1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File Number 0-30242
Lamar Advertising Company
Commission File Number 1-12407
Lamar Media Corp.
(Exact name of registrants as specified in its charter)
Delaware 72-1449411
Delaware 72-1205791
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5551 Corporate Blvd., Baton Rouge, LA 70808
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (225) 926-1000
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
The number of shares of Lamar Advertising Company's Class A common stock
outstanding as of May 5, 2000: 71,566,572
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of May 5, 2000: 17,000,000
The number of shares of Lamar Media Corp. common stock outstanding as of
May 5, 2000: 100
This combined Form 10-Q is separately filed by (i) Lamar Advertising Company
and (ii) Lamar Media Corp. (which is a wholly-owned subsidiary of Lamar
Advertising Company). Lamar Media Corp. meets the conditions set forth in
general instruction H(1) (a) and (b) of Form 10-Q and is, therefore, filing
this form with the reduced disclosure format permitted by such instruction.
2
Corporate Restructuring
On July 20, 1999, Lamar Advertising Company completed a corporate
reorganization to create a new holding company structure. The reorganization
was accomplished through a merger under section 251(g) of the Delaware General
Corporation Law. At the effective time of the merger, all stockholders of Lamar
Advertising Company became stockholders in a new holding company and Lamar
Advertising Company became a wholly-owned subsidiary of the new holding
company. The new holding company took the Lamar Advertising Company name and
the old Lamar Advertising Company was renamed Lamar Media Corp. In the merger,
all outstanding shares of old Lamar Advertising Company's capital stock were
converted into shares of the new holding company with the same voting powers,
designations, preferences and rights, and the same qualifications, restrictions
and limitations, as the shares of old Lamar Advertising Company. Following the
restructuring, the Class A common stock of the new holding company trades under
the symbol "LAMR" on the Nasdaq National Market with the same CUSIP number as
the old Lamar Advertising Company's Class A common stock.
In this annual report, "Lamar," the "Company," "we," "us" and "our" refer to
Lamar Advertising Company and its consolidated subsidiaries with respect to
periods following the reorganization and to old Lamar Advertising Company with
respect to periods prior to the reorganization, except where we make it clear
that we are only referring to Lamar Media Corp. or a particular subsidiary.
In addition, "Lamar Media" and "Media" refer to Lamar Media Corp. and its
consolidated subsidiaries with respect to periods following the reorganization
and to old Lamar Advertising Company with respect to periods prior to the
reorganization, except where we make it clear that we are only referring to
Lamar Media Corp. or a particular subsidiary.
3
CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000
and March 31, 1999 2
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and
March 31, 1999 3
Notes to Condensed Consolidated Financial
Statements 4 - 6
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 7
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000
and March 31, 1999 8
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and
March 31, 1999 9
Notes to Condensed Consolidated Financial
Statements 10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 13
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risks 14
ITEM 4. Submission of Matters to a Vote of Security Holders 14
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 15 - 16
Signatures 16
4
PART I - FINANCIAL INFORMATION
ITEM 1.- FINANCIAL STATEMENTS
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
March 31, December 31,
Assets 2000 1999
----------- -----------
Current assets:
Cash and cash equivalents $ 9,905 $ 8,401
Receivables, net 81,275 81,226
Prepaid expenses 28,735 21,524
Other current assets 14,862 14,342
----------- -----------
Total current assets 134,777 125,493
----------- -----------
Property, plant and equipment 1,441,825 1,412,605
Less accumulated depreciation and amortization (244,502) (218,893)
----------- -----------
Net property plant and equipment 1,197,323 1,193,712
----------- -----------
Intangible assets 1,914,110 1,874,177
Other assets - non-current 17,827 13,563
----------- -----------
Total assets $ 3,264,037 $ 3,206,945
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 9,992 $ 11,492
Current maturities of long-term debt 4,312 4,318
Accrued expenses 26,711 57,653
Deferred income 12,200 11,243
----------- -----------
Total current liabilities 53,215 84,706
Long-term debt 1,703,598 1,611,463
Deferred income taxes 104,821 112,412
Deferred income 1,221 1,222
Other liabilities 7,371 5,613
----------- -----------
Total liabilities 1,870,226 1,815,416
----------- -----------
Stockholders' equity:
Series AA preferred stock, par value $.001, $63.80 cumulative dividends,
authorized 1,000,000 shares; 5,719.49 shares
issued and outstanding at 2000 and 1999 -- --
Class A common stock, par value $.001, 125,000,000 shares
authorized, 71,566,322 shares and 70,576,251 issued and
outstanding at 2000 and 1999, respectively 72 71
Class B common stock, par value $.001, 37,500,000 shares
authorized, 17,000,000 and 17,449,997 shares issued and
outstanding at 2000 and 1999, respectively 17 17
Additional paid-in capital 1,510,262 1,478,916
Accumulated deficit (116,540) (87,475)
----------- -----------
Stockholders' equity 1,393,811 1,391,529
----------- -----------
Total liabilities and stockholders' equity $ 3,264,037 $ 3,206,945
=========== ===========
See accompanying notes to consolidated financial statements.
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LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three months ended
March 31,
2000 1999
------------ ------------
Net revenues $ 151,267 $ 85,766
------------ ------------
Operating expenses:
Direct advertising expenses 52,512 29,764
General and administrative expenses 34,204 20,099
Depreciation and amortization 72,970 31,561
------------ ------------
159,686 81,424
------------ ------------
Operating income (loss) (8,419) 4,342
------------ ------------
Other expense (income):
Interest income (327) (686)
Interest expense 32,890 18,145
(Gain) loss on disposition of assets 1 (336)
------------ ------------
32,564 17,123
------------ ------------
Loss before income taxes and cumulative effect of a change in
accounting principle (40,983) (12,781)
Income tax benefit (12,009) (2,842)
------------ ------------
Loss before cumulative effect of a change in accounting principle (28,974) (9,939)
Cumulative effect of a change in accounting principle -- (767)
------------ ------------
Net loss (28,974) (10,706)
Preferred stock dividends (91) (91)
------------ ------------
Net loss applicable to common stock $ (29,065) $ (10,797)
============ ============
Loss per common share - basic and diluted:
Loss before accounting change $ (.33) $ (.17)
Cumulative effect of a change in accounting principle -- (.01)
------------ ------------
Net loss $ (.33) $ (.18)
============ ============
Weighted average common shares outstanding 88,466,644 61,143,351
Incremental common shares from dilutive stock options -- --
Incremental common shares from convertible debt -- --
------------ ------------
Weighted average common shares assuming dilution 88,466,644 61,143,351
============ ============
See accompanying notes to consolidated financial statements.
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LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (28,974) $ (10,706)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 72,970 31,561
(Gain) loss on disposition of assets 1 (336)
Deferred tax benefit (12,527) (2,319)
Provision for doubtful accounts 1,183 941
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (785) (1,923)
Prepaid expenses (7,273) (11)
Other assets (508) (1,915)
Increase (decrease) in:
Trade accounts payable (1,531) (194)
Accrued expenses (11,208) (6,432)
Deferred income 955 675
Other liabilities 33 37
-------------- --------------
Net cash provided by operating activities 12,336 9,378
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (3,351) (1,184)
Acquisition of new markets (82,082) (74,930)
Capital expenditures (19,004) (12,581)
Proceeds from disposition of assets 531 749
-------------- --------------
Net cash used in investing activities (103,906) (87,946)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 1,213 1,312
Principal payments on long-term debt (1,048) (45,939)
Proceeds from issuance of notes payable -- 2,860
Net borrowings under credit agreements 93,000 --
Dividends (91) (91)
-------------- --------------
Net cash provided by (used in)
financing activities 93,074 (41,858)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 1,504 (120,426)
Cash and cash equivalents at beginning of period 8,401 128,597
-------------- --------------
Cash and cash equivalents at end of period $ 9,905 $ 8,171
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 36,504 $ 18,835
============== ==============
Cash paid for state and federal income taxes $ 886 $ 570
============== ==============
See accompanying notes to consolidated financial statements
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LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
1. Significant Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position and results of operations for the interim periods presented
have been reflected herein. The results of operations for interim periods are
not necessarily indicative of the results to be expected for the entire year.
These condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K.
Certain amounts in the prior year's consolidated financial statements have been
reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported results of operations.
2. Acquisitions
On January 14, 2000, the Company purchased the stock of Aztec Group, Inc. for a
purchase price of approximately $34,826. The purchase price consisted of
approximately $5,600 cash and the issuance of 481,481 shares of Lamar
Advertising Company common stock valued at approximately $29,226.
On March 31, 2000, the Company purchased the assets of an outdoor company in the
Company's northeast region for a cash purchase price of approximately $33,600.
During the three months ended March 31, 2000, the Company completed 24
additional acquisitions of outdoor advertising assets for a cash purchase price
of approximately $24,552.
Each of these acquisitions were accounted for under the purchase method of
accounting, and, accordingly, the accompanying financial statements include the
results of operations of each acquired entity from the date of acquisition. The
acquisition costs have been allocated to assets acquired and liabilities
assumed based on fair market value at the dates of acquisition. The following
is a summary of the preliminary allocation of the acquisition costs in the
above transactions.
Property
Current Plant & Other Other Current Long-term
Assets Equipment Goodwill Intangibles Assets Liabilities Liabilities
----------------------------------------------------------------------------------------------
Aztec Group, Inc. 487 8,335 21,799 10,526 -- 708 5,645
Northeast region
acquisition -- 3,406 16,116 14,082 -- -- --
Other 44 6,895 16,870 1,953 3 35 189
----------------------------------------------------------------------------------------------
531 18,636 54,785 26,561 3 743 5,834
==============================================================================================
Summarized below are certain unaudited pro forma statement of operations data
for the three months ended March 31, 2000 and 1999 as if each of the above
acquisitions and the acquisitions occurring in 1999, which were fully described
in the Company's December 31, 1999 Annual Report on Form 10K, had been
consummated as of January 1, 1999. This
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pro forma information does not purport to represent what the Company's results
of operations actually would have been had such transactions occurred on the
date specified or to project the Company's results of operations for any future
periods.
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Net revenues $ 152,326 $ 141,762
============== ==============
Net loss applicable to
common stock $ (29,516) $ (29,596)
============== ==============
Net loss per common share - basic $ (.33) $ (.34)
============== ==============
Net loss per common share - diluted $ (.33) $ (.34)
============== ==============
3. Summarized Financial Information of Subsidiaries
Separate financial statements of each of the Company's direct or indirect
wholly owned subsidiaries that have guaranteed the Company's obligations with
respect to its publicly issued notes (collectively, the "Guarantors") are not
included herein because the Guarantors are jointly and severally liable under
the guarantees, and the aggregate assets, liabilities, earnings and equity of
the Guarantors are substantially equivalent to the assets, liabilities,
earnings and equity of the Company on a consolidated basis.
Summarized financial information for Missouri Logos, a Partnership, a 66 2/3%
owned subsidiary of the Company and the only subsidiary of the Company that is
not a Guarantor, is set forth below:
Balance Sheet Information: March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
Current assets 239 288
Total assets 283 333
Total liabilities 10 6
Venturers' equity 273 327
Income Statement Information: Three months ended Three months ended
March 31, 2000 March 31, 1999
-------------- --------------
(Unaudited) (Unaudited)
Revenues 254 274
Net income 164 214
4. New Accounting Pronouncements
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-Up
Activities. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, and requires that the costs of start-up
activities, including organizational costs, be expensed as incurred. The effect
of SOP 98-5 is recorded as a cumulative effect of a change in accounting
principle as described in Accounting Principles Board Opinion No. 20
"Accounting Changes" in the amount of $767, net of tax, for the three months
ended March 31, 1999.
-5-
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5. Earnings Per Share
Earnings per share are computed in accordance with SFAS No. 128, "Earnings Per
Share." The calculations of basic earnings per share excludes any dilutive
effect of stock options and convertible debt while diluted earnings per share
includes the dilutive effect of stock options and convertible debt. The
following information is disclosed for purposes of calculating the antidilutive
earnings per share for the periods presented:
March 31, March 31,
2000 1999
------------ ------------
Net loss applicable to common stock $ (29,065) $ (10,797)
Income impact of assumed conversions 2,302 --
------------ ------------
Loss available to common shareholders
assuming conversion $ (26,763) $ (10,797)
============ ============
Weighted average common shares
outstanding 88,466,644 61,143,351
Shares issuable upon exercise of
stock options 842,550 598,848
Incremental shares from convertible debt 6,216,210 --
------------ ------------
Weighted average common shares plus
dilutive potential common shares 95,525,404 61,742,199
============ ============
Net loss per common share - diluted $ (.28) $ (.17)
============ ============
6. Subsequent Events
Lamar acquired the assets of Outdoor West, Inc for a total cash purchase price
of approximately $40,000 and will be accounted for under the purchase method of
accounting.
In addition, Lamar has signed a Definitive Agreement and Plan of Merger with
Advantage Outdoor Company, Inc. ("Advantage"). At the effective time of the
merger, all of the outstanding shares of Advantage common stock will be
converted into between 2,000,000 and 2,300,000 shares of Lamar's Class A common
stock depending on the average closing sales price of Lamar's common stock over
a period prior to closing. In connection with the merger, Lamar will assume up
to $79,000 of Advantage's obligations. This merger will add approximately 5,100
displays. Advantage has the right to terminate the merger agreement if the
average closing sales price of Lamar's Class A common Stock over a 30 day
period prior to closing is less than $42.00 per share. This merger is subject
to approval under the Hart-Scott-Rodino Antitrust Improvements Act and the
satisfaction of other customary closing conditions.
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LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
March 31, December 31,
Assets 2000 1999
----------- -----------
Current assets:
Cash and cash equivalents $ 9,905 $ 8,401
Receivables, net 81,315 80,671
Prepaid expenses 28,735 21,524
Other current assets 24,146 25,193
----------- -----------
Total current assets 144,101 135,789
----------- -----------
Property, plant and equipment 1,441,825 1,412,605
Less accumulated depreciation and amortization (244,502) (218,893)
----------- -----------
Net property plant and equipment 1,197,323 1,193,712
----------- -----------
Intangible assets 1,892,188 1,851,965
Other assets - non-current 17,827 13,563
----------- -----------
Total assets $ 3,251,439 $ 3,195,029
=========== ===========
Liabilities and Stockholder's Equity
Current liabilities:
Trade accounts payable $ 9,992 $ 11,492
Current maturities of long-term debt 4,312 4,318
Accrued expenses 23,387 54,031
Deferred income 12,200 11,243
----------- -----------
Total current liabilities 49,891 81,084
Long-term debt 1,703,598 1,611,463
Deferred income taxes 105,580 112,776
Deferred income 1,221 1,222
Other liabilities 7,371 5,613
----------- -----------
Total liabilities 1,867,661 1,812,158
----------- -----------
Stockholder's equity:
Common stock, $.01 par value, authorized 3,000 shares;
issued and outstanding 100 shares at March 31, 2000 and
December 31, 1999 -- --
Additional paid-in capital 1,498,832 1,469,606
Accumulated deficit (115,054) (86,735)
----------- -----------
Stockholder's equity 1,383,778 1,382,871
----------- -----------
Total liabilities and stockholder's equity $ 3,251,439 $ 3,195,029
=========== ===========
See accompanying notes to consolidated financial statements.
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LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three Months ended
March 31,
2000 1999
----------- -----------
Net revenues $ 151,267 $ 85,766
----------- -----------
Operating expenses:
Direct advertising expenses 52,512 29,764
General and administrative expenses 33,818 20,099
Depreciation and amortization 72,307 31,561
----------- -----------
158,637 81,424
----------- -----------
Operating income (loss) (7,370) 4,342
----------- -----------
Other expense (income):
Interest income (327) (686)
Interest expense 32,890 18,145
(Gain) loss on disposition of assets 1 (336)
----------- -----------
32,564 17,123
----------- -----------
Loss before income taxes and cumulative effect of a change in
accounting principle (39,934) (12,781)
Income tax benefit (11,615) (2,842)
----------- -----------
Loss before cumulative effect of a change in accounting principle (28,319) (9,939)
Cumulative effect of a change in accounting principle -- (767)
----------- -----------
Net loss (28,319) (10,706)
Preferred stock dividends -- (91)
----------- -----------
Net loss applicable to common stock $ (28,319) $ (10,797)
=========== ===========
See accompanying notes to consolidated financial statements.
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LAMAR MEDIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months ended
March 31,
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (28,319) $ (10,706)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 72,307 31,561
Gain (loss) on disposition of assets 1 (336)
Deferred tax benefit (12,133) (2,319)
Provision for doubtful accounts 1,183 941
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (1,389) (1,923)
Prepaid expenses (7,273) (11)
Other assets 2,907 (1,915)
Increase (decrease) in:
Trade accounts payable (1,531) (194)
Accrued expenses (13,656) (6,432)
Deferred income 955 675
Other liabilities 33 37
----------- -----------
Net cash provided by operating activities 13,085 9,378
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (3,351) (1,184)
Acquisition of new markets (81,709) (74,930)
Capital expenditures (19,004) (12,581)
Proceeds from disposition of assets 531 749
----------- -----------
Net cash used in investing activities (103,533) (87,946)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock -- 1,312
Principal payments on long-term debt (1,048) (45,939)
Proceeds from issuance of long-term debt 93,000 2,860
Dividends -- (91)
----------- -----------
Net cash provided by (used in) financing activities 91,952 (41,858)
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,504 (120,426)
Cash and cash equivalents at beginning of period 8,401 128,597
----------- -----------
Cash and cash equivalents at end of period $ 9,905 $ 8,171
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 36,504 $ 18,835
=========== ===========
Cash paid for state and federal income taxes $ 886 $ 570
=========== ===========
See accompanying notes to consolidated financial statements.
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LAMAR MEDIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
1. Significant Accounting Policies
On July 20, 1999, Lamar Advertising Company reorganized into a new holding
company structure. As a result of this reorganization (1) the former Lamar
Advertising Company became a wholly-owned subsidiary of a newly formed holding
company, (2) the name of the former Lamar Advertising Company was changed to
Lamar Media Corp., (3) the name of the new holding company became Lamar
Advertising Company, (4) the outstanding shares of capital stock of the former
Lamar Advertising Company, including the Class A common stock, were
automatically converted, on a share for share basis, into identical shares of
capital stock of the new holding company and (5) the Class A common stock of
the new holding company commenced trading on the Nasdaq National Market under
the symbol "LAMR" instead of the Class A common stock of the former Lamar
Advertising Company. In addition, following the holding company reorganization,
substantially all of the former Lamar Advertising Company's debt obligations,
including the bank credit facility and other long-term debt remained the
obligations of Lamar Media. Under Delaware law, the reorganization did not
require the approval of the stockholders of the former Lamar Advertising
Company. The purpose of the reorganization was to provide Lamar Advertising
Company with a more flexible capital structure and to enhance its financing
options. The business operations of the former Lamar Advertising Company and
its subsidiaries have not changed as a result of the reorganization.
Certain footnotes are not provided for the accompanying financial statements as
the information in notes 2, 3, 4 and 6 to the consolidated financial statements
of Lamar Advertising Company included elsewhere in this report is substantially
equivalent to that required for the consolidated financial statements of Lamar
Media Corp. Earnings per share data is not provided for the operating results
of Lamar Media Corp. as it is a wholly-owned subsidiary of Lamar Advertising
Company.
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.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LAMAR ADVERTISING COMPANY
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three months ended March 31, 2000
and 1999. This discussion should be read in conjunction with the consolidated
financial statements of the Company and the related notes.
The following discussion is a summary of the key factors management considers
necessary in reviewing the Company's results of operations, liquidity and
capital resources. The future operating results of the Company may differ
materially from the results described below. For a discussion of certain
factors which may affect the Company's future operating performance, please
refer to Exhibit 99.1 hereto entitled "Factors Affecting Future Operating
Results".
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Net revenues increased $65.5 million or 76.4% to $151.3 million for the three
months ended March 31, 2000 as compared to the same period in 1999. This
increase was attributable to the Company's acquisitions during 1999 and 2000
and internal growth within the Company's existing markets.
Operating expenses, exclusive of depreciation and amortization, increased $36.9
million or 73.9% for the three months ended March 31, 2000 as compared to the
same period in 1999. This was primarily the result of the additional operating
expenses related to the operations of acquired outdoor advertising assets and
the continued development of the logo sign program.
Depreciation and amortization expense increased $41.4 million or 131.2% from
$31.6 million for the three months ended March 31, 1999 to $73.0 million for
the three months ended March 31, 2000 as a result of an increase in capitalized
assets resulting from the Company's recent acquisition activity.
Due to the above factors, operating income decreased $12.8 million to an
operating loss of $8.4 million for three months ended March 31, 2000 from
operating income of $4.3 million for the same period in 1999.
Interest expense increased $14.8 million from $18.1 million for the three
months ended March 31, 1999 to $32.9 million for the same period in 2000 as a
result of additional borrowings under the Company's bank credit facility to
fund increased acquisition activity and the issuance of $287.5 million
convertible notes in August 1999.
There was an income tax benefit of $12.0 million for the three months ended
March 31, 2000 as compared to an income tax benefit of $2.8 million for the
same period in 1999. The effective tax rate for the three months ended March
31, 2000 is approximately 29.0% which is less than statutory rates due to
permanent differences resulting from non-deductible amortization of goodwill.
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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 three months
ended March 31, 1999. This expense is a one time adjustment to recognize
start-up activities and organization costs that were capitalized in prior
periods.
As a result of the above factors, the Company recognized a net loss for the
three months ended March 31, 2000 of $29.0 million, as compared to a net loss
of $10.7 million for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and revolving credit borrowings. Its acquisitions have
been financed primarily with borrowed funds and the issuance of Class A common
stock.
During the three months ended March 31, 2000, the Company financed its
acquisition activity of approximately $93.9 million with borrowings under the
Company's bank credit facility. At March 31, 2000, following these
acquisitions, the Company had $130 million available under the Revolving
Facility and believes that this availability coupled with internally generated
funds will be sufficient for the foreseeable future to satisfy all debt service
obligations and to finance additional acquisition activity and current
operations.
The Company's net cash provided by operating activities increased $3.0 million
for the three months ended March 31, 2000 due primarily to an increase in
noncash items of $31.8 million, which includes an increase in depreciation and
amortization of $41.4 million and an increase in the income tax benefit of
$10.2 million. The increase in noncash items was offset by an increase in net
loss of $18.3 million, a decrease in accrued expenses of $4.8 million and an
increase in receivables of $7.3 million. Net cash used in investing activities
increased $16.0 million from $87.9 million for the three months ended March 31,
1999 to $103.9 million for the same period in 2000. This increase was due to a
$7.2 million increase in acquisitions of new markets, a $2.2 million increase
in notes receivable, and a $6.4 million increase in capital expenditures. Net
cash provided by financing activities for the three months ended March 31, 2000
is $93.1 million due to $93.0 million in net borrowings under credit agreements
used to finance acquisition activity during the period.
LAMAR MEDIA CORP.
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Media for the three months ended March 31, 2000
and 1999. This discussion should be read in conjunction with the consolidated
financial statements of Lamar Media and the related notes.
The following discussion is a summary of the key factors management considers
necessary in reviewing Lamar Media's results of operations, liquidity and
capital resources. The future operating results of Lamar Media may differ
materially from the results described below. For a discussion of certain
factors which may affect Lamar Media's future operating performance, please
refer to Exhibit 99.1 hereto entitled "Factors Affecting Future Operating
Results".
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RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Net revenues increased $65.5 million or 76.4% to $151.3 million for the three
months ended March 31, 2000 as compared to the same period in 1999. This
increase was attributable to Lamar Media's acquisitions during 1999 and 2000
and internal growth within Lamar Media's existing markets.
Operating expenses, exclusive of depreciation and amortization, increased $36.5
million or 73.1% for the three months ended March 31, 2000 as compared to the
same period in 1999. This was primarily the result of the additional operating
expenses related to the operations of acquired outdoor advertising assets and
the continued development of the logo sign program.
Depreciation and amortization expense increased $40.7 million or 129.1% from
$31.6 million for the three months ended March 31, 1999 to $72.3 million for
the three months ended March 31, 2000 as a result of an increase in capitalized
assets resulting from Lamar Media's recent acquisition activity.
Due to the above factors, operating income decreased $11.7 million to an
operating loss of $7.4 million for three months ended March 31, 2000 from
operating income of $4.3 million for the same period in 1999.
Interest expense increased $14.7 million from $18.2 million for the three
months ended March 31, 1999 to $32.9 million for the same period in 2000 as a
result of additional borrowings under Lamar Media's bank credit facility to
fund increased acquisition activity and the issuance of $287.5 million
convertible notes in August 1999.
There was an income tax benefit of $11.6 million for the three months ended
March 31, 2000 as compared to an income tax benefit of $2.8 million for the
same period in 1999. The effective tax rate for the three months ended March
31, 2000 is approximately 29.1% 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, Lamar Media recognized an expense of $.8 million as a
cumulative effect of a change in accounting principle for the three months
ended March 31, 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
three months ended March 31, 2000 of $28.3 million, as compared to a net loss
of $10.7 million for the same period in 1999.
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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to interest rate risk in connection with variable rate
debt instruments issued by the Company. The Company does not enter into market
risk sensitive instruments for trading purposes. The information below
summarizes the Company's interest rate risk associated with its principal
variable rate debt instruments outstanding at March 31, 2000.
Loans under Lamar Media's New Bank Credit Agreement bear interest at variable
rates equal to the Chase Prime Rate or LIBOR plus the applicable margin. Because
the Chase Prime Rate or LIBOR may increase or decrease at any time, the Company
and Lamar Media 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 Agreement. Increases in the interest rates
applicable to borrowings under the New Bank Credit Agreement would result in
increased interest expense and a reduction in the Company's and Lamar Media's
net income and after tax cash flow.
At March 31, 2000, there was approximately $869 million of aggregate
indebtedness outstanding under the New Bank Credit Agreement, or approximately
50.9% of the Company's and Lamar Media's outstanding long-term debt on that
date, bearing interest at variable rates. The aggregate interest expense for the
three months ended March 31, 2000 with respect to borrowings under the Bank
Credit Agreement was $16.4 million, and the weighted average interest rate
applicable to borrowings under these credit facilities during the three months
ended March 31, 2000 was 8.0%. Assuming that the weighted average interest rate
was 200-basis points higher (that is 10.0% rather than 8.0%), then the Company's
and Lamar Media's March 31, 2000 interest expense would have been approximately
$4.0 million higher resulting in a $2.5 million decrease in the Company's and
Lamar Media's three months ended March 31, 2000 net income and 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 Agreement 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.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II - OTHER INFORMATION
Item 6. Exhibits 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 June 30, 1999 (File No.
0-20833) filed on August 16, 1999 and incorporated
herein by reference.
3.3 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.
3.4 Amended and Restated Bylaws of Lamar Media Corp.
Previously filed as exhibit 3.1 to Lamar Media's
Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 1-12407) filed on
November 12, 1999 and incorporated herein by
reference.
4.1 Supplemental Indenture to the Indenture dated
November 15, 1996 among Lamar Media Corp., certain
of its subsidiaries and State Street Bank and Trust
Company, as Trustee, dated March 2, 2000 delivered
by Lamar Advan, Inc. and, in substantially identical
agreements, by the scheduled additional subsidiary
guarantors. Filed herewith.
4.2 Supplemental Indenture to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank,
as Trustee, dated March 2, 2000 delivered by Lamar
Advan, Inc. and, in substantially identical
agreements, by the scheduled additional subsidiary
guarantors. Filed herewith.
4.3 Supplemental Indenture to the Indenture dated
September 25, 1997 among Lamar Media Corp., certain
of its subsidiaries and State Street Bank and Trust
Company, as Trustee, dated March 2, 2000 delivered
by Lamar Advan, Inc. and, in substantially identical
agreements, by the scheduled additional subsidiary
guarantors. Filed herewith.
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10.1 Joinder Agreement to the Lamar Media Corp. Credit
Agreement dated August 13, 1999 by Lamar Advan, Inc.
and, in substantially identical agreements, by the
scheduled additional subsidiary guarantors, in favor
of The Chase Manhattan Bank, as Administrative Agent
dated March 2, 2000. Filed herewith.
27.1 Financial Data Schedule for the Company. Filed
herewith.
27.2 Financial Data Schedule for Lamar Media Corp. Filed
herewith.
99.1 Factors Affecting Future Operating Results of the
Company and Lamar Media. Filed herewith.
(b) Reports on Form 8-K
Reports on Form 8-K were filed with the Commission during the first
quarter of 2000 to report the following items as of the dates
indicated:
On February 9, 2000, the Company filed a report on Form 8-K
in order to update the financial statements filed on November
23, 1999, Lamar Advertising Company filed the report to
include updated pro forma financial information of Lamar
Advertising Company giving effect to the acquisition of
Chancellor Media Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LAMAR ADVERTISING COMPANY
DATED: May 12, 2000 BY: /s/ KEITH A. ISTRE
---------------------------------
Keith A. Istre
Chief Financial and Accounting
Officer, Treasurer and Director
LAMAR MEDIA CORP.
BY: /s/ KEITH A. ISTRE
---------------------------------
Keith A. Istre
Chief Financial and Accounting
Officer, Treasurer and Director
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Agreement and Plan of Merger dated as of July 20,
1999 among Lamar Media Corp., Lamar New Holding Co.,
and Lamar Holdings Merge Co. Previously filed as
exhibit 2.1 to the Company's Current Report on Form
8-K filed on July 22, 1999 (File No. 0-30242) and
incorporated herein by reference.
3.1 Certificate of Incorporation of Lamar New Holding
Co. Previously filed as exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the period ended
June 30, 1999 (File No. 0-20833) filed on August 16,
1999 and incorporated herein by reference.
3.2 Certificate of Amendment of Certificate of
Incorporation of Lamar New Holding Co. (whereby the
name of Lamar New Holding Co. was changed to Lamar
Advertising Company). Previously filed as exhibit
3.2 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1999 (File No.
0-20833) filed on August 16, 1999 and incorporated
herein by reference.
3.3 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.
3.4 Amended and Restated Bylaws of Lamar Media Corp.
Previously filed as exhibit 3.1 to Lamar Media's
Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 1-12407) filed on
November 12, 1999 and incorporated herein by
reference.
4.1 Supplemental Indenture to the Indenture dated
November 15, 1996 among Lamar Media Corp., certain
of its subsidiaries and State Street Bank and Trust
Company, as Trustee, dated March 2, 2000 delivered
by Lamar Advan, Inc. and, in substantially identical
agreements, by the scheduled additional subsidiary
guarantors. Filed herewith.
4.2 Supplemental Indenture to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank,
as Trustee, dated March 2, 2000 delivered by Lamar
Advan, Inc. and, in substantially identical
agreements, by the scheduled additional subsidiary
guarantors. Filed herewith.
4.3 Supplemental Indenture to the Indenture dated
September 25, 1997 among Lamar Media Corp., certain
of its subsidiaries and State Street Bank and Trust
Company, as Trustee, dated March 2, 2000 delivered
by Lamar Advan, 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 Advan, Inc.
and, in substantially identical agreements, by the
scheduled additional subsidiary guarantors, in favor
of The Chase Manhattan Bank, as Administrative Agent
dated March 2, 2000. Filed herewith.
27.1 Financial Data Schedule for the Company. Filed
herewith.
27.2 Financial Data Schedule for Lamar Media Corp. Filed
herewith.
99.1 Factors Affecting Future Operating Results of the
Company and Lamar Media. Filed herewith.