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 31,1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from
Commission file number 0-20833
LAMAR ADVERTISING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 72-1205791
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
5551 Corporate Blvd.,
Baton Rouge, LA 70808
(Address of principal (Zip Code)
executive officers)
Registrant's telephone number, including area code (504) 926-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class May 9,1997
Class A Common Stock,$ .001 par value 17,613,140
Class B Common Stock,$ .001 par value 13,716,387
CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of
October 31, 1996, December 31, 1996 and 1 - 2
March 31, 1997
Condensed Consolidated Statements of Earnings
for the three months ended April 30,
1996 and March 31, 1997 3
Condensed Consolidated Statements of Cash Flows
for the three months ended April 30, 1996
and March 31, 1997 4 - 5
Notes to Condensed Consolidated Financial
Statements 6 - 9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 13
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 6. Exhibits and Reports on Form 8-K 13 - 14
Signatures 14
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
October 31, December 31, March 31,
1996 1996 1997
(Unaudited) (Unaudited)
ASSETS
Cash and cash equivalents $ 8,430 81,007 78,421
Receivables
Trade accounts, net 12,855 18,949 19,368
Affiliates, related parties
and employees 348 558 401
Other 327 141 378
Net receivables 13,530 19,648 20,147
Prepaid expenses 1,973 3,939 3,974
Other current assets 1,544 1,655 2,054
Total current assets 25,477 106,249 104,596
Property, plant and equipment 207,071 260,325 262,824
Less accumulated depreciation
and amortization ( 87,343) (89,595) ( 87,853)
Net property, plant and equipment 119,728 170,730 174,971
Investment securities 4,414 2,250 1,189
Intangible assets 18,223 78,899 78,389
Deferred taxes 2,463 6,862 6,560
Other assets 2,884 3,166 3,598
173,189 368,156 369,303
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable 3,263 4,279 2,500
Accrued expenses 11,066 7,900 10,310
Current maturities of long-term
debt 3,815 4,088 4,018
Deferred income 5,793 6,484 7,149
Total current liabilities 23,937 22,751 23,977
Long-term debt 128,140 279,260 278,223
Deferred income 811 847 864
Other liabilities 1,260 1,535 1,900
Total liabilities 154,148 304,393 304,964
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
October 31, December 31, March 31,
1996 1996 1997
(Unaudited) (Unaudited)
STOCKHOLDERS' EQUITY
Class A preferred stock, par
value $638, $63.80 cumulative,
authorized 10,000 shares; 5,719.49
shares issued and outstanding, 3,649 3,649 3,649
Class A common stock, $.001 par value.
Authorized 50,000,000 shares;
issued and outstanding 15,004,340
shares 17,611,240 shares and 17,613,140
shares at October 31, 1996 December
31, 1996, and March 31,1997 respectively 15 17 18
Class B common stock, $.001 par value.
Authorized 25,000,000 shares;
issued and outstanding 13,791,387
shares, at October 31, 1996, 13,716,387
shares, at December 31, 1996, and
March 31, 1997 14 14 14
Additional paid in capital 38,060 92,258 92,287
Accumulated deficit ( 24,681) ( 32,796) ( 31,591)
Unrealized gain (loss) on investment
securities net of deferred tax
benefit/expense 1,984 621 ( 38)
Stockholders' Equity 19,041 63,763 64,339
Total liabilities and
stockholders' equity $ 173,189 368,156 369,303
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Three Months
Ended April 30,1996 Ended March 31,1997
Revenues
Net advertising revenue $28,838 $37,682
Other income 195 165
29,033 37,847
Operating expenses
Outdoor advertising:
Direct advertising
expenses 10,049 13,467
Selling, general and
administrative expenses 7,004 9,253
Depreciation and amortization 3,641 6,750
20,694 29,470
Operating income 8,339 8,377
Non-operating (income)
expense:
Interest income ( 48) ( 1,121)
Interest expense 4,025 6,944
Loss on disposition
of assets 493 447
Other expenses 94 13
4,564 6,283
Earnings before
income taxes 3,775 2,094
Income tax expense (benefit) 1,515 798
Net earnings 2,260 1,296
Preferred stock dividends 91 91
Net earnings applicable to
common stock 2,169 1,205
Net earnings per common
Share, Primary .08 .04
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months Three Months
Ended Ended
April 30, 1996 March 31,1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,260 1,296
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 3,641 6,750
Loss on disposition of assets 493 447
Deferred taxes 1,322 704
Provision for doubtful accounts 319 405
Changes in operating assets and
liabilities:
Increase in receivables ( 136) ( 601)
Increase in prepaid expenses ( 29) ( 47)
(Increase) decrease in other assets 1,558 ( 716)
Increase (decrease)in trade accounts
payable 14 ( 1,778)
Increase in accrued expenses 2,302 2,411
Increase (decrease) in other liabilities 20 ( 40)
Increase in deferred income 61 681
Net cash provided by operating
activities 11,825 9,512
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable ( 206) -
Acquisition of new markets ( 1,591) ( 2,329)
Capital expenditures ( 5,528) ( 7,382)
Proceeds from disposition of assets 155 427
Purchase of intangible assets ( 180) ( 1,645)
Net cash used in investing
activities ( 7,350) ( 10,929)
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months Three Months
Ended Ended
April 30,1996 March 31,1997
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock - 29
Principal payments on long-term debt 157 ( 1,141)
Proceeds from issuance of notes payable - 34
Proceeds from issuance of notes
payable to banks 3,500 -
Principal payments on notes payable to
banks ( 5,000) -
Stock redemption ( 2,964) -
Dividends ( 216) ( 91)
Net cash used in financing activities ( 4,523) ( 1,169)
Net decrease in cash and
cash equivalents ( 48) ( 2,586)
Cash and cash equivalents at beginning
of year 1,800 81,007
Cash and cash equivalents at end of
year $ 1,752 78,421
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,182 866
Cash paid for state and
federal income taxes $ 237 2,184
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 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 net earnings.
On December 17, 1996, the Board of Directors of the Company voted to change
the Company's fiscal year such that the Company's fiscal year shall end on
December 31 of each year. The Company's last fiscal year ended on October 31,
1996. The two-month period from November 1, 1996 to December 31, 1996 will be
treated as a transition period that will not be a part of fiscal year 1996 or
calendar year 1997. In light of the Company's public offering in fiscal 1996
this year end change was recommended to conform to predominant year ends within
the industry.
Earnings per common share are computed by dividing net earnings by the
weighted average number of common shares outstanding during each period
(25,688,142 shares for three months ending April 30, 1996 and 31,661,388 for
three months ended March 31, 1997). Weighted average shares for the three months
ended March 31, 1997, include the effect of 332,340 shares issuable upon the
exercise of stock options calculated using the treasury stock method.
2. Long-Term Debt
In November 1996, the Company commenced a tender offer for all of its 11% Senior
Secured Notes that were issued in 1993 in the principal amount of $100,000. As
of March 31 1997, approximately $98,500 of the notes were tendered to the
Company and retired.
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
Also in November 1996, the Company issued $255,000 in principal amount of 9 5/8%
Senior Subordinated Notes due December 1, 2006 (the "Notes"), with interest
payable semi-annually on June 1 and December 1, commencing June 1, 1997. The
notes are senior subordinated unsecured obligations of the Company and are
subordinated in right of payment to all senior indebtedness of the Company and
are senior to all existing and future subordinated indebtedness of the Company.
The Notes are redeemable at the Company's option at any time on or after
December 31, 2001 at redemption prices specified by the indenture, and are
required to be repurchased earlier in the event of a change of control of the
Company. The indenture governing the Notes includes certain restrictive
covenants which limit the Company's ability to incur additional debt, pay
dividends and make other restricted payments, consummate certain transactions
and other matters.
In December 1996, the Company entered into a new Bank Credit Agreement (the "New
Bank Credit Agreement") with a syndicate of financial institutions which
replaced the Company's existing bank credit facilities. The New Bank Credit
Agreement provides the Company with a committed $225,000 million revolving
credit facility and a $75,000 incremental term facility funded at the discretion
of the lenders. Availability of the line under the revolving facility will be
reduced over a fiveyear period from 1999 to 2003 and will bear interest at a
variable rate of interest based upon an applicable margin over prime or the
LIBOR rate. The term loan will amortize over six years beginning in 1999. The
New Bank Credit Agreement is guaranteed by the Company's subsidiaries and
secured by the capital stock of the Company's subsidiaries. The New Bank Credit
Agreement contains various restrictive covenants which require that the Company
meet certain minimum leverage and coverage ratios, restrict additional
indebtedness, limit dividends and other restricted payments, limit capital
expenditures and dispositions of assets, and other restrictions. As of
March 31, 1997 there were no balances outstanding under the New Bank Credit
Agreement.
3. Acquisitions
Effective November 1, 1996, the Company purchased all of the stock of FKM
Advertising Co., Inc. for a purchase price of approximately $40,000 and on
December 10, 1996, the Company purchased substantially all of the assets of
Outdoor East, L.P. for a total purchase price of approximately $60,500. The
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
acquisitions were accounted for under the purchase method of accounting. The
following is a summary of the assets acquired and liabilities assumed in these
transactions:
Current assets 3,050
Property, plant, and equipment 47,943
Intangibles 51,487
Current liabilities 252
Long-term liabilities 1,728
4. Stockholders Equity
In November 1996, the Company completed an equity offering of 2,530,000 shares
of Class A Common Stock at a price of $23.00 per share. This transaction
resulted in a $54,171 increase in total stockholder's equity after deducting
commissions and fees related to the transaction.
5. Subsequent Events
On April 1, 1997, the Company acquired all of the outstanding capital stock of
Penn Advertising, Inc. for a purchase price of approximately $167.0 million.
Funds for the acquisition were provided form the proceeds of the Company's
November 1996 public offerings of the Notes and its Class A Common Stock and a
$94,000 draw under the New Bank Credit Agreement. Pursuant to this acquisition,
the Company has acquired a total of 8,500 outdoor advertising displays through-
out the states of Maryland, New York and Pennsylvania. The Company has agreed to
sell the displays in the Baltimore, Maryland market, representing approximately
16% of the displays acquired, to Universal Outdoor, Inc. for a cash purchase
price of $46.5 million. In connection with the proposed sale, the Company and
its lenders executed an amendment to the New Bank Credit Agreement. The sale to
Universal is subject to regulatory approval and satisfaction of other closing
conditions.
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
6. 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 the 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:
March 31, 1997
Current assets 242
Total assets 298
Total liabilities 12
Venturers' equity 286
Revenues 236
Net income 122
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As a result of the change in the Company's year end from October 31 to
December 31, the results of operations set forth in the accompanying financial
statements reflect the three month period ended March 31, 1997 and the three
month period ended April 30, 1996. As a result, the results of operations do not
reflect comparative periods. As an aid to understanding and comparing the
Company's operating results,the following table sets forth results of
operations for the three month period ended March 31, 1996 and 1997. The
discussion that follows compares these two periods.
Three Months Ended
March 31, 1996 March 31, 1997
Outdoor advertising net $ 27,663 $ 37,682
Other income 182 165
27,845 37,847
Direct advertising expenses 10,779 13,467
General and administrative expenses 7,434 9,253
Depreciation and amortization 3,502 6,750
21,715 29,470
Operating income 6,130 8,377
Non-operating (income)\expense
Interest income ( 52) ( 1,121)
Interest expense 4,026 6,944
Other expenses 481 460
4,455 6,283
Earnings before income taxes 1,675 2,094
Income tax expense 652 798
Net earnings 1,023 1,296
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. Forward-looking statements contained in the following discussion are
expectations only and there can be no assurance that actual results will not
materially differ from these expectations. This discussion should be read in
conjunction with the financial statements and related notes of the Company. See
also "Important Factors Regarding Forward-Looking Statements" included as
Exhibit 99.1 to the Company's Annual Report on Form 10-K for the year ended
October 31, 1996.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Net revenues increased $10 million or 35.9% to $37.8 million for the three
months ended March 31, 1997.This increase was the result of a (i)$7.7 million
increase in billboard net revenues, of which $5.2 million is attributable to the
Company's acquisitions of FKM Outdoor Advertising Co., Outdoor East, L.P. and
Revere National Corporation with the remaining $2.5 million attributable to
existing operations, and a (ii) $1.9 million increase in logo sign revenue due
to the completion of development of the new state logo sign franchises awarded
and acquired in 1996 and the continued expansion of the Company's existing logo
sign franchises. Net billboard advertising revenue for the period ended March
31, 1997 was $32.3 million and net logo sign revenue was $4.6 million.
Operating expenses, exclusive of depreciation and amortization, increased $4.5
million or 24.7% for the three months ended March 31, 1997 as compared to the
same period in 1996. This was primarily the result of the additional operating
expenses related to acquisitions of outdoor advertising assets and the newly
developed and acquired logo sign franchises.
Depreciation and amortization expense increased $3.2 million or 92.7% from $3.5
million for the three months ended March 31, 1996 to $6.8 million for three
months ended March 31, 1997 as a result in the increase in capital assets.
Due to the above factors, operating income increased $2.2 million or 36.7% to
$8.4 million for three months ended March 31,1997 from $6.1 million for the same
period in 1996.
Interest income increased $1.1 million as a result of earnings on excess cash
investments made during the period.Interest expense increased $2.9 million from
$4.0 million for the three months ended March 31, 1996 to $6.9 million for three
months ended March 31, 1997 as a result of interest expense on the Notes issued
in November 1996.
Income tax expense remained relatively consistent for both periods.
As a result of the above factors, the Company recognized net earnings for the
three months ended March 31, 1997 of $1.3 million.
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.
In November and December of 1996, the Company engaged in several transactions
which significantly changed its capital structure and positioned it to expanded
operations through acquisitions. These transactions were: (i) a public offering
of 2,530,000 shares of Class A Common Stock at $23 per share,(ii) a tender offer
that retired approximately $98.5 million of the $100 million outstanding 11%
Senior Secured Notes due 2003,(iii)an offering of $255 million of 9 5/8% Senior
Subordinated Notes due 2006, and (iv) a new bank credit facility consisting of
a committed $225 million revolving credit facility and a $75 million incremental
facility funded at the discretion of the lenders. The new credit facility
replaced the Company's previous bank credit facilities. There is currently $94
million outstanding under the revolving credit facility.
Net proceeds to the Company, after underwriting discounts, from the equity and
Note offerings were $55.4 million and $248.0 million, respectively. These
proceeds were used to extinguish outstanding bank debt of approximately $47.0
million, fund the tender offer for the Senior Secured Notes, purchase Outdoor
East for $60.5 million and pay investment banking fees as well as other related
costs of approximately $12.0 million related to the above transactions.
The Company's net cash provided by operating activities is $9.5 million for the
three months ended March 31, 1997 due to the Company's net earnings of $1.3
million, non-cash items of $8.3 million (including depreciation and amortization
of $6.8 million), a decrease in trade accounts payable of $1.8 million, and an
increase in accrued expenses of $2.4 million. Net cash used in investing
activities is $10.9 million for the three months ended March 31, 1997 due to
acquisitions of new markets of $2.3 million, capital expenditures of $7.4
million, and purchases of intangible assets of $1.6 million. Net cash used in
financing activities is $1.2 million for the three months ending March 31, 1997
due primarily to principal payments on long-term debt of $1.1 million. The items
described above yield a net decrease in cash and cash equivalents of $2.6
million for the three months ending March 31, 1997.
On April 1, 1997, the Company acquired the outstanding capital stock of Penn
Advertising, Inc. ("Penn") for a cash purchase price of $167 million. Funds for
the acquisition were provided from the remaining proceeds of the equity and Note
offerings and a $94 million draw under the Company's revolving credit facility.
The Company has agreed to sell Penn - Baltimore, a subsidiary of Penn,for a cash
purchase price of $46.5 million, subject to regulatory approval and satisfaction
of other closing conditions. Upon the closing of the sale, the $46.5 million in
proceeds to be received by the Company will be applied to reduce the amount
outstanding under the revolving credit facility. There can be no assurance,
however, that the sale of Penn-Baltimore will be completed.
Manufacturers of tobacco products, primarily cigarettes, were historically major
users of outdoor advertising displays. Due to societal and governmental
pressures and other factors, in the early 1990's, leading tobacco manufacturers
substantially reduced their domestic advertising expenditures. The Company's
tobacco revenues as a percentage of total net revenues, declined from 17% in
fiscal 1991 to 9% in fiscal 1996. During this period, the Company has replaced
the reduced tobacco advertising by diversifying its customer base and increasing
sales to local advertisers.
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,
March 20, 1997. 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 1998 Annual Meeting of Stockholders:
Votes Cast For Votes Withheld
Kevin P. Reilly, Jr. 150,690,895 133,671
Dudley W. Coates 150,809,895 14,671
Keith A. Istre 150,690,895 133,671
Charles W. Lamar, III 150,690,895 133,671
Gerald H. Marchand 150,690,895 133,671
Jack S. Rome, Jr. 150,690,895 133,671
William R. Schmidt 150,809,895 14,671
T. Everett Stewart, Jr. 150,690,894 133,702
There were no abstentions or broker non-votes.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits
Exhibit 10.1 Amendment No. 1 to the Credit and Pledge
Agreement dated as of March 31, 1997 between the
Company, the Subsidiary Guarantors party thereto,
the Lenders party thereto and the Chase Manhattan
Bank, as Administrative Agent. Filed herewith.
Exhibit 27.1Financial Data Schedule. Filed herewith.
(b)Reports on Form 8-K
Reports on Form 8-K were filed with the Commission during the
quarter ended March 31,1997 to report the following items as of the
dates indicated:
The Company filed on February 10, 1997 a report on Form 8-K
reporting under Item 5 that it had entered into a definitive
agreement to purchase all of the outstanding capital stock of
Penn Advertising, Inc. for a cash purchase price of
approximately $167.0 million.
The Company filed on April 14, 1997 a report on Form 8-K
reporting under Item 2 that it had completed the acquisition
of the outstanding capital stock of Penn Advertising, Inc. for
a cash purchase price of approximately $167.0 million and that
it had agreed to sell approximately certain outdoor
advertising displays that it had acquired in Baltimore,
Maryland to Universal Outdoor, Inc. for a cash purchase price
of $46.5 million.
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 9, 1997 BY /s/Keith Istre
Keith A. Istre
Chief Financial and Accounting Officer
and Director