1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 2001
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 their charters)
Delaware 72-1449411
Delaware 72-1205791
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
5551 Corporate Blvd., Baton Rouge, LA 70808
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (225) 926-1000
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
The number of shares of Lamar Advertising Company's Class A common stock
outstanding as of August 8, 2001: 82,524,145
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of August 8, 2001: 16,638,136
The number of shares of Lamar Media Corp. common stock outstanding as of
August 8, 2001: 100
This combined Form 10-Q is separately filed by (i) Lamar Advertising Company and
(ii) Lamar Media Corp. (which is a wholly-owned subsidiary of Lamar Advertising
Company). Lamar Media Corp. meets the conditions set forth in general
instruction H(1) (a) and (b) of Form 10-Q and is, therefore, filing this form
with the reduced disclosure format permitted by such instruction.
2
CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of
June 30, 2001 and December 31, 2000............................................... 1
Condensed Consolidated Statements of Operations for the three
months ended June 30, 2001 and June 30, 2000 and six months
ended June 30, 2001 and June 30, 2000............................................. 2
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2001 and
June 30, 2000..................................................................... 3
Notes to Condensed Consolidated Financial
Statements........................................................................ 4 - 6
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of
June 30, 2001 and December 31, 2000............................................... 7
Condensed Consolidated Statements of Operations for the three
months ended June 30, 2001 and June 30, 2000 and six months
ended June 30, 2001 and June 30, 2000............................................. 8
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2001 and
June 30, 2000..................................................................... 9
Notes to Condensed Consolidated Financial
Statements........................................................................ 10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................... 11 - 15
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risks..........................................................................16
PART II - OTHER INFORMATION
ITEM 4. Submission of matters to a vote of security holders...................................17
ITEM 6. Exhibits and Reports on Form 8-K.................................................18 - 19
Signatures............................................................................19
3
PART I - FINANCIAL INFORMATION
ITEM 1.- FINANCIAL STATEMENTS
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
June 30, December 31,
2001 2000
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,770 $ 72,340
Receivables, net 108,224 91,674
Prepaid expenses 36,703 23,164
Other current assets 9,820 8,738
----------- -----------
Total current assets 157,517 195,916
----------- -----------
Property, plant and equipment 1,733,409 1,630,866
Less accumulated depreciation and amortization (393,238) (335,991)
----------- -----------
Net property, plant and equipment 1,340,171 1,294,875
----------- -----------
Intangible assets 2,222,404 2,129,733
Other assets - non-current 19,661 17,249
----------- -----------
Total assets $ 3,739,753 $ 3,637,773
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 12,005 $ 9,918
Accrued expenses 33,300 40,724
Current maturities of long-term debt 97,641 66,814
Deferred income 11,945 11,005
----------- -----------
Total current liabilities 154,891 128,461
Long-term debt 1,719,386 1,671,466
Deferred income taxes 141,406 140,452
Other liabilities 8,341 7,939
----------- -----------
Total liabilities 2,024,024 1,948,318
----------- -----------
Stockholders' Equity:
Series AA preferred stock, par value $.001, $63.80
cumulative dividends, authorized 5,720 shares;
5,719.49 shares issued and outstanding at 2001 and 2000 -- --
Class A preferred stock, par value $638, $63.80
cumulative dividends, 10,000 shares authorized;
0 shares issued and outstanding at 2001 and 2000 -- --
Class A common stock, $.001 par value, 175,000,000 shares
authorized; 82,524,045 shares and 80,101,793
shares issued and outstanding at 2001 and 2000, respectively 83 80
Class B common stock, $.001 par value, 37,500,000 shares
authorized; 16,638,136 and 17,000,000 shares issued and
outstanding at 2001 and 2000, respectively 17 17
Additional paid-in-capital 1,952,446 1,871,303
Accumulated deficit (236,817) (181,945)
----------- -----------
Stockholders' equity 1,715,729 1,689,455
----------- -----------
Total liabilities and stockholders' equity $ 3,739,753 $ 3,637,773
=========== ===========
See accompanying notes to condensed consolidated financial statements.
-1-
4
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net revenues $ 191,788 $ 172,953 $ 362,173 $ 324,220
------------ ------------ ------------ ------------
Operating expenses (income):
Direct advertising expenses 61,315 53,626 122,851 106,138
General and administrative expenses 36,436 35,261 74,132 69,465
Depreciation and amortization 88,823 76,230 174,230 149,200
Gain on disposition of assets (803) (105) (1,019) (104)
------------ ------------ ------------ ------------
185,771 165,012 370,194 324,699
------------ ------------ ------------ ------------
Operating income (loss) 6,017 7,941 (8,021) (479)
------------ ------------ ------------ ------------
Other expense (income):
Interest income (178) (369) (422) (696)
Interest expense 32,972 36,401 68,752 69,291
------------ ------------ ------------ ------------
32,794 36,032 68,330 68,595
------------ ------------ ------------ ------------
Loss before income tax benefit (26,777) (28,091) (76,351) (69,074)
Income tax benefit (6,377) (7,693) (21,661) (19,702)
------------ ------------ ------------ ------------
Net loss (20,400) (20,398) (54,690) (49,372)
Preferred stock dividends 91 91 182 182
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (20,491) $ (20,489) $ (54,872) $ (49,554)
------------ ============ ============ ============
Loss per common share - basic and diluted $ (.21) $ (.23) $ (.56) $ (.56)
============ ============ ============ ============
Weighted average common shares outstanding 98,209,271 89,512,428 97,903,588 88,989,536
Incremental common shares from dilutive stock
options -- -- -- --
Incremental common shares from convertible debt -- -- -- --
------------ ------------ ------------ ------------
Weighted average common shares assuming dilution 98,209,271 89,512,428 97,903,588 88,989,536
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
-2-
5
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
-----------------------
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (54,690) $ (49,372)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 174,230 149,200
Gain on disposition of assets (1,019) (104)
Deferred tax benefit (22,013) (20,279)
Provision for doubtful accounts 3,602 2,329
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (18,238) (13,789)
Prepaid expenses (11,436) (7,635)
Other assets 471 (207)
Increase (decrease) in:
Trade accounts payable 2,088 (1,524)
Accrued expenses (10,657) (3,456)
Other liabilities 145 52
Deferred income 196 (920)
--------- ---------
Net cash provided by operating activities 62,679 54,295
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of new markets (227,318) (230,652)
Capital expenditures (36,925) (43,700)
Proceeds from disposition of assets 3,334 1,122
--------- ---------
Net cash used in investing activities (260,909) (273,230)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs -- (1,448)
Net proceeds from issuance of common stock 50,217 1,893
Principal payments on long-term debt (2,375) (2,168)
Net borrowings under credit agreements 81,000 224,000
Dividends (182) (182)
--------- ---------
Net cash provided by financing activities 128,660 222,095
--------- ---------
Net (decrease) increase in cash and cash equivalents (69,570) 3,160
Cash and cash equivalents at beginning of period 72,340 8,401
--------- ---------
Cash and cash equivalents at end of period $ 2,770 $ 11,561
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
---------
Cash paid for interest $ 67,301 $ 69,047
========= =========
Cash paid for state and federal income taxes $ 781 $ 1,616
========= =========
Common stock issuance related to acquisitions $ 29,000 $ 122,031
========= =========
See accompanying notes to condensed consolidated financial statements.
-3-
6
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
1. 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.
2. Acquisitions
On January 1, 2001, the Company purchased the assets of two outdoor advertising
companies, American Outdoor Advertising, LLC and Appalachian Outdoor Advertising
Co., Inc. for a total cash purchase price of approximately $31,500 and $20,000,
respectively.
On February 1, 2001, the Company purchased all of the outstanding common stock
of Bowlin Outdoor Advertising and Travel Centers, Inc. for a total purchase
price of approximately $44,400. The purchase price consisted of approximately
$15,100 cash and the issuance of 725,000 shares of Lamar Advertising Company
valued at $29,000.
Effective April 1, 2001, the Company purchased all of the outstanding common
stock of DeLite Outdoor Advertising, LLC and DeLite Outdoor Advertising, Inc.
for a cash purchase price of approximately $43,000.
On April 1, 2001, the Company purchased certain assets of PNE Media, LLC for
a cash purchase price of approximately $21,000.
During the six months ended June 30, 2001, the company completed 64 additional
acquisitions of outdoor advertising and transit assets for an aggregate cash
purchase price of approximately $96,800.
Each of these acquisitions were accounted for under the purchase method of
accounting, and, accordingly, the accompanying financial statements include the
results of operations of each acquired entity from the date of acquisition. The
purchase price has been allocated to assets acquired and liabilities assumed
based on fair market value at the dates of acquisition. The following is a
summary of the allocation of the purchase price in the above transactions.
-4-
7
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Current Property Plant Other Other Current Long-term
Assets & Equipment Goodwill Intangibles Assets Liabilities Liabilities
-----------------------------------------------------------------------------------------
American Outdoor 557 1,185 18,682 11,112 -- -- --
Appalachian Outdoor 325 5,822 2,666 11,512 -- 325 --
Bowlin Outdoor 2,041 29,173 6,788 23,889 -- 3,307 14,178
PNE 180 4,879 4,500 11,344 -- -- --
Delite 1,159 10,864 20,033 19,435 -- 543 7,968
Other 1,009 28,004 31,116 36,408 2,450 482 1,681
----------------------------------------------------------------------------------------------
5,271 79,927 83,785 113,700 2,450 4,657 23,827
==============================================================================================
Summarized below are certain unaudited pro forma statements of operations data
for the three months and six months ended June 30, 2001 and June 30, 2000 as if
each of the above acquisitions and the acquisitions occurring in 2000, which
were fully described in the Company's December 31, 2000 Annual Report on Form
10-K, had been consummated as of January 1, 2000. This pro forma information
does not purport to represent what the Company's results of operations actually
would have been had such transactions occurred on the date specified or to
project the Company's results of operations for any future periods.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
2001 2000 2001 2000
--------- ----------- ----------- ---------
Net revenues $ 191,788 $ 188,137 $ 365,199 $358,458
========= ========== ========== ========
Net loss applicable to
common stock $ (20,491) $ (26,057) $ (55,192) $(62,594)
========= ========== ========== ========
Net loss per common share -
basic and diluted $ (.21) $ (.28) $ (.56) $ (.68)
========= ========== ========== ========
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 guarantees are full and unconditional and joint and several
and the only subsidiary that is not a guarantor is considered minor. Lamar
Media's ability to make distributions to Lamar Advertising is restricted under
the terms of its bank credit facility and the indenture relating to Lamar
Media's outstanding notes.
-5-
8
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. Earnings Per Share
Earnings per share are computed in accordance with SFAS No. 128, "Earnings Per
Share." The calculations of basic earnings per share exclude any dilutive effect
of stock options and convertible debt while diluted earning per share includes
the dilutive effect of stock options and convertible debt. The number of
potentially dilutive shares excluded from the calculation because of their
anti-dilutive effect are 6,683,547 and 6,818,549 for three months ended June 30,
2001 and 2000, and 6,705,656 and 6,936,816 for the six months ended June 30,
2001 and 2000, respectively.
5. New Accounting Pronouncements
In June 2000, the FASB issued SFAS No. 138, "Accounting for Derivative
Instruments and Hedging Activities -- an amendment of FASB No. 133", which
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
assets or liabilities in the statement of financial position and measure those
instruments at fair value. On January 1, 2001, the Company adopted SFAS No. 133.
The Company's adoption of SFAS No. 133 did not have any affect on the financial
position or results of operations in 2001.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company is required to adopt the provisions of Statement 141 immediately,
and Statement 142 effective January 1, 2002. Furthermore, goodwill and
intangible assets determined to have an indefinite useful life acquired in a
purchase business combination completed after June 30, 2001, but before
Statement 142 is adopted in full will not be amortized but will continue to be
evaluated for impairment in accordance with the appropriate pre-Statement 142
literature. The Company is currently assessing the impact of Statements 141 and
142 on its financial condition and results of operations.
-6-
9
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
June 30, December 31,
Assets 2001 2000
----------- -----------
Current assets:
Cash and cash equivalents $ 2,770 $ 72,340
Receivables, net 107,155 91,628
Prepaid expenses 36,703 23,164
Other current assets 15,587 15,966
----------- -----------
Total current assets 162,215 203,098
----------- -----------
Property, plant and equipment 1,733,409 1,630,866
Less accumulated depreciation and amortization (393,238) (335,991)
----------- -----------
Net property, plant and equipment 1,340,171 1,294,875
----------- -----------
Intangible assets 2,199,372 2,106,493
Other assets - non-current 18,937 17,249
----------- -----------
Total assets $ 3,720,695 $ 3,621,715
=========== ===========
Liabilities and Stockholder's Equity
Current liabilities:
Trade accounts payable $ 12,005 $ 9,918
Accrued expenses 23,244 35,765
Current maturities of long-term debt 97,641 66,814
Deferred income 11,945 11,005
----------- -----------
Total current liabilities 144,835 123,502
Long-term debt 1,431,886 1,671,466
Deferred income taxes 146,150 142,052
Other liabilities 8,342 7,939
----------- -----------
Total liabilities 1,731,213 1,944,959
----------- -----------
Stockholder's equity:
Common stock, $.01 par value, authorized 3,000 shares;
issued and outstanding 100 shares at June 30, 2001 and December 31, 2000 -- --
Additional paid-in capital 2,217,769 1,855,421
Accumulated deficit (228,287) (178,665)
----------- -----------
Stockholder's equity 1,989,482 1,676,756
----------- -----------
Total liabilities and stockholder's equity $ 3,720,695 $ 3,621,715
=========== ===========
See accompanying notes to condensed consolidated financial statements.
-7-
10
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net revenues $ 191,788 $ 172,953 $ 362,173 $ 324,220
--------- --------- --------- ---------
Operating expenses (income):
Direct advertising expenses 61,315 53,626 122,851 106,138
General and administrative expenses 36,376 34,775 74,021 68,593
Depreciation and amortization 87,910 75,189 172,419 147,496
Gain on disposition of assets (803) (105) (1,019) (104)
--------- --------- --------- ---------
184,798 163,485 368,272 322,123
--------- --------- --------- ---------
Operating income (loss) 6,990 9,468 (6,099) 2,097
--------- --------- --------- ---------
Other expense (income):
Interest income (178) (369) (422) (696)
Interest expense 29,200 36,401 62,463 69,291
--------- --------- --------- ---------
29,022 36,032 62,041 68,595
--------- --------- --------- ---------
Loss before income tax benefit (22,032) (26,564) (68,140) (66,498)
Income tax benefit (4,556) (7,116) (18,518) (18,731)
--------- --------- --------- ---------
Net loss $ (17,476) $ (19,448) $ (49,622) $ (47,767)
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
-8-
11
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
----------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net loss $ (49,622) $ (47,767)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 172,419 147,496
Gain on disposition of assets (1,019) (104)
Deferred tax benefit (18,869) (19,308)
Provision for doubtful accounts 3,602 2,329
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (18,283) (14,343)
Prepaid expenses (11,436) (7,635)
Other assets (357) 3,902
Increase (decrease) in:
Trade accounts payable 2,088 (1,524)
Accrued expenses (15,754) (6,172)
Other liabilities 145 52
Deferred income 196 (920)
--------- ---------
Net cash provided by operating activities 63,110 56,006
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Acquisition of new markets (225,714) (230,652)
Capital expenditures (36,925) (43,700)
Proceeds from disposition of assets 3,334 1,122
--------- ---------
Net cash used in investing activities (259,305) (273,230)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Debt issuance costs -- (1,448)
Principal payments on long-term debt (2,375) (2,168)
Contribution from parent 48,000 --
Net borrowings under credit agreements 81,000 224,000
--------- ---------
Net cash provided by financing activities 126,625 220,384
--------- ---------
Net (decrease) increase in cash and cash equivalents (69,570) 3,160
Cash and cash equivalents at beginning of period 72,340 8,401
--------- ---------
Cash and cash equivalents at end of period $ 2,770 $ 11,561
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 61,012 $ 69,047
========= =========
Cash paid for state and federal income taxes $ 781 $ 1,616
========= =========
Parent company stock contributed for acquisitions $ 29,000 $ 122,031
========= =========
Noncash Financing Activity
Note payable converted to contributed capital $ 287,500 $ --
========= =========
See accompanying notes to condensed consolidated financial statements.
-9-
12
LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
1. Significant Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of Lamar Media's
financial position and results of operations for the interim periods presented
have been reflected herein. The results of operations for interim periods are
not necessarily indicative of the results to be expected for the entire year.
These condensed consolidated financial statements should be read in conjunction
with Lamar Media's consolidated financial statements and the notes thereto
included in Lamar Media's Annual Report on Form 10-K.
Certain amounts in the prior year's condensed consolidated financial statements
have been reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported results of operations.
Certain footnotes are not provided for the accompanying financial statements as
the information in notes 2, 3, and 5 to the condensed consolidated financial
statements of Lamar Advertising Company included elsewhere in this report is
substantially equivalent to that required for the condensed consolidated
financial statements of Lamar Media Corp. Earnings per share data is not
provided for the operating results of Lamar Media Corp. as it is a wholly-owned
subsidiary of Lamar Advertising Company.
-10-
13
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 six-month and three-month periods
ended June 30, 2001 and 2000. This discussion should be read in conjunction with
the consolidated financial statements of the Company and the related notes.
The following discussion is a summary of the key factors management considers
necessary in reviewing the Company's results of operations, liquidity and
capital resources. The future operating results of the Company may differ
materially from the results described below. For a discussion of certain factors
which may affect the Company's future operating performance, please refer to the
"Factors Affecting Future Operating Results" included in the Company's Annual
Report on Form 10K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission on March 23, 2001.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
Net revenues increased $38.0 million or 11.7% to $362.2 million for the six
months ended June 30, 2001 as compared to the same period in 2000. This increase
was attributable to the Company's acquisitions during 2001 and 2000 and internal
growth within the Company's existing markets.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $21.4 million or 12.2% for the six months ended
June 30, 2001 as compared to the same period in 2000. This was primarily the
result of additional operating expenses related to operations of acquired
outdoor advertising assets.
Depreciation and amortization expense increased $25.0 million or 16.8% from
$149.2 million for the six months ended June 30, 2000 to $174.2 million for the
six months ended June 30, 2001 as a result of an increase in capitalized assets
resulting from the Company's recent acquisition activity.
Due to the above factors, the Company's operating loss increased $7.5 million to
an operating loss of $8.0 million for six months ended June 30, 2001 from an
operating loss of $0.5 million for six months ended June 30, 2000. This change
was primarily due to the increase in depreciation and amortization.
Interest expense decreased $0.5 million from $69.3 million for the six months
ended June 30, 2000 to $68.8 million for the same period in 2001 as a result of
declining interest rates during the six months ended June 30, 2001 as compared
to the same period in 2000.
Income tax benefit increased $2.0 million creating a tax benefit of $21.7
million for the six months ended June 30, 2001 as compared to $19.7 million for
the same period in 2000. The effective tax rate for the six months ended June
30, 2001 is 28.4% which is less than statutory rates due to permanent
differences resulting from non-deductible amortization of goodwill.
-11-
14
As a result of the above factors, the Company recognized a net loss for the six
months ended June 30, 2001 of $54.7 million, as compared to a net loss of $49.4
million for the same period in 2000.
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
Revenues for the three months ended June 30, 2001 increased $18.8 million or
10.9% to $191.8 million from $173.0 million for the same period in 2000.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, for the three months ended June 30, 2001 increased $8.9
million or 10.0% over the same period in 2000.
Depreciation and amortization expense increased $12.6 million or 16.5% from
$76.2 million for three months ended June 30, 2000 to $88.8 million for the
three months ended June 30, 2001.
Operating income decreased $1.9 million to $6.0 million for the three months
ended June 30, 2001 as compared to $7.9 million for the same period in 2000.
Interest expense decreased $3.4 million from $36.4 million for the three months
ended June 30, 2000 to $33.0 million for the same period in 2001.
The Company recognized a net loss for the three months ended June 30, 2001 of
$20.4 million.
The results for the three months ended June 30, 2001 were affected by the same
factors as the six months ended June 30, 2001. Reference is made to the
discussion of the six month results.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and revolving credit borrowings. Its acquisitions have been
financed primarily with borrowed funds and the issuance of debt and equity
securities.
During the six months ended June 30, 2001, the Company financed the cash portion
of its acquisition activity of approximately $227.3 million with borrowings
under the Company's bank credit facility. At June 30, 2001, following these
acquisitions, the Company had $269 million available under the Revolving
Facility and believes that this availability coupled with internally generated
funds will be sufficient for the foreseeable future to satisfy all debt service
obligations and to finance additional acquisition activity and current
operations.
The Company's net cash provided by operating activities increased $8.4 million
from $54.3 million for the six months ended June 30, 2000 to $62.7 million for
the six months ended June 30, 2001 due primarily to an increase in noncash items
of $23.7 million, which includes an increase in depreciation and amortization of
$25.0 million offset by an increase in deferred tax benefit of $1.7 million and
a increase in gain or loss on disposition of assets of $0.9 million. The
increase in noncash items was offset by a decrease in net earnings of $5.3
million, a decrease in accrued expenses of $7.2 million and an increase in
receivables of $4.4 million. Net cash used in investing activities decreased
$12.3 million from $273.2 million for the six months ended June 30, 2000 to
$260.9 million for the same period in 2001. This decrease was due to a $3.4
million decrease in acquisition of outdoor advertising assets and a $6.8 million
decrease in
-12-
15
capital expenditures and a $2.2 million increase in proceeds from disposition of
assets. Net cash provided by financing activities for the six months ended June
30, 2001 is $128.7 million primarily due to $81.0 million in net borrowings
under credit agreements used to finance acquisition activity and working capital
requirements during the period and $50.2 million net proceeds from issuance of
common stock which includes $48.0 million related to the issuance of 1.2 million
shares of Lamar Advertising Class A common stock in June 2001.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2000, the FASB issued SFAS No. 138, "Accounting for Derivative
Instruments and Hedging Activities - an amendment of FASB No. 133", which
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
assets or liabilities in the statement of financial position and measure those
instruments at fair value. On January 1, 2001, the Company adopted SFAS No. 133.
The Company's adoption of SFAS No. 133 did not have any affect on the financial
position or results of operations in 2001.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company is required to adopt the provisions of Statement 141 immediately,
and Statement 142 effective January 1, 2002. Furthermore, goodwill and
intangible assets determined to have an indefinite useful life acquired in a
purchase business combination completed after June 30, 2001, but before
Statement 142 is adopted in full will not be amortized but will continue to be
evaluated for impairment in accordance with the appropriate pre-Statement 142
literature. The Company is currently assessing the impact of Statements 141 and
142 on its financial condition and results of operations.
LAMAR MEDIA CORP.
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Media for the six month and three month periods
ended June 30, 2001 and 2000. This discussion should be read in conjunction with
the consolidated financial statements of Lamar Media and the related notes.
The following discussion is a summary of the key factors management considers
necessary in reviewing Lamar Media's results of operations, 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 the
"Factors Affecting Future Operating Results" included in Lamar Media's Annual
Report on Form 10-K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission on March 23, 2001.
-13-
16
RESULTS OF OPERATIONS
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
Net revenues increased $38.0 million or 11.7% to $362.2 million for the six
months ended June 30, 2001 as compared to the same period in 2000. This increase
was attributable to Lamar Media's acquisitions during 2001 and 2000 and internal
growth within Lamar Media's existing markets.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $22.1 million or 12.7% for the six months ended
June 30, 2001 as compared to the same period in 2000. This was primarily the
result of additional operating expenses related to operations of acquired
outdoor advertising assets.
Depreciation and amortization expense increased $24.9 million or 16.9% from
$147.5 million for the six months ended June 30, 2000 to $172.4 million for the
six months ended June 30, 2001 as a result of an increase in capitalized assets
resulting from Lamar Media's recent acquisition activity.
Due to the above factors, Lamar Media's operating income decreased $8.2 million
to an operating loss of $6.1 million for six months ended June 30, 2001 from
operating income of $2.1 million for the same period in 2000. This change was
primarily due to the increase in depreciation and amortization.
Interest expense decreased $6.8 million from $69.3 million for the six months
ended June 30, 2000 to $62.5 million for the same period in 2001 as a result of
declining interest rates during the six months ended June 30, 2001 and the
reduction in interest expense due to the cancellation of the $287.5 million note
payable to Lamar Advertising Company in January 2001.
Income tax benefit decreased $0.2 million creating a tax benefit of $18.5
million for the six months ended June 30, 2001 as compared to $18.7 million for
the same period in 2000. The effective tax rate for the six months ended June
30, 2001 is 27.2% which is less than statutory rates due to permanent
differences resulting from non-deductible amortization of goodwill.
As a result of the above factors, Lamar Media recognized a net loss for the six
months ended June 30, 2001 of $49.6 million, as compared to a net loss of $47.8
million for the same period in 2000.
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
Net revenues increased $18.8 million or 10.9% to $191.8 million for the three
months ended June 30, 2001 as compared to the same period in 2000.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $9.3 million or 10.5% for the three months
ended June 30, 2001 as compared to the same period in 2000.
Depreciation and amortization expense increased $12.7 million or 16.9% from
$75.2 million for the three months ended June 30, 2000 to $87.9 million for the
three months ended June 30, 2001.
-14-
17
Due to the above factors, operating income decreased $2.5 million to operating
income of $7.0 million for three months ended June 30, 2001 from operating
income of $9.5 million for the same period in 2000.
Interest expense decreased $7.2 million from $36.4 million for the three months
ended June 30, 2000 to $29.2 million for the same period in 2001.
There was an income tax benefit of $4.6 million for the three months ended June
30, 2001 as compared to an income tax benefit of $7.1 million for the same
period in 2000.
As a result of the above factors, Lamar Media recognized a net loss for the
three months ended June 30, 2001 of $17.5 million, as compared to a net loss of
$19.4 million for the same period in 2000.
The results for the three months ended June 30, 2001 were affected by the same
factors as the six months ended June 30, 2001. Reference is made to the
discussion of the six months results.
-15-
18
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Lamar Advertising Company is exposed to interest rate risk in connection with
variable rate debt instruments issued by its wholly-owned subsidiary, Lamar
Media Corp. The Company does not enter into market risk sensitive instruments
for trading purposes. The information below summarizes the Company's interest
rate risk associated with its principal variable rate debt instruments
outstanding at June 30, 2001.
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 June 30, 2001, there was approximately $981 million of aggregate indebtedness
outstanding under the new bank credit agreement, or approximately 54.0% of the
Company's and 64.1% of Lamar Media's outstanding long-term debt on that date,
bearing interest at variable rates. The aggregate interest expense for the six
months ended June 30, 2001 with respect to borrowings under the new bank credit
agreement was $35.9 million, and the weighted average interest rate applicable
to borrowings under these credit facilities during the six months ended June 30,
2001 was 7.5%. Assuming that the weighted average interest rate was 200-basis
points higher (that is 9.5% rather than 7.5%), then the Company's and Lamar
Media's June 30, 2001 interest expense would have been approximately $9.7
million higher resulting in a $5.9 million decrease in the Company's and Lamar
Media's six months ended June 30, 2001 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.
-16-
19
PART II - OTHER INFORMATION
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of stockholders on Thursday, May 24, 2001.
The following represents the results of the proposals submitted to a vote of
security holders:
Proposal to Elect Directors
The following persons were elected to the Company's Board of Directors for a
term of office expiring at the Company's 2002 Annual Meeting of Stockholders:
FOR WITHHELD
----------- ----------
Kevin P. Reilly, Jr. 213,294,295 12,341,163
Sean E. Reilly 213,662,795 11,972,663
Keith A. Istre 225,394,552 240,906
Charles W. Lamar, III 225,405,480 229,978
Gerald H. Marchand 225,410,580 224,878
Anna Reilly Cullinan 213,294,295 12,341,163
T. Everett Stewart, Jr. 225,406,052 229,406
Stephen P. Mumblow 225,402,980 232,478
John Maxwell Hamilton 225,410,780 224,678
Thomas Reifenheiser 225,411,680 223,778
Approval of the Amendment to the Company's 1996 Equity Incentive Plan to include
directors as eligible participants.
FOR AGAINST ABSTAIN
--- ------- -------
192,115,200 33,514,672 5,584
Approval of the Amendment to the Company's 1996 Equity Incentive Plan that sets
forth the maximum number of shares of restricted or unrestricted stock that may
be granted to a participant in any calendar year.
FOR AGAINST ABSTAIN
--- ------- -------
221,539,998 4,089,438 6,021
Approval of the Amendment to the Company's 1996 Equity Incentive Plan that
allows the establishment of performance goals for the granting of restricted or
unrestricted stock.
FOR AGAINST ABSTAIN
--- ------- -------
222,565,656 3,063,581 6,219
-17-
20
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 Certificate of Amendment of Certificate of Incorporation of Lamar
Advertising Company. Previously filed as Exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 2000 (File No. 0-30242) filed on August 11, 2000 and
incorporated herein by reference.
3.4 Certificate of Correction of Certificate of Incorporation of
Lamar Advertising Company. Previously filed as Exhibit 3.4 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2000 (File No. 0-30242) filed on November 14, 2000
and incorporated herein by reference.
3.5 Bylaws of Lamar Advertising Company. Previously filed as exhibit
3.3 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1999 (File No. 0-20833) filed on August 16, 1999
and incorporated herein by reference.
3.6 Amended and Restated Bylaws of Lamar Media Corp. Previously filed
as exhibit 3.1 to Lamar Media's Quarterly Report on Form 10-Q for
the period ended September 30, 1999 (File No. 1-12407) filed on
November 12, 1999 and incorporated herein by reference.
4.1 Supplemental Indenture to the Indenture dated November 15, 1996
among Lamar Media Corp., certain of its subsidiaries and State
Street Bank and Trust Company, as Trustee, dated April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, 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 April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, Inc. and, in
substantially
-18-
21
identical agreements, by the scheduled additional subsidiary
guarantors. Filed herewith.
4.3 Supplemental Indenture to the Indenture dated September 25, 1997
among Lamar Media Corp., certain of its subsidiaries and State
Street Bank and Trust Company, as Trustee, dated April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, Inc. and, in
substantially identical agreements, by the scheduled additional
subsidiary guarantors. Filed herewith.
10.1 Joinder Agreement to the Lamar Media Corp. Credit Agreement dated
August 13, 1999 by Lamar Bellows Outdoor Advertising, Inc. and,
in substantially identical agreements, by the scheduled
additional subsidiary guarantors, in favor of The Chase Manhattan
Bank, as Administrative Agent dated April 9, 2001. Filed
herewith.
(b) Reports on Form 8-K
Reports on Form 8-K were filed with the Commission during the second
quarter of 2001 to report the following items as of the dates
indicated:
On June 7, 2001, the Company filed a report on Form 8-K in order
to file an Underwriting Agreement dated June 4, 2001 among Lamar
Advertising Company, AMFM Operating Inc. and Deutsche Banc Alex
Brown Inc. and related exhibits for incorporation by reference
into the Registration Statement on Form S-3 of Lamar Advertising
Company previously filed with Securities and Exchange Commission
(File No. 333-48288 and File No. Commission 333-45490), which
Registration Statements were declared effective by the Commission
on September 21, 2000 and November 2, 2000, respectively.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAMAR ADVERTISING COMPANY
DATED: August 13, 2001 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
-19-
22
INDEX TO EXHIBIT
EXHIBIT
NO. DESCRIPTION
------- ------------
2.1 Agreement and Plan of Merger dated as of July 20, 1999 among
Lamar Media Corp., Lamar New Holding Co., and Lamar Holdings
Merge Co. Previously filed as exhibit 2.1 to the Company's
Current Report on Form 8-K filed on July 22, 1999 (File No.
0-30242) and incorporated herein by reference.
3.1 Certificate of Incorporation of Lamar New Holding Co. Previously
filed as exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1999 (File No. 0-20833) filed
on August 16, 1999 and incorporated herein by reference.
3.2 Certificate of Amendment of Certificate of Incorporation of Lamar
New Holding Co. (whereby the name of Lamar New Holding Co. was
changed to Lamar Advertising Company). Previously filed as
exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1999 (File No. 0-20833) filed on August
16, 1999 and incorporated herein by reference.
3.3 Certificate of Amendment of Certificate of Incorporation of Lamar
Advertising Company. Previously filed as Exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 2000 (File No. 0-30242) filed on August 11, 2000 and
incorporated herein by reference.
3.4 Certificate of Correction of Certificate of Incorporation of
Lamar Advertising Company. Previously filed as Exhibit 3.4 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2000 (File No. 0-30242) filed on November 14, 2000
and incorporated herein by reference.
3.5 Bylaws of Lamar Advertising Company. Previously filed as exhibit
3.3 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1999 (File No. 0-20833) filed on August 16, 1999
and incorporated herein by reference.
3.6 Amended and Restated Bylaws of Lamar Media Corp. Previously filed
as exhibit 3.1 to Lamar Media's Quarterly Report on Form 10-Q for
the period ended September 30, 1999 (File No. 1-12407) filed on
November 12, 1999 and incorporated herein by reference.
4.1 Supplemental Indenture to the Indenture dated November 15, 1996
among Lamar Media Corp., certain of its subsidiaries and State
Street Bank and Trust Company, as Trustee, dated April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, 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 April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, Inc. and, in
substantially
23
identical agreements, by the scheduled additional subsidiary
guarantors. Filed herewith.
4.3 Supplemental Indenture to the Indenture dated September 25, 1997
among Lamar Media Corp., certain of its subsidiaries and State
Street Bank and Trust Company, as Trustee, dated April 9, 2001
delivered by Lamar Bellows Outdoor Advertising, Inc. and, in
substantially identical agreements, by the scheduled additional
subsidiary guarantors. Filed herewith.
10.1 Joinder Agreement to the Lamar Media Corp. Credit Agreement dated
August 13, 1999 by Lamar Bellows Outdoor Advertising, Inc. and,
in substantially identical agreements, by the scheduled
additional subsidiary guarantors, in favor of The Chase Manhattan
Bank, as Administrative Agent dated April 9, 2001. Filed
herewith.