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 30,1997
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 July 31, 1997
Class A Common Stock,$ .001 par value 17,629,715
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
June 30, 1997
Condensed Consolidated Statements of Earnings
for the three months ended July 31, 1996
and June 30, 1997 and the six months ended
July 31, 1996 and June 30, 1997 3
Condensed Consolidated Statements of Cash Flows
for the six months ended July 31, 1996
and June 30, 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 - 15
ITEM 3. Quantitative and Qualitative Disclosures about 15
Market Risks
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 16
Signatures 16
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)
October 31, December 31, June 30,
1996 1996 1997
ASSETS
Cash and cash equivalents $ 8,430 81,007 7,748
Receivables
Trade accounts, net 12,855 18,949 24,771
Affiliates, related parties
and employees 348 558 627
Other 327 141 442
Net receivables 13,530 19,648 25,840
Prepaid expenses 1,973 3,939 6,681
Other current assets 1,544 1,655 2,076
Total current assets 25,477 106,249 42,345
Property, plant and equipment 207,071 260,325 379,328
Less accumulated depreciation
and amortization ( 87,343) (89,595) ( 98,725)
Net property, plant and equipment 119,728 170,730 280,603
Investment securities 4,414 2,250 870
Intangible assets 18,223 78,899 195,874
Deferred taxes 2,463 6,862 -
Other assets 2,884 3,166 5,093
173,189 368,156 524,785
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable 3,263 4,279 2,694
Accrued expenses 11,066 7,900 10,604
Current maturities of long-term
debt 3,815 4,088 4,161
Deferred income 5,793 6,484 6,133
Total current liabilities 23,937 22,751 23,592
Long-term debt 128,140 279,260 412,982
Deferred income 811 847 827
Other liabilities 1,260 1,535 2,147
Deferred tax liability - - 19,498
Total liabilities 154,148 304,393 459,046
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
October 31, December 31, June 30,
1996 1996 1997
STOCKHOLDERS' EQUITY
Class A preferred stock, par
value $638, $63.80 cumulative dividends,
authorized 10,000 shares; 5,719.49
shares issued and outstanding at October
31, 1996, December 31, 1996 and June 30,
1997, respectively 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 17,625,290
shares at October 31, 1996, December
31, 1996, and June 30, 1997, respectively 15 17 18
Class B common stock, $.001 par value.
Authorized 25,000,000 shares;
issued and outstanding 13,791,387
shares, 13,716,387 shares and 13,716,387
shares at October 31,1996, December 31,
1996, and June 30, 1997, respectively 14 14 14
Additional paid in capital 38,060 92,258 92,483
Accumulated deficit ( 24,681) ( 32,796) ( 30,189)
Unrealized gain (loss) on investment
securities net of deferred tax
benefit/expense 1,984 621 ( 236)
Stockholders' equity 19,041 63,763 65,739
Total liabilities and
stockholders' equity $ 173,189 $368,156 $524,785
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended Six Months Ended
July 31,1996 June 30,1997 July 31,1996 June 30,1997
Revenues
Outdoor advertising net $31,386 $49,962 $60,224 $87,644
Other income 134 146 329 311
31,520 50,108 60,553 87,955
Operating expenses
Direct advertising
expenses 10,076 15,483 20,125 28,950
Selling, general and
administrative expenses 8,147 10,828 15,151 20,081
Depreciation and
amortization 3,540 10,977 7,181 17,727
21,763 37,288 42,457 66,758
Operating income 9,757 12,820 18,096 21,197
Other expenses (income)
Interest income ( 39) ( 300) ( 87) ( 1,421)
Interest expense 4,105 8,460 8,130 15,404
Loss on disposition
of assets 237 295 730 742
Other expenses 8 164 102 177
4,311 8,619 8,875 14,902
Earnings before
income taxes 5,446 4,201 9,221 6,295
Income tax expense 2,230 2,616 3,745 3,414
Net earnings 3,216 1,585 5,476 2,881
Preferred stock dividends 91 183 183 274
Net earnings applicable to
common stock 3,125 1,402 5,293 2,607
Net earnings per common
share .13 .04 .21 .08
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended Six Months Ended
July 31, 1996 June 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 5,476 2,881
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 7,181 17,727
Loss on disposition of assets 730 742
Deferred taxes 1,685 ( 1,194)
Provision for doubtful accounts 248 710
Changes in operating assets and
liabilities:
Increase in receivables ( 1,516) ( 3,718)
(Increase) decrease in prepaid expenses 1 ( 366)
(Increase) decrease in other assets 1,599 ( 620)
Increase (decrease)in trade accounts
payable 937 ( 2,035)
Increase in accrued expenses 863 2,142
Increase (decrease) in other liabilities 38 ( 1)
Increase (decrease) in deferred income 1,692 ( 415)
Net cash provided by operating
activities 18,934 15,853
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable ( 675) ( 1,300)
Acquisition of new markets ( 3,993) (257,061)
Capital expenditures ( 12,624) ( 14,990)
Proceeds from disposition of assets 419 52,186
Purchase of intangible assets ( 872) ( 881)
Net cash used in investing
activities ( 17,745) (222,046)
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended Six Months Ended
July 31,1996 June 30,1997
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock - 225
Principal payments on long-term debt ( 1,627) ( 2,051)
Proceeds from issuance of long-term debt - 34
Proceeds under New Bank Credit Agreement 14,500 186,000
Principal payments under New Bank Credit
Agreement ( 10,500) ( 51,000)
Stock redemption ( 2,964) -
Dividends ( 433) ( 274)
Net cash provided by (used in)
financing activities ( 1,024) 132,934
Net increase (decrease) in cash and
cash equivalents 165 ( 73,259)
Cash and cash equivalents at beginning
of period 1,800 81,007
Cash and cash equivalents at end of
period $ 1,965 7,748
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 8,009 14,756
Cash paid for state and
federal income taxes $ 1,686 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 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 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 was treated as a
transition period that was not a part of fiscal year 1996 or calendar year 1997,
and was reported on Form 10 Q/T. 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 applicable to
common stock by the weighted average number of common shares outstanding during
each period (24,482,020 for the three months ended July 31, 1996, 25,041,742 for
the six months ended July 31, 1996, 31,808,716 for the three months ended June
30, 1997 and 31,840,641 for the six months ended June 30, 1997). Weighted
average shares for the three months ended June 30,1997 and six months ended June
30, 1997 include the effect of 477,158 shares and 510,331 shares, respectively,
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 June 30,1997, approximately $98,500 of the notes were tendered to the Company
and retired. As a result of this tender offer and the extinguishment of other
credit facilities, the Company incurred a loss on debt extinguishment of
approximately $9,500 net of income tax benefit of $5,700.
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 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 Bank Credit Agreement (the Bank
Credit Agreement") with a syndicate of financial institutions which replaced the
Company's existing bank credit facilities. The Bank Credit Agreement provides
the Company with a committed $225,000 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 five year 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 Bank Credit Agreement is
guaranteed by the Company's subsidiaries and secured by the capital stock of the
Company's subsidiaries. The 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 June 30, 1997 there was $135,000 outstanding under the
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.
Effective April 1, 1997, the Company acquired all of the outstanding capital
stock of Penn Advertising, Inc. for a purchase price of approximately $167,000.
The Company subsequently sold approximately 16% of the displays acquired to
Universal Outdoor, Inc. for $46,500 in cash.
On May 15, 1997, the Company acquired all of the outstanding stock of McWhorter
Advertising, Inc. for a cash purchase price of $8,500.
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
On June 3, 1997, the Company purchased substantially all of the assets of
Headrick Outdoor, Inc. for a cash price of $76,600. Simultaneous with the
acquisition, the Company sold approximately 9% of the outdoor displays
acquired for $6.0 million in cash.
The Company borrowed $135 million under the Bank Credit Agreement to
finance the above acquisitions.
Each of these acquisitions was accounted for under the purchase method of
accounting. The following is a summary of the allocation of the acquisition
costs in the above transactions.
Current assets 8,166
Property, plant, and equipment 150,214
Intangibles 174,360
Current liabilities 1,379
Deferred tax liabilities 29,084
Other liabilities 1,001
Summarized below is unaudited pro forma statement of operations data for the
three months ended July 31, 1996 and June 30, 1997 and six months ended July
31, 1996 and June 30, 1997 as if these transactions had been consummated as of
February 1, 1996. 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
July 31,1996 June 30,1997 July 31,1996 June 30,1997
Revenues $ 48,937 $ 52,356 $ 92,906 $100,239
Net loss, applicable to
common stock ( 376) ( 155) ( 2,898) ( 30)
Net (loss) per common share( .02) ( .004) ( .12) ( .001)
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
4. Stockholders Equity
In November 1996, the Company completed an offering of 2,530,000 shares of its
Class A common stock at a price to the public of $23.00 per share. This
transaction resulted in a $54,171 increase in total stockholders' equity after
deducting commissions and fees related to the transaction.
5. 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:
Six Months Ended June 30, 1997
(Unaudited)
Current assets $ 350
Total assets 408
Total liabilities 9
Venturers' equity 399
Revenues 457
Net income 235
6. Subsequent Event
The Company has signed a letter of intent to acquire from Outdoor Systems,
Inc. ("OSI"), for a cash purchase price of approximately $118,000 outdoor
advertising assets located in certain markets that OSI has agreed to acquire
from National Advertising Company ("3M"). The acquisition is contingent on
completion of OSI's acquisition of 3M and other customary closing conditions,
including execution of a definitive agreement and expiration or early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act. Both the number of displays and purchase price are subject
to change before finalization of the transaction. The Company intends to
initially finance the acquisition with a draw under the Bank Credit Agreement.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As a result of the change in the Company's fiscal year end from October 31 to
December 31, the results of operations set forth in the accompanying financial
statements reflect the three month periods ended June 30, 1997 and July 31,
1996, and the six month periods ended June 30, 1997 and July 31, 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 periods
ended June 30, 1996 and 1997, and the six month periods ended June 30, 1996
and 1997. The discussion that follows compares these two periods.
Three Months Ended Six Months Ended
June 30,1996 June 30,1997 June 30,1996 June 30,1997
Outdoor advertising, net $ 30,834 $ 49,962 $ 58,497 $ 87,644
Other income 113 146 295 311
30,947 50,108 58,792 87,955
Direct advertising expenses 10,329 15,483 21,108 28,950
General and administrative
expenses 7,429 10,828 14,863 20,081
Depreciation and
amortization 3,533 10,977 7,035 17,727
21,291 37,288 43,006 66,758
Operating income 9,656 12,820 15,786 21,197
Other expenses (income)
Interest income ( 39) ( 300) ( 91) ( 1,421)
Interest expense 3,957 8,460 7,983 15,404
Other expenses 339 459 820 919
4,257 8,619 8,712 14,902
Earnings before income
taxes 5,399 4,201 7,074 6,295
Income tax expense 2,177 2,616 2,829 3,414
Net earnings 3,222 1,585 4,245 2,881
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 as
well as the "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
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Revenues increased $29.2 million or 49.6% to $88.0 million for the six months
ended June 30, 1997. This increase was the result of a (i) $24.7 million
increase in billboard net revenues,of which $20.3 million is attributable to the
Company's acquisitions of FKM Outdoor Advertising Co., Outdoor East, L.P.,Revere
National Corporation, Penn Advertising, Inc., and Headrick Outdoor, Inc., with
the remaining $4.4 million attributable to existing operations, and a (ii) $4.0
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 six months ended June 30, 1997 was
$76.4 million and net logo sign revenue was $9.9 million.
Operating expenses, exclusive of depreciation and amortization, increased $13.1
million or 36.3% for the six months ended June 30, 1997 as compared to the same
period in 1996. This increase 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 $10.7 million or 152.0% from
$7.0 million for the six months ended June 30, 1996 to $17.7 million for six
months ended June 30, 1997 as a result of an increase in capital assets due to
the Company's recent acquisitions.
Due to the above factors, operating income increased $5.4 million or 34.3% to
$21.2 million for six months ended June 30, 1997 from $15.8 million for the same
period in 1996.
Interest income increased $1.3 million as a result of earnings on excess cash
investments made during the period. Interest expense increased $7.4 million from
$8.0 million for the six months ended June 30, 1996 to $15.4 million for six
months ended June 30, 1997 as a result of interest expense on the Notes issued
in November 1996 and additional borrowings under the Bank Credit Agreement.
The effective income tax rate increased from 40% for the six months ended June
30, 1996 to 54% for the six months ended June 30, 1997. This increase was due
to goodwill recorded as part of the stock acquisitions described above. The
amortization of this goodwill is nondeductible for income tax purposes and
generates the increased tax rate.
As a result of the above factors, the Company recognized net earnings for the
six months ended June 30, 1997 of $2.9 million.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Revenues for the three months ended June 30, 1997 increased $19.2 million or
61.9% to $50.1 million from $30.9 million for the same period in 1996.
Operating expenses, exclusive of depreciation and amortization, for the three
months ended June 30, 1997 increased $8.6 million or 48.2% over the same period
in 1996.
Depreciation and amortization expense increased $7.4 million or 210.7% from $3.5
million for three months ended June 30, 1996 to $11.0 million for the three
months ended June 30, 1997.
Due to the above factors, operating income increased $3.2 million or 32.8% to
$12.8 million compared to $9.7 million for the three months ended June 30, 1997
as compared to the same period in 1996.
Interest expense increased $4.5 million from $4.0 million for the three months
ended June 30, 1996 to $8.5 million for the same period in 1997.
The effective tax rate increased from 40.1% for the three months ended June 30,
1996 to 62.3% for the three months ended June 30, 1997.
As a result of the above factors, the Company recognized net earnings for the
three months ended June 30, 1997 of $1.6 million.
The results for the three months ended June 30, 1997 were affected by the same
factors as the six months ended June 30, 1997. 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.
In November and December of 1996, the Company engaged in several transactions
which significantly changed its capital structure and positioned it to expand
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) the offering of $255 million in principal
amount of the Notes, and (iv) entering into the Bank Credit Agreement, which
consists of a committed $225 million revolving credit facility (the "Revolving
Facility")and a $75 million incremental facility funded at the discretion of the
lenders (the "Incremental Facility"). The Bank Credit Agreement replaced the
Company's previous bank credit facilities. There is currently $132 million
outstanding under the Revolving 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
substantially all of the assets of Outdoor East, L.P. 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 balance of approximately $85
million was used for acquisitions in the second quarter as described below.
The Company's net cash provided by operating activities is $15.9 million for the
six months ended June 30,1997 due to the Company's net earnings of $2.9 million,
non-cash items of $18.0 million (including depreciation and amortization of
$17.7 million), an increase in receivables of $3.7 million, a decrease in trade
accounts payable of $2.0 million, and an increase in accrued expenses of $2.1
million. Net cash used in investing activities is $222.0 million for the six
months ended June 30, 1997 due to an increase in notes receivable of $1.3
million, acquisitions of new markets of $257.1 million (offset by proceeds from
dispositions of assets of $52.2 million), capital expenditures of $15.0 million,
and purchases of intangible assets of $.9 million. Net cash provided by
financing activities is $132.9 million for the six months ending June 30,1997
due primarily to proceeds from issuance of notes payable to banks of $186
million offset by principal payments on long-term debt of $2.1 million and
principal payments on notes payable to banks of $51.0 million. The items
described above yield a net decrease in cash and cash equivalents of $73.3
million for the six months ending June 30, 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 Revolving Facility. On June 3, 1997,
the Company sold Penn Advertising of Baltimore, Inc., a subsidiary of Penn, for
a cash purchase price of $46.5 million. Upon the closing of the sale, $46.0
million in proceeds was used to reduce the amount outstanding under the
Revolving Facility.
On June 4, 1997, the Company acquired the assets of Headrick Outdoor, Inc.
("Headrick") for a cash purchase price of $76.6 million. Funds for this
acquisition were provided from the Revolving Facility. In obtaining approval of
the acquisition under the Hart-Scott-Rodino Antitrust Improvements Act (the "HSR
Act"), the Company agreed to sell certain of the acquired assets to an
unaffiliated third party for a purchase price of $6.0 million, consisting of
approximately $4.7 million in cash and an approximately $1.3 million note from
the purchaser. The cash proceeds from such sale were used to reduce the amount
outstanding under the Revolving Facility.
The Company has signed a letter of intent to acquire from Outdoor Systems, Inc.
("OSI"), for a cash purchase price of approximately $118.0 million, outdoor
advertising assets located in certain markets that OSI has agreed to acquire
from National Advertising Company ("3M"). The acquisition is contingent on com-
pletion of OSI's acquisition of 3M and other customary closing conditions,
including execution of a definitive agreement and expiration or early
termination of the waiting period under the HSR Act. Both the number of displays
and purchase price are subject to change before finalization of the transaction.
The Company intends to initially finance the acquisition with a $78 million draw
under the Revolving Facility and a $40 million draw under the Incremental
Facility. Following completion of this acquisition, the Company will have $15
million available under the Revolving Facility and $35 million available but not
committed under the Incremental Facility. As a result, the Company will be
required to raise funds from external sources to finance any additional
acquisition activity. There can be no assurance, however, that such funds will
be available on acceptable terms, if at all.
Regulation of Tobacco Advertising
Approximately 10% of the Company's billboard advertising net revenues and 8% of
consolidated net revenues in fiscal 1996 came from the tobacco products
industry, compared to 9% for fiscal 1995, 7% for fiscal 1994 and 1993, 12% for
fiscal 1992 and 17% for fiscal 1991. Manufacturers of tobacco products,
principally cigarettes, were historically major users of outdoor advertising
displays. Beginning in 1992, the leading tobacco companies substantially reduced
their domestic advertising expenditures in response to societal and governmental
pressures and other factors. Although the Company has attempted to replace
tobacco advertising by diversifying its customer base and increasing sales to
local advertisers, there can be no assurance that the tobacco industry will not
further reduce advertising expenditures in the future either voluntarily or as a
result of governmental regulations or as to what affect any such reduction may
have on the Company.
In June 1997 several of the major tobacco companies in the U.S. and
numerous state attorneys general reached agreement on a proposed settlement of
litigation between such parties. The terms of this proposed settlement include
a ban on all outdoor advertising of tobacco products commencing nine months
after finalization of the settlement. The settlement, however, is subject to
numerous conditions, the most notable of which is the enactment of legislation
by the federal government. At this time, it is uncertain when a definitive
settlement will be reached, if at all, or what the terms of any such settlement
will be.A reduction in billboard advertising by the tobacco industry could cause
an immediate reduction in the Company's outdoor advertising revenues, may
simultaneously increase the Company's available inventory, and could have a
material adverse effect on the Company's results of operations. The Company
believes, however, that it would be able to replace a substantial portion of
revenues from tobacco advertising that would be eliminated due to such a
settlement with revenues from other sources.
New Accounting Pronouncements
The Financial Accounting Standards Board (FASB)has issued Statement of Financial
Accounting Standards (SFAS) No.128 "Earnings Per Share", which established a new
accounting principle for the calculation of earnings per share. This SFAS is
effective for accounting periods ending after December 15, 1997. Management does
not believe that SFAS No. 128 will have a material impact on earnings per share
for the periods presented.
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income", which will
require the Company to disclose, in financial statement format, all non-owner
changes in equity. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Adoption of this standard is not expected to have a material
impact on disclosures in the Company's financial statements.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information", which established a new accounting principle for
reporting information about operating segments in annual financial statements
and interim financial reports. It also established standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997.
The Company is currently evaluating the applicability of this standard. However,
the Company oes not expect a material impact on disclosures in the Company's
financial statements.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not Applicable
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27.1 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K
Reports on Form 8-K were filed with the Commission during the
quarter ended June 30, 1997 to report the following items as of
the dates indicated:
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.
("Penn") for a cash purchase price of approximately $167.0
million and that it had agreed to sell certain outdoor
advertising displays that it had acquired in Baltimore, Maryland
to Universal Outdoor, Inc. ("UOUT") for a cash
purchase price of $46.5 million. On June 12, 1997, the Company
amended this report to report under Item 2 the
completion of the sale to UOUT and to present under Item 7
the historical financial statements of Penn and pro forma
financial information of the Company giving effect to the Penn
acquisition and the subsequent sale of assets to UOUT.
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 5, 1997 BY /s/Keith Istre
Keith A. Istre
Chief Financial and Accounting Officer
and Director