731,213 1,944,959
----------- -----------
Stockholder's equity:
Common stock, $.01 par value, authorized 3,000 shares;
issued and outstanding 100 shares at June 30, 20002001 and December 31, 19992000 -- --
Additional paid-in capital 1,591,637 1,469,6062,217,769 1,855,421
Accumulated deficit (134,502) (86,735)
------------ ------------(228,287) (178,665)
----------- -----------
Stockholder's equity 1,457,135 1,382,871
------------ ------------1,989,482 1,676,756
----------- -----------
Total liabilities and stockholder's equity $ 3,499,7453,720,695 $ 3,195,029
============ ============3,621,715
=========== ===========
See accompanying notes to condensed consolidated financial statements.
-8--7-
1110
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three Months Endedmonths ended Six Months Endedmonths ended
June 30, June 30,
---------------------- ----------------------
2001 2000 19992001 2000
1999
------------ ------------ ------------ --------------------- --------- --------- ---------
Net revenues $ 191,788 $ 172,953 $ 97,809362,173 $ 324,220
$ 183,575
------------ ------------ ------------ --------------------- --------- --------- ---------
Operating expenses:expenses (income):
Direct advertising expenses 61,315 53,626 30,481122,851 106,138 60,245
General and administrative expenses 36,376 34,775 20,75474,021 68,593 40,853
Depreciation and amortization 87,910 75,189 32,652172,419 147,496
64,213
------------ ------------ ------------ ------------
163,590 83,887 322,227 165,311
------------ ------------ ------------ ------------Gain on disposition of assets (803) (105) (1,019) (104)
--------- --------- --------- ---------
184,798 163,485 368,272 322,123
--------- --------- --------- ---------
Operating income 9,363 13,922 1,993 18,264
------------ ------------ ------------ ------------(loss) 6,990 9,468 (6,099) 2,097
--------- --------- --------- ---------
Other expense (income):
Interest income (178) (369) (269)(422) (696) (955)
Interest expense 29,200 36,401 18,23462,463 69,291
36,379
Gain on disposition of assets (105) (141) (104) (477)
------------ ------------ ------------ ------------
35,927 17,824 68,491 34,947
------------ ------------ ------------ --------------------- --------- --------- ---------
29,022 36,032 62,041 68,595
--------- --------- --------- ---------
Loss before income taxes and cumulative
effect of a change in accounting
principletax benefit (22,032) (26,564) (3,902)(68,140) (66,498) (16,683)
Income tax expense (benefit)benefit (4,556) (7,116) 1,076(18,518) (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$ (17,476) $ (19,448) $ (5,161)(49,622) $ (47,767)
$ (15,958)
============ ============ ============ ===================== ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
-9--8-
1211
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
----------------------
2001 2000
1999
------------ --------------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net loss $ (47,767)(49,622) $ (15,684)(47,767)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 172,419 147,496 64,213
Cumulative effect of a change in accounting
principle -- 767
Gain on disposition of assets (1,019) (104)
(477)
Deferred taxestax benefit (18,869) (19,308) (4,469)
Provision for doubtful accounts 3,602 2,329 500
Changes in operating assets and liabilities:
Decrease (Increase) decrease in:
Receivables (10,992) (6,945)(18,283) (14,343)
Prepaid expenses (11,436) (7,635) (150)
Other assets (357) 3,902
1,023
Increase (Decrease)(decrease) in:
Trade accounts payable 2,088 (1,524) 67
Accrued expenses (15,754) (6,172)
(4,441)Other liabilities 145 52
Deferred income 196 (920)
(1,373)
Other liabilities 52 36
------------ --------------------- ---------
Net cash provided by operating activities 59,357 33,067
------------ ------------63,110 56,006
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (3,351) (1,590)- -------------------------------------
Acquisition of new markets (225,714) (230,652) (139,064)
Capital expenditures (36,925) (43,700) (30,274)
Proceeds from disposition of assets 3,334 1,122
1,602
------------ --------------------- ---------
Net cash used in investing activities (276,581) (169,326)
------------ ------------(259,305) (273,230)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Debt issuance costs (1,448) -- Net proceeds from issuance of common stock -- 2,194(1,448)
Principal payments on long-term debt (2,375) (2,168)
(47,009)Contribution from parent 48,000 --
Net borrowings under credit agreements 81,000 224,000
57,000
Dividends -- (274)
------------ --------------------- ---------
Net cash provided by financing activities 126,625 220,384
11,911
------------ --------------------- ---------
Net (decrease) increase (decrease) in cash and cash equivalents (69,570) 3,160 (124,348)
Cash and cash equivalents at beginning of period 72,340 8,401
128,597
------------ --------------------- ---------
Cash and cash equivalents at end of period $ 2,770 $ 11,561
$ 4,249
============ ===================== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 61,012 $ 69,047
$ 36,196
============ ===================== =========
Cash paid for state and federal income taxes $ 781 $ 1,616
$ 1,485
============ ============
Common stock issuance related to acquisitions $ -- $ 475
============ ===================== =========
Parent company stock contributed for acquisitions $ 29,000 $ 122,031
========= =========
Noncash Financing Activity
Note payable converted to contributed capital $ 287,500 $ --
============ ===================== =========
See accompanying notes to condensed consolidated financial statements.
-10--9-
1312
LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(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 condensed 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 1,2, 3, 4,and 5 7 and 8 to the condensed consolidated financial
statements of Lamar Advertising Company included elsewhere in this report is
substantially equivalent to that required for the condensed 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--10-
1413
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 monthsix-month and three monththree-month periods
ended June 30, 20002001 and 1999.2000. 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 entitledthe
"Factors Affecting Future Operating Results". included in the Company's Annual
Report on Form 10K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission on March 23, 2001.
RESULTS OF OPERATIONS
Six Months Ended June 30, 20002001 Compared to Six Months Ended June 30, 19992000
Net revenues increased $140.6$38.0 million or 76.6%11.7% to $324.2$362.2 million for the six
months ended June 30, 20002001 as compared to the same period in 1999.2000. This increase
was attributable to the Company's acquisitions during 20002001 and 19992000 and internal
growth within the Company's existing markets.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $74.5$21.4 million or 73.7%12.2% for the six months ended
June 30, 20002001 as compared to the same period in 1999.2000. 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.assets.
Depreciation and amortization expense increased $85.0$25.0 million or 132.4%16.8% from
$64.2 million for the six months ended June 30, 1999 to
$149.2 million for the six months ended June 30, 2000 to $174.2 million for the
six months ended June 30, 2001 as a result of an increase in capitalized assets
resulting from the Company's recent acquisition activity.
Due to the above factors, the Company's operating income decreased $18.9loss increased $7.5 million or 103.2% to
an operating loss of $0.6$8.0 million for six months ended June 30, 20002001 from an
operating incomeloss of $18.3$0.5 million for the same period in 1999.
Interest expense increased $32.9 million from $36.4 million for the six months ended June 30, 19992000. This change
was primarily due to $69.3the increase in depreciation and amortization.
Interest expense decreased $0.5 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 increasing interest rates.
There was an income tax benefit of $19.7from $69.3 million for the six months
ended June 30, 2000 as compared to an income tax benefit of $1.8$68.8 million for the same period in 1999.2001 as a result of
declining interest rates during the six months ended June 30, 2001 as compared
to the same period in 2000.
Income tax benefit increased $2.0 million creating a tax benefit of $21.7
million for the six months ended June 30, 2001 as compared to $19.7 million for
the same period in 2000. The effective tax rate for the six months ended June
30, 20002001 is approximately 28.5%,
-12-
1528.4% which is less than statutory rates due to permanent
differences resulting from non-deductible amortization of goodwill.
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 six months ended
June 30, 1999. This expense is a one time adjustment to recognize start-up
activities and organization costs that were capitalized in prior periods.-11-
14
As a result of the above factors, the Company recognized a net loss for the six
months ended June 30, 20002001 of $49.4$54.7 million, as compared to a net loss of $15.7$49.4
million for the same period in 1999.2000.
Three Months Ended June 30, 20002001 Compared to Three Months Ended June 30, 19992000
Revenues for the three months ended June 30, 20002001 increased $75.2$18.8 million or
76.8%10.9% to $173.0$191.8 million from $97.8$173.0 million for the same period in 1999.2000.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, for the three months ended June 30, 20002001 increased $37.7$8.9
million or 73.5%10.0% over the same period in 1999.2000.
Depreciation and amortization expense increased $43.5$12.6 million or 133.5%16.5% from
$32.7$76.2 million for three months ended June 30, 19992000 to $76.2$88.8 million for the
three months ended June 30, 2000.2001.
Operating income decreased $6.1$1.9 million or 43.7% to $7.8$6.0 million for the three months
ended June 30, 2001 as compared to $7.9 million for the same period in 2000.
Interest expense decreased $3.4 million from $36.4 million for the three months
ended June 30, 2000 as compared to $13.9$33.0 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 2000.2001.
The Company recognized a net loss for the three months ended June 30, 20002001 of
$20.4 million as compared to a net loss of $5.0 million for the same period in
1999.million.
The results for the three months ended June 30, 20002001 were affected by the same
factors as the six months ended June 30, 2000.2001. 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 debt and equity
securities.
During the six months ended June 30, 2000,2001, the Company financed the cash portion
of its acquisition activity of approximately $230.7$227.3 million with borrowings
under the Company's bank credit facility. At June 30, 2000,2001, following these
acquisitions, the Company had $249$269 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 $24.5$8.4 million
from $33.1 million for the six months ended June 30, 1999 to $57.6$54.3 million for the six months ended June 30, 2000 to $62.7 million for
the six months ended June 30, 2001 due primarily to an increase in noncash items
of $71.6$23.7 million, which includes an increase in depreciation and amortization of
$85.0$25.0 million offset by a decrease in deferred taxes of $15.8 million and an increase in provision for doubtful accountsdeferred tax benefit of $1.8$1.7 million and
a increase in gain or loss on disposition of assets of $0.9 million. The
increase in noncash items was offset by a decrease in net earnings of $33.7$5.3
million, a decrease in accrued expenses of $7.2 million and an increase in
receivables of $3.5 million, an increase in prepaid expenses of $7.5
million and an increase in accrued expenses of $1.0$4.4 million. Net cash used in investing activities increased $107.3
-13-
16decreased
$12.3 million from $169.3$273.2 million for the six months ended June 30, 19992000 to
$276.6$260.9 million for the same period in 2000.2001. This increasedecrease was due to a $91.6$3.4
million decrease in acquisition of outdoor advertising assets and a $6.8 million
decrease in
-12-
15
capital expenditures and a $2.2 million increase in acquisitionproceeds from disposition of
new markets and an increase in capital expenditures
of $13.4 million.assets. Net cash provided by financing activities for the six months ended June
30, 20002001 is $222.1$128.7 million primarily due significantly to $224.0$81.0 million in net borrowings
under credit agreements which was used primarily to finance acquisitions.acquisition activity and working capital
requirements during the period and $50.2 million net proceeds from issuance of
common stock which includes $48.0 million related to the issuance of 1.2 million
shares of Lamar Advertising Class A common stock in June 2001.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2000, Lamar Media Corp. finalizedthe FASB issued SFAS No. 138, "Accounting for Derivative
Instruments and Hedging Activities - an incremental loan agreementamendment of FASB No. 133", which
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
assets or liabilities in the statement of financial position and measure those
instruments at fair value. On January 1, 2001, the Company adopted SFAS No. 133.
The Company's adoption of SFAS No. 133 did not have any affect on the financial
position or results of operations in 2001.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company is required to adopt the provisions of Statement 141 immediately,
and Statement 142 effective January 1, 2002. Furthermore, goodwill and
intangible assets determined to have an indefinite useful life acquired in a
purchase business combination completed after June 30, 2001, but before
Statement 142 is adopted in full will not be amortized but will continue to be
evaluated for impairment in accordance with the appropriate pre-Statement 142
literature. The Company is currently assessing the impact of Statements 141 and
142 on its lenders in which Media received commitments for $250 millionfinancial condition and results of the previously
uncommitted $400 million incremental facility. The proceeds of this facility
were used to pay down the revolving bank credit facility.operations.
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 month periods
ended June 30, 20002001 and 1999.2000. 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.operations, liquidity and
capital resources. 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 entitledthe
"Factors Affecting Future Operating Results". included in Lamar Media's Annual
Report on Form 10-K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission on March 23, 2001.
-13-
16
RESULTS OF OPERATIONS
Six Months Ended June 30, 20002001 Compared to Six Months Ended June 30, 19992000
Net revenues increased $140.6$38.0 million or 76.6%11.7% to $324.2$362.2 million for the six
months ended June 30, 20002001 as compared to the same period in 1999.2000. This increase
was attributable to Lamar Media's acquisitions during 20002001 and 19992000 and internal
growth within Lamar Media's existing markets.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $73.6$22.1 million or 72.8%12.7% for the six months ended
June 30, 20002001 as compared to the same period in 1999.2000. 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.assets.
Depreciation and amortization expense increased $83.3$24.9 million or 129.7%16.9% from
$64.2 million for the six months ended June 30, 1999 to
$147.5 million for the six months ended June 30, 2000 to $172.4 million for the
six months ended June 30, 2001 as a result of an increase in capitalized assets
resulting from Lamar Media's recent acquisition activity.
Due to the above factors, Lamar Media's operating income decreased $16.3$8.2 million or 89.1%
to an operating incomeloss of $2.0$6.1 million for six months ended June 30, 20002001 from
$18.3operating income of $2.1 million for the same period in 1999.2000. This change was
primarily due to the increase in depreciation and amortization.
Interest expense increased $32.9decreased $6.8 million from $36.4 million for the six months
ended June 30, 1999 to $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 increasing interest rates.
There was an income tax benefit of $18.7 million for the six months
ended June 30, 2000 as compared to an income tax benefit of $1.8$62.5 million for the same period in 1999.2001 as a result of
declining interest rates during the six months ended June 30, 2001 and the
reduction in interest expense due to the cancellation of the $287.5 million note
payable to Lamar Advertising Company in January 2001.
Income tax benefit decreased $0.2 million creating a tax benefit of $18.5
million for the six months ended June 30, 2001 as compared to $18.7 million for
the same period in 2000. The effective tax rate for the six months ended June
30, 20002001 is approximately 28.2%27.2% 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 six months ended
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 six
months ended June 30, 20002001 of $47.8$49.6 million, as compared to a net loss of $15.7$47.8
million for the same period in 1999.2000.
Three Months Ended June 30, 20002001 Compared to Three Months Ended June 30, 1999
Revenues2000
Net revenues increased $18.8 million or 10.9% to $191.8 million for the three
months ended June 30, 2000 increased $75.2 million or
76.8%2001 as compared to $173.0 million from $97.8 million for the same period in 1999.2000.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $9.3 million or 10.5% for the three months
ended June 30, 2000 increased $37.2 million or 72.5% over2001 as compared to the same period in 1999.2000.
Depreciation and amortization expense increased $42.5$12.7 million or 130.3%16.9% from
$32.7 million for three months ended June 30, 1999 to
$75.2 million for the three months ended June 30, 2000.
Operating2000 to $87.9 million for the
three months ended June 30, 2001.
-14-
17
Due to the above factors, operating income decreased $4.5$2.5 million or 32.7% to $9.4operating
income of $7.0 million for three months ended June 30, 2001 from operating
income of $9.5 million for the same period in 2000.
Interest expense decreased $7.2 million from $36.4 million for the three months
ended June 30, 2000 as compared to $13.9$29.2 million for the same period in 1999.
Interest expense increased $18.2 million from $18.22001.
There was an income tax benefit of $4.6 million for the three months ended June
30, 19992001 as compared to $36.4an income tax benefit of $7.1 million for the same
period in 2000.
As a result of the above factors, Lamar Media recognized a net loss for the
three months ended June 30, 20002001 of $19.4$17.5 million, as compared to a net loss of
$5.0$19.4 million for the same period in 1999.2000.
The results for the three months ended June 30, 20002001 were affected by the same
factors as the six months ended June 30, 2000.2001. Reference is made to the
discussion of the six monthmonths results.
-15-
18
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
TheLamar Advertising Company is exposed to interest rate risk in connection with
variable rate debt instruments issued by the Company.its wholly-owned subsidiary, Lamar
Media Corp. 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 June 30, 2000.2001.
Loans under Lamar Media's new bank credit facilityagreement 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
isand Lamar Media are 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 facility.agreement. Increases in the interest rates
applicable to borrowings under the new bank credit facilityagreement 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 June 30, 2000,2001, there was approximately $1.0 billion$981 million of aggregate indebtedness
outstanding under Lamar Media'sthe new bank credit facility,agreement, or approximately 54.5%54.0% of the
Company's and 64.1% of Lamar Media's outstanding long-term debt on that date,
bearing interest at variable rates. The aggregate interest expense for the six
months ended June 30, 20002001 with respect to borrowings under the new bank credit
facilityagreement was $35.9 million, and the weighted average interest rate applicable
to borrowings under these credit facilities during the six months ended June 30,
20002001 was 8.3%7.5%. Assuming that the weighted average interest rate was 200-basis
points higher (that is 10.3%9.5% rather than 8.3%7.5%), then the Company's 2000and Lamar
Media's June 30, 2001 interest expense would have been approximately $8.6$9.7
million higher resulting in a $5.3$5.9 million increasedecrease in the Company's and Lamar
Media's six months ended June 30, 20002001 net lossincome 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 facilityagreement 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.
-16-
19
PART II - OTHER INFORMATION
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of stockholders on Thursday, May 25, 2000.24, 2001.
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 20012002 Annual Meeting of Stockholders:
Votes Cast For Votes Withheld
-------------- --------------FOR WITHHELD
----------- ----------
Kevin P. Reilly, Jr. 211,506,097 145,881213,294,295 12,341,163
Sean E. Reilly 211,538,427 113,488213,662,795 11,972,663
Keith A. Istre 211,538,427 113,488225,394,552 240,906
Charles W. Lamar, III 211,538,427 113,488225,405,480 229,978
Gerald H. Marchand 211,538,427 113,488
Wendell S.225,410,580 224,878
Anna Reilly 211,458,427 193,488Cullinan 213,294,295 12,341,163
T. Everett Stewart, 211,538,427 113,488Jr. 225,406,052 229,406
Stephen P. Mumblow 211,538,427 113,488
R. Steven Hicks 211,538,427 113,488225,402,980 232,478
John Maxwell Hamilton 225,410,780 224,678
Thomas O. Hicks 211,538,427 113,488Reifenheiser 225,411,680 223,778
Approval of the Amendment to the Company's 1996 Equity Incentive Plan to include
directors as eligible participants.
FOR AGAINST ABSTAIN
--- ------- -------
200,583,680 9,212,727 31,423192,115,200 33,514,672 5,584
Approval of the Amendment to the Company's Restated Certificate1996 Equity Incentive Plan that sets
forth the maximum number of Incorporationshares of restricted or unrestricted stock that may
be granted to a participant in any calendar year.
FOR AGAINST ABSTAIN
--- ------- -------
211,303,051 321,224 27,640221,539,998 4,089,438 6,021
Approval of the Assumption of Lamar AdvertisingAmendment to the Company's 1996 Equity Incentive Plan that
allows the establishment of performance goals for the granting of restricted or
unrestricted stock.
FOR AGAINST ABSTAIN
--- ------- -------
201,109,477 8,688,830 29,523222,565,656 3,063,581 6,219
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.
-17-
20
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 JunJune 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 Lamar
Advertising Company. Previously filed as Exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 2000 (File No. 0-30242) filed on August 11, 2000 and
incorporated herein by reference.
3.4 Certificate of Correction of Certificate of Incorporation of
Lamar Advertising Company. Filed herewith.Previously filed as Exhibit 3.4 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2000 (File No. 0-30242) filed on November 14, 2000
and incorporated herein by reference.
3.5 Bylaws of theLamar Advertising 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.
3.53.6 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 June 1, 2000April 9, 2001
delivered by Lamar Bellows Outdoor West,Advertising, Inc. of Georgia and Outdoor West, Inc. of Tennessee and, in
substantially identical agreements, by the schedulescheduled 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 June 1, 2000April 9, 2001
delivered by Lamar Bellows Outdoor West,Advertising, Inc. of Georgia and Outdoor West, Inc. of Tennessee and, in
substantially
-18-
21
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 June 1, 2000April 9, 2001
delivered by Lamar Bellows Outdoor West,Advertising, 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 datedated
August 13, 1999 by Lamar Bellows Outdoor West,Advertising, 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 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.April 9, 2001. Filed
herewith.
(b) Reports on Form 8-K
NoneReports on Form 8-K were filed with the Commission during the second
quarter of 2001 to report the following items as of the dates
indicated:
On June 7, 2001, the Company filed a report on Form 8-K in order
to file an Underwriting Agreement dated June 4, 2001 among Lamar
Advertising Company, AMFM Operating Inc. and Deutsche Banc Alex
Brown Inc. and related exhibits for incorporation by reference
into the Registration Statement on Form S-3 of Lamar Advertising
Company previously filed with Securities and Exchange Commission
(File No. 333-48288 and File No. Commission 333-45490), which
Registration Statements were declared effective by the Commission
on September 21, 2000 and November 2, 2000, respectively.
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: August 11, 200013, 2001 BY: /s/ Keith A. 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 A. Istre
Chief Financial and Accounting
Officer, Treasurer and Director
-19-
22
INDEX TO EXHIBIT
INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
EXHIBIT
NO. 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 June 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 Lamar
Advertising Company. Previously filed as Exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 2000 (File No. 0-30242) filed on August 11, 2000 and
incorporated herein by reference.
3.4 Certificate of Correction of Certificate of Incorporation of
Lamar Advertising Company. Previously filed as Exhibit 3.4 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2000 (File No. 0-30242) filed on November 14, 2000
and incorporated herein by reference.
3.5 Bylaws of Lamar Advertising 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.
3.6 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 April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, Company). Previously filed as exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the period ended Jun 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.
3.5 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 June 1, 2000 delivered by Outdoor
West, Inc. of Georgia and Outdoor West, Inc. of Tennessee and, in
substantially identical agreements, by the schedule 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 June 1, 2000 delivered by
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 June 1, 2000 delivered by 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 date
August 13, 1999 by 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 June 1, 2000. 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 April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, Inc. and, in
substantially
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.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 April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, Inc. and, in
substantially identical agreements, by the scheduled additional
subsidiary guarantors. Filed herewith.
10.1 Joinder Agreement to the Lamar Media Corp. Credit Agreement dated
August 13, 1999 by Lamar Bellows Outdoor Advertising, Inc. and,
in substantially identical agreements, by the scheduled
additional subsidiary guarantors, in favor of The Chase Manhattan
Bank, as Administrative Agent dated April 9, 2001. Filed
herewith.