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 September 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 November 5, 2001: 82,586,076
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of November 5, 2001: 16,611,835
The number of shares of Lamar Media Corp. common stock outstanding as of
November 5, 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.
CONTENTS
<Table>
<Caption>
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of
September 30, 2001 and December 31, 2000.................................. 1
Condensed Consolidated Statements of Operations for the three
months ended September 30, 2001 and September 30, 2000 and
nine months ended September 30, 2001 and September 30, 2000............... 2
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2001 and
September 30, 2000........................................................ 3
Notes to Condensed Consolidated Financial
Statements................................................................ 4 - 7
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of
September 30, 2001 and December 31, 2000.................................. 8
Condensed Consolidated Statements of Operations for the three
months ended September 30, 2001 and September 30, 2000 and
nine months ended September 30, 2001 and September 30, 2000............... 9
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2001 and
September 30, 2000........................................................ 10
Notes to Condensed Consolidated Financial
Statements................................................................ 11
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 12 - 16
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risks.............................................................. 17
PART II - OTHER INFORMATION
ITEM 4. Submission of matters to a vote of security holders....................... 18
ITEM 6. Exhibits and Reports on Form 8-K.......................................... 18 - 19
Signatures................................................................ 19
</Table>
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)
<Table>
<Caption>
September 30, December 31,
2001 2000
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,015 $ 72,340
Receivables, net 109,140 91,674
Prepaid expenses 36,638 23,164
Other current assets 7,332 8,738
----------- -----------
Total current assets 159,125 195,916
----------- -----------
Property, plant and equipment 1,755,986 1,630,866
Less accumulated depreciation and amortization (422,819) (335,991)
----------- -----------
Net property, plant and equipment 1,333,167 1,294,875
----------- -----------
Intangible assets 2,210,088 2,129,733
Other assets - non-current 18,537 17,249
----------- -----------
Total assets $ 3,720,917 $ 3,637,773
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 13,127 $ 9,918
Accrued expenses 28,356 40,724
Current maturities of long-term debt 81,957 66,814
Deferred income 14,191 11,005
----------- -----------
Total current liabilities 137,631 128,461
Long-term debt 1,751,518 1,671,466
Deferred income taxes 132,213 140,452
Other liabilities 7,836 7,939
----------- -----------
Total liabilities 2,029,198 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; 82,567,476 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; 16,611,835 and 17,000,000 shares issued and
outstanding at 2001 and 2000, respectively 17 17
Additional paid-in capital 1,952,888 1,871,303
Accumulated deficit (261,269) (181,945)
----------- -----------
Stockholders' equity 1,691,719 1,689,455
----------- -----------
Total liabilities and stockholders' equity $ 3,720,917 $ 3,637,773
=========== ===========
</Table>
See accompanying notes to condensed consolidated financial statements.
-1-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net revenues $ 188,267 $ 184,806 $ 550,545 $ 509,026
------------ ------------ ------------ ------------
Operating expenses (income):
Direct advertising expenses 64,593 56,038 187,444 162,176
General and administrative expenses 37,552 33,748 111,789 103,213
Depreciation and amortization 89,399 82,333 263,629 231,533
(Gain) Loss on disposition of assets 311 (170) (708) (274)
------------ ------------ ------------ ------------
191,855 171,949 562,154 496,648
------------ ------------ ------------ ------------
Operating income (loss) (3,588) 12,857 (11,609) 12,378
------------ ------------ ------------ ------------
Other expense (income):
Interest income (100) (272) (522) (968)
Interest expense 30,409 39,895 99,161 109,186
------------ ------------ ------------ ------------
30,309 39,623 98,639 108,218
------------ ------------ ------------ ------------
Loss before income tax benefit (33,897) (26,766) (110,248) (95,840)
Income tax benefit (9,536) (7,257) (31,197) (26,959)
------------ ------------ ------------ ------------
Net loss (24,361) (19,509) (79,051) (68,881)
Preferred stock dividends 91 91 273 273
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (24,452) $ (19,600) $ (79,324) $ (69,154)
============ ============ ============ ============
Loss per common share - basic and diluted $ (.25) $ (.21) $ (.81) $ (.77)
============ ============ ============ ============
Weighted average common shares
outstanding 99,163,065 91,953,435 98,328,027 89,982,439
Incremental common shares from dilutive stock
options -- -- -- --
Incremental common shares from convertible debt -- -- -- --
------------ ------------ ------------ ------------
Weighted average common shares
assuming dilution 99,163,065 91,953,435 98,328,027 89,982,439
============ ============ ============ ============
</Table>
See accompanying notes to condensed consolidated financial statements.
-2-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
Nine Months Ended
September 30,
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (79,051) $ (68,881)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 263,629 231,533
Gain on disposition of assets (708) (274)
Deferred tax benefit (32,214) (26,757)
Provision for doubtful accounts 5,495 4,686
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (21,325) (20,238)
Prepaid expenses (11,139) (8,987)
Other assets 3,442 756
Increase (decrease) in:
Trade accounts payable 3,210 (4,992)
Accrued expenses (15,935) 8,266
Other liabilities 178 4
Deferred income 2,426 352
--------- ---------
Net cash provided by operating activities 118,008 115,468
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable -- (3,351)
Acquisition of new markets (274,560) (318,150)
Capital expenditures (59,958) (58,107)
Proceeds from disposition of assets 3,906 1,511
--------- ---------
Net cash used in investing activities (330,612) (378,097)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs -- (1,470)
Net proceeds from issuance of common stock 51,711 5,404
Principal payments on long-term debt (35,159) (3,757)
Net borrowings under credit agreements 130,000 261,000
Dividends (273) (273)
--------- ---------
Net cash provided by financing activities 146,279 260,904
--------- ---------
Net decrease in cash and cash equivalents (66,325) (1,725)
Cash and cash equivalents at beginning of period 72,340 8,401
--------- ---------
Cash and cash equivalents at end of period $ 6,015 $ 6,676
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 104,151 $ 99,767
========= =========
Cash paid for state and federal income taxes $ 798 $ 1,717
========= =========
Common stock issuance related to acquisitions $ 29,000 $ 178,268
========= =========
</Table>
See accompanying notes to condensed consolidated financial statements.
-3-
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 results of operations.
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.
On 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.
On August 2, 2001, the Company purchased the assets of Capital Outdoor, Inc. for
a cash purchase price of approximately $30,000.
During the nine months ended September 30, 2001, the company completed 73
additional acquisitions of outdoor advertising and transit assets for an
aggregate cash purchase price of approximately $112,000.
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-
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<Table>
<Caption>
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 23,890 -- 3,307 14,178
PNE 180 4,879 4,500 11,344 -- -- --
Delite 1,159 10,864 20,033 19,435 -- 543 7,968
Capital 179 5,744 12,547 11,709 -- 87 --
Other 1,710 29,275 37,937 44,380 2,000 485 2,821
----- ------ ------ ------ ----- ----- -----
6,151 86,942 103,153 133,382 2,000 4,747 24,967
===== ====== ======= ======= ===== ===== ======
</Table>
Summarized below are certain unaudited pro forma statements of operations data
for the three months and nine months ended September 30, 2001 and September 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.
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
Net revenues $ 188,559 $ 192,716 $ 555,613 $ 552,925
========= ========= ========= =========
Net loss applicable to
common stock $ (24,506) $ (22,021) $ (80,020) $ (84,936)
========= ========= ========= =========
Net loss per common share -
basic and diluted $ (.25) $ (.24) $ (.81) $ (.92)
========= ========= ========= =========
</Table>
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-
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 418,585 and 584,801 for three months ended September
30, 2001 and 2000, and 469,059 and 628,503 for the nine months ended September
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 SFAS No. 141, "Business Combinations", and SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 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. SFAS No. 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 SFAS No. 142. SFAS No. 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 adoption of SFAS No.
141 as of July 1, 2001 had no impact on the Company's financial statements.
The Company is required to adopt the provisions of SFAS No. 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 SFAS No. 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. Because of the extensive effort
needed to comply with adopting SFAS No. 142, the impact of adoption on the
Company's financial statements has not been determined, including whether any
transitional
-6-
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
impairment losses will be required to be recognized as the effect of a change in
accounting principle. As of September 30, 2001, the Company had unamortized
goodwill of approximately $1,164,000 which will be subject to the transition
provisions of SFAS No. 142. Amortization expense related to goodwill was
approximately $68,100 and $57,300 for the nine months ended September 30, 2001
and September 30, 2000, respectively, and approximately $23,300 and $20,600 for
the three months ended September 30, 2001 and 2000, respectively. In accordance
with the transition provisions of SFAS No. 142, effective July 1, 2001, any
goodwill resulting from acquisitions closed after July 1, 2001 is currently not
being amortized.
-7-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<Table>
<Caption>
September 30, December 31,
Assets 2001 2000
----------- -----------
Current assets:
Cash and cash equivalents $ 6,015 $ 72,340
Receivables, net 109,140 91,628
Prepaid expenses 36,638 23,164
Other current assets 21,824 15,966
----------- -----------
Total current assets 173,617 203,098
----------- -----------
Property, plant and equipment 1,755,986 1,630,866
Less accumulated depreciation and amortization (422,819) (335,991)
----------- -----------
Net property, plant and equipment 1,333,167 1,294,875
----------- -----------
Intangible assets 2,187,434 2,106,493
Other assets - non-current 17,813 17,249
----------- -----------
Total assets $ 3,712,031 $ 3,621,715
=========== ===========
Liabilities and Stockholder's Equity
Current liabilities:
Trade accounts payable $ 13,127 $ 9,918
Accrued expenses 21,053 35,765
Current maturities of long-term debt 81,957 66,814
Deferred income 14,191 11,005
----------- -----------
Total current liabilities 130,328 123,502
Long-term debt 1,464,018 1,671,466
Deferred income taxes 138,772 142,052
Other liabilities 7,836 7,939
----------- -----------
Total liabilities 1,740,954 1,944,959
----------- -----------
Stockholder's equity:
Common stock, $.01 par value, authorized 3,000 shares;
issued and outstanding 100 shares at 2001 and 2000, respectively -- --
Additional paid-in capital 2,220,798 1,855,421
Accumulated deficit (249,721) (178,665)
----------- -----------
Stockholder's equity 1,971,077 1,676,756
----------- -----------
Total liabilities and stockholder's equity $ 3,712,031 $ 3,621,715
=========== ===========
</Table>
See accompanying notes to condensed consolidated financial statements.
-8-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
Three months ended Nine months ended
September 30, September 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Net revenues $ 188,267 $ 184,806 $ 550,545 $ 509,026
--------- --------- --------- ---------
Operating expenses (income):
Direct advertising expenses 64,593 56,038 187,444 162,176
General and administrative expenses 37,481 33,910 111,607 102,503
Depreciation and amortization 88,501 82,367 260,920 229,863
(Gain) loss on disposition of assets 311 (170) (708) (274)
--------- --------- --------- ---------
190,886 172,145 559,263 494,268
--------- --------- --------- ---------
Operating income (loss) (2,619) 12,661 (8,718) 14,758
--------- --------- --------- ---------
Other expense (income):
Interest income (100) (272) (522) (968)
Interest expense 26,635 39,895 89,098 109,186
--------- --------- --------- ---------
26,535 39,623 88,576 108,218
--------- --------- --------- ---------
Loss before income tax benefit (29,154) (26,962) (97,294) (93,460)
Income tax benefit (7,720) (7,354) (26,238) (26,085)
--------- --------- --------- ---------
Net loss $ (21,434) $ (19,608) $ (71,056) $ (67,375)
========= ========= ========= =========
</Table>
See accompanying notes to condensed consolidated financial statements.
-9-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<Table>
<Caption>
Nine Months Ended
September 30,
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (71,056) $ (67,375)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 260,920 229,863
Gain on disposition of assets (708) (274)
Deferred tax benefit (27,256) (25,882)
Provision for doubtful accounts 5,495 4,686
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (21,369) (20,792)
Prepaid expenses (11,139) (8,987)
Other assets (3,100) 7,524
Increase (decrease) in:
Trade accounts payable 3,210 (4,992)
Accrued expenses (18,279) 4,620
Other liabilities 178 4
Deferred income 2,426 352
--------- ---------
Net cash provided by operating activities 119,322 118,747
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable -- (3,351)
Acquisition of new markets (272,436) (316,298)
Capital expenditures (59,958) (58,107)
Proceeds from disposition of assets 3,906 1,511
--------- ---------
Net cash used in investing activities (328,488) (376,245)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs -- (1,470)
Principal payments on long-term debt (35,159) (3,757)
Contribution from parent 48,000 --
Net borrowings under credit agreements 130,000 261,000
--------- ---------
Net cash provided by financing activities 142,841 255,773
--------- ---------
Net decrease in cash and cash equivalents (66,325) (1,725)
Cash and cash equivalents at beginning of period 72,340 8,401
--------- ---------
Cash and cash equivalents at end of period $ 6,015 $ 6,676
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 94,717 $ 99,767
========= =========
Cash paid for state and federal income taxes $ 798 $ 1,717
========= =========
Parent company stock contributed for acquisitions $ 29,000 $ 178,268
========= =========
Noncash Financing Activity
Note payable converted to contributed capital $ 287,500 $ --
========= =========
</Table>
See accompanying notes to condensed consolidated financial statements.
-10-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
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.
-11-
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 nine-month and three-month periods
ended September 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
Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000
Net revenues increased $41.5 million or 8.2% to $550.5 million for the nine
months ended September 30, 2001 as compared to the same period in 2000. This
increase was primarily attributable to the Company's acquisitions during 2001
and 2000.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $33.8 million or 12.7% for the nine months
ended September 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 $32.1 million or 13.9% from
$231.5 million for the nine months ended September 30, 2000 to $263.6 million
for the nine months ended September 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 $24.0 million
to an operating loss of $11.6 million for the nine months ended September 30,
2001 from operating income of $12.4 million for the nine months ended September
30, 2000.
Interest expense decreased $10.0 million from $109.2 million for the nine months
ended September 30, 2000 to $99.2 million for the same period in 2001 as a
result of declining interest rates during the nine months ended September 30,
2001 as compared to the same period in 2000.
Income tax benefit increased $4.2 million creating a tax benefit of $31.2
million for the nine months ended September 30, 2001 as compared to $27.0
million for the same period in 2000. The effective tax rate for the nine months
ended September 30, 2001 is 28.3% which is less than statutory rates due to
permanent differences resulting from non-deductible amortization of goodwill.
-12-
As a result of the above factors, the Company recognized a net loss for the nine
months ended September 30, 2001 of $79.1 million, as compared to a net loss of
$68.9 million for the same period in 2000.
Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000
Revenues for the three months ended September 30, 2001 increased $3.5 million or
1.9% to $188.3 million from $184.8 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 September 30, 2001 increased
$12.4 million or 13.8% over the same period in 2000.
Depreciation and amortization expense increased $7.1 million or 8.6% from $82.3
million for three months ended September 30, 2000 to $89.4 million for the three
months ended September 30, 2001.
Operating income decreased $16.5 million to an operating loss of $3.6 million
for the three months ended September 30, 2001 as compared to an operating income
of $12.9 million for the same period in 2000.
Interest expense decreased $9.5 million from $39.9 million for the three months
ended September 30, 2000 to $30.4 million for the same period in 2001.
The Company recognized a net loss for the three months ended September 30, 2001
of $24.4 million.
The results for the three months ended September 30, 2001 were affected by the
same factors as the nine months ended September 30, 2001. Reference is made to
the discussion of the nine 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 nine months ended September 30, 2001, the Company financed the cash
portion of its acquisition activity of approximately $275 million with
borrowings under the Company's bank credit facility. At September 30, 2001,
following these acquisitions, the Company had $220 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 $2.5 million
from $115.5 million for the nine months ended September 30, 2000 to $118.0
million for the nine months ended September 30, 2001 due primarily to an
increase in noncash items of $27.0 million, which includes an increase in
depreciation and amortization of $32.1 million offset by a increase in deferred
tax benefit of $5.5 million. The increase in noncash items was offset by a
decrease in net earnings of $10.2 million, a decrease in accrued expenses of
$24.2 million and an increase in receivables of $1.1 million and an increase in
prepaid expenses of $2.1 million offset by an increase in trade accounts payable
of $8.2 million and in increase in deferred
-13-
income of $2.1 million. Net cash used in investing activities decreased $47.5
million from $378.1 million for the nine months ended September 30, 2000 to
$330.6 million for the same period in 2001. This decrease was due to a $43.6
million decrease in acquisition of outdoor advertising offset by a $51.9 million
increase in capital expenditures, a $52.4 million increase in proceeds from
disposition of assets, and a $53.4 million decrease in notes receivable. Net
cash provided by financing activities for the nine months ended September 30,
2001 is $146.3 million primarily due to $130.0 million in net borrowings under
credit agreements used to finance acquisition activity and working capital
requirements during the period and $551.7 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 offset by $35.2
million principal payments on long-term debt.
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 SFAS No. 141, "Business Combinations", and SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 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. SFAS No. 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 SFAS No. 142. SFAS No. 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 adoption of SFAS No.
141 as of July 1, 2001 had no impact on the Company's financial statements.
The Company is required to adopt the provisions of SFAS No. 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 SFAS No. 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. Because of the extensive effort
needed to comply with adopting SFAS No. 142, the impact of adoption on the
Company's financial statements has not been determined, including whether any
transitional impairment losses will be required to be recognized as the effect
of a change in accounting principle. As of September 30, 2001, the Company had
unamortized goodwill of $1.2 billion, which will be subject to the transition
provisions of SFAS No. 142. Amortization expense related to goodwill was
approximately $68.1 million and $57.3 million for the nine months ended
September 30, 2001 and September 30, 2000, respectively, and $23.3 million and
$20.6 million for the three months ended September 30, 2001 and 2000,
respectively. In accordance with the transition provisions of SFAS No. 142,
effective July 1, 2001, any goodwill resulting from acquisitions closed after
July 1, 2001 is currently not being amortized.
-14-
LAMAR MEDIA CORP.
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Media for the nine month and three month periods
ended September 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.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000
Net revenues increased $41.5 million or 8.2% to $550.5 million for the nine
months ended September 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 $34.4 million or 13.0% for the nine months
ended September 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 $31.0 million or 13.5% from
$229.9 million for the nine months ended September 30, 2000 to $260.9 million
for the nine months ended September 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 $23.5 million
to an operating loss of $8.7 million for nine months ended September 30, 2001
from operating income of $14.8 million for the same period in 2000.
Interest expense decreased $20.1 million from $109.2 million for the nine months
ended September 30, 2000 to $89.1 million for the same period in 2001 as a
result of declining interest rates during the nine months ended September 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.
The effective tax rate for the nine months ended September 30, 2001 is 27.0%
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 nine
months ended September 30, 2001 of $71.1 million, as compared to a net loss of
$67.4 million for the same period in 2000.
-15-
Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000
Net revenues increased $3.5 million or 1.9% to $188.3 million for the three
months ended September 30, 2001 as compared to the same period in 2000.
Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $12.1 million or 13.5% for the three months
ended September 30, 2001 as compared to the same period in 2000.
Depreciation and amortization expense increased $6.1 million or 7.4% from $82.4
million for the three months ended September 30, 2000 to $88.5 million for the
three months ended September 30, 2001.
Due to the above factors, operating income decreased $15.3 million to an
operating loss of $2.6 million for three months ended September 30, 2001 from
operating income of $12.7 million for the same period in 2000.
Interest expense decreased $13.3 million from $39.9 million for the three months
ended September 30, 2000 to $26.6 million for the same period in 2001.
There was an income tax benefit of $7.7 million for the three months ended
September 30, 2001 as compared to an income tax benefit of $7.4 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 September 30, 2001 of $21.4 million, as compared to a net
loss of $19.6 million for the same period in 2000.
The results for the three months ended September 30, 2001 were affected by the
same factors as the nine months ended September 30, 2001. Reference is made to
the discussion of the nine months results.
-16-
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 September 30, 2001.
Loans under Lamar Media's 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 bank credit agreement. Increases in the interest rates applicable to
borrowings under the 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 September 30, 2001, there was approximately $999 million of aggregate
indebtedness outstanding under the bank credit agreement, or approximately 54.5%
of the Company's and 64.6% of Lamar Media's outstanding long-term debt on that
date, bearing interest at variable rates. The aggregate interest expense for the
nine months ended September 30, 2001 with respect to borrowings under the bank
credit agreement was $49.2 million, and the weighted average interest rate
applicable to borrowings under these credit facilities during the nine months
ended September 30, 2001 was 6.5%. Assuming that the weighted average interest
rate was 200-basis points higher (that is 8.5% rather than 6.5%), then the
Company's and Lamar Media's September 30, 2001 interest expense would have been
approximately $14.7 million higher resulting in a $9.0 million decrease in the
Company's and Lamar Media's nine months ended September 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 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.
-17-
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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 the 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 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.
3.6 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 August 30, 2001 delivered by Maine
Logos, L.L.C. 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 August 30, 2001 delivered by
Maine Logos, L.L.C. 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 August 30, 2001 delivered by Maine
Logos, L.L.C. Filed herewith.
-18-
10.1 Joinder Agreement dated August 30, 2001 to the Lamar Media Corp. Credit
Agreement dated August 13, 1999 by Maine Logos, L.L.C. Filed herewith.
(b) Reports on Form 8-K.
None
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: November 9, 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-
EXHIBIT INDEX
<Table>
<Caption>
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 Certificate of Amendment of Certificate of Incorporation of the 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 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.
3.6 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 August 30, 2001 delivered by Maine
Logos, L.L.C. 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 August 30, 2001 delivered by
Maine Logos, L.L.C. 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 August 30, 2001 delivered by Maine
Logos, L.L.C. Filed herewith.
</Table>
<Table>
10.1 Joinder Agreement dated August 30, 2001 to the Lamar Media Corp. Credit
Agreement dated August 13, 1999 by Maine Logos, L.L.C. Filed herewith.
</Table>