UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to _______________
Commission File Number 0-30242
Lamar Advertising Company
Commission File Number 1-12407
Lamar Media Corp.
(Exact name of registrants as specified in its charter)
Delaware 72-1449411
Delaware 72-1205791
(State or other jurisdiction of incorporation or (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 May 8, 2002: 84,158,693
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of May 8, 2002: 16,611,835
The number of shares of Lamar Media Corp. common stock outstanding as of April
29, 2002: 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.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This combined Quarterly Report on Form 10-Q of Lamar Advertising Company and
Lamar Media Corp. contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These are statements that relate to future periods and
include statements regarding the Company's and Lamar Media's anticipated
performance in 2002.
Generally, the words anticipates, believes, expects, intends, estimates,
projects, plans and similar expressions identify forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause the Company's and Lamar Media's
actual results, performance or achievements or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by these forward-looking statements. These risks, uncertainties and
other important factors include, among others:
o risks and uncertainties relating to the Company's significant
indebtedness;
o the Company's need for and ability to obtain additional funding for
acquisitions or operations;
o the integration of companies that the Company acquires and its ability
to recognize cost savings or operating efficiencies as a result of
these acquisitions;
o the continued popularity of outdoor advertising as an advertising
medium;
o the regulation of the outdoor advertising industry; and
o the extent and length of the current economic downturn generally and
the demand for advertising in particular.
For a further description of these and other risks and uncertainties, the
Company encourages you to carefully read the portion of the combined Annual
Report on Form 10-K for the year ended December 31, 2001 of the Company and
Lamar Media (the "2001 Combined Form 10-K) under the caption "Factor Affecting
Future Operating Results" in Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations filed with the SEC on March 21,
2002.
The Company cautions investors not to place undue reliance on the
forward-looking statements contained in this document. These statements speak
only as of the date of this report, and Lamar Advertising Company and Lamar
Media undertake no obligation to update or revise the statements, except as may
be required by law.
CONTENTS
<Table>
<Caption>
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of
March 31, 2002 and December 31, 2001 1
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2002
and March 31, 2001 2
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2002 and
March 31, 2001 3
Notes to Condensed Consolidated Financial
Statements 4 - 7
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of
March 31, 2002 and December 31, 2001 8
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2002
and March 31, 2001 9
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2002 and
March 31, 2001 10
Notes to Condensed Consolidated Financial
Statements 11
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 15
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risks 16
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 17
Signatures 17
Index to Exhibits 18 - 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>
March 31, December 31,
Assets 2002 2001
- ------ ------------ ------------
Current assets:
Cash and cash equivalents $ 27,121 $ 12,885
Receivables, net 99,956 95,135
Prepaid expenses 39,659 27,176
Other current assets 16,282 8,019
------------ ------------
Total current assets 183,018 143,215
------------ ------------
Property, plant and equipment 1,807,741 1,777,399
Less accumulated depreciation and amortization (481,806) (451,686)
------------ ------------
Net property, plant and equipment 1,325,935 1,325,713
------------ ------------
Intangible assets 2,212,923 2,179,475
Other assets - non-current 16,873 17,304
------------ ------------
Total assets $ 3,738,749 $ 3,665,707
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Trade accounts payable $ 11,701 $ 10,048
Current maturities of long-term debt 81,976 66,559
Accrued expenses 23,018 33,674
Deferred income 14,004 11,618
------------ ------------
Total current liabilities 130,699 121,899
Long-term debt 1,775,322 1,745,026
Deferred income taxes 121,922 118,837
Other liabilities 8,086 7,724
------------ ------------
Total liabilities 2,036,029 1,993,486
------------ ------------
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 2002 and 2001 -- --
Class A preferred stock, par value $638, $63.80 cumulative
dividends, 10,000 shares authorized, 0 shares issued and
outstanding at 2002 and 2001 -- --
Class A common stock, par value $.001, 175,000,000 shares
authorized, 84,144,893 shares and 82,899,800 issued and
outstanding at 2002 and 2001, respectively 84 83
Class B common stock, par value $.001, 37,500,000 shares
authorized, 16,611,835 shares issued and outstanding at 2002
and 2001 17 17
Additional paid-in capital 2,009,817 1,963,065
Accumulated deficit (307,198) (290,944)
------------ ------------
Stockholders' equity 1,702,720 1,672,221
------------ ------------
Total liabilities and stockholders' equity $ 3,738,749 $ 3,665,707
============ ============
</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
March 31,
2002 2001
------------- -------------
Net revenues $ 176,538 $ 170,385
------------- -------------
Operating expenses:
Direct advertising expenses 67,227 61,536
General and administrative expenses 41,206 37,696
Depreciation and amortization 67,100 85,407
Gain on disposition of assets (89) (216)
------------- -------------
175,444 184,423
------------- -------------
Operating income (loss) 1,094 (14,038)
------------- -------------
Other expense (income):
Interest income (221) (244)
Interest expense 26,776 35,780
------------- -------------
26,555 35,536
------------- -------------
Loss before income tax benefit (25,461) (49,574)
Income tax benefit (9,298) (15,284)
------------- -------------
Net loss (16,163) (34,290)
Preferred stock dividends (91) (91)
------------- -------------
Net loss applicable to common stock $ (16,254) $ (34,381)
============= =============
Loss per common share - basic and diluted $ (.16) $ (.35)
============= =============
Weighted average common shares outstanding 100,542,109 97,603,342
Incremental common shares from dilutive stock
options -- --
Incremental common shares from convertible debt -- --
------------- -------------
Weighted average common shares assuming dilution 100,542,109 97,603,342
============= =============
</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>
Three Months Ended
March 31,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (16,163) $ (34,290)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 67,100 85,407
Gain on disposition of assets (89) (216)
Deferred tax benefit (4,025) (15,611)
Provision for doubtful accounts 2,744 1,803
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (5,698) (6,416)
Prepaid expenses (11,773) (10,103)
Other assets (8,130) (276)
Increase (decrease) in:
Trade accounts payable 1,652 895
Accrued expenses (10,439) (17,416)
Deferred income 2,085 1,846
Other liabilities 57 504
------------ ------------
Net cash provided by operating activities 17,321 6,127
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable -- (197)
Acquisition of new markets (38,211) (101,167)
Capital expenditures (14,121) (15,571)
Proceeds from disposition of assets 701 1,036
------------ ------------
Net cash used in investing activities (51,631) (115,899)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 6,355 1,487
Principal payments on long-term debt (16,668) (1,345)
Net borrowings under credit agreements 60,000 42,000
Debt issuance costs (1,050) (389)
Dividends (91) (91)
------------ ------------
Net cash provided by financing activities 48,546 41,662
------------ ------------
Net increase (decrease) in cash and cash equivalents 14,236 (68,110)
Cash and cash equivalents at beginning of period 12,885 72,340
------------ ------------
Cash and cash equivalents at end of period $ 27,121 $ 4,230
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 30,343 $ 39,560
============ ============
Cash paid for state and federal income taxes $ 311 $ 368
============ ============
Common stock issued for acquisitions $ 38,000 $ 29,000
============ ============
</Table>
See accompanying notes to condensed consolidated financial statements
-3-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
1. Significant Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of Lamar Advertising
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 2001 Combined 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, 2002, the Company purchased the stock of Delite Outdoor of Ohio
Holdings, Inc. for $38,000. The purchase price consisted of 963,488 shares of
Lamar Advertising Class A common stock.
On January 8, 2002, the Company purchased the assets of MC Partners for a cash
purchase price of approximately $15,313.
During the three months ended March 31, 2002, the Company completed 24
additional acquisitions of outdoor advertising assets for a cash purchase price
of approximately $22,899.
Each of these acquisitions was accounted for under the purchase method of
accounting, and, accordingly, the accompanying financial statements include the
results of operations of each acquired entity from the date of acquisition. The
acquisition costs have been allocated to assets acquired and liabilities assumed
based on fair market value at the dates of acquisition. The following is a
summary of the preliminary allocation of the acquisition costs in the above
transactions.
<Table>
<Caption>
Property
Current Plant & Other Other Current Long-term
Assets Equipment Goodwill Intangibles Assets Liabilities Liabilities
---------- ----------- ---------- ----------- ---------- ----------- -----------
Delite Outdoor of Ohio Holdings 972 10,048 12,751 21,640 -- 742 6,669
MC Partners 245 2,563 5,523 9,363 -- 40 2,341
Other 155 8,910 4,284 11,128 -- -- 1,578
---------- ----------- ---------- ----------- ---------- ----------- -----------
1,372 21,521 22,558 42,131 -- 782 10,588
========== =========== ========== =========== ========== =========== ===========
</Table>
Summarized below are certain unaudited pro forma statement of operations data
for the three months ended March 31, 2002 and 2001 as if each of the above
acquisitions and the acquisitions occurring in 2001, which were fully described
in the 2001 Combined Annual Report on Form 10-K, had been consummated as of
January 1, 2001. This proforma
-4-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
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 Three Months Ended
March 31, 2002 March 31, 2001
------------------ ------------------
Net revenues $ 176,538 $ 179,809
=============== ===============
Net loss applicable to
common stock $ (16,254) $ (37,940)
=============== ===============
Net loss per common share - basic $ (.16) $ (.38)
=============== ===============
Net loss per common share - diluted $ (.16) $ (.38)
=============== ===============
</Table>
3. Goodwill and Other Intangible Assets - Adoption of Statement 142
The following is a summary of intangible assets at March 31, 2002 and December
31, 2001.
<Table>
<Caption>
Estimated Life
(Years) 2002 2001
-------------- ----------- -----------
Amortized Intangible Assets:
- ----------------------------
Debt issuance costs and fees 7 - 10 $ 48,429 $ 47,379
Customer lists and contracts 7 - 10 366,680 359,154
Non-compete agreements 3 - 15 56,976 56,419
Site locations and other 5 - 15 931,498 897,450
----------- -----------
$ 1,403,583 $ 1,360,402
Accumulated Amortization (347,978) (315,687)
----------- -----------
Net Amortized Intangibles $ 1,055,605 $ 1,044,715
=========== ===========
</Table>
<Table>
<Caption>
Unamortized Intangible Assets: 2002 2001
- ------------------------------ ------------ ------------
Goodwill $ 1,410,953 $ 1,388,395
Accumulated Amortization (253,635) (253,635)
------------ ------------
Net Unamortized Intangibles $ 1,157,318 $ 1,134,760
============ ============
</Table>
The changes in the carrying amount of goodwill for the three months ended March
31, 2002 are as follows:
<Table>
Balance as of December 31, 2001 $ 1,388,395
Goodwill acquired during the year 22,558
Impairment losses --
------------
Balance as of March 31, 2002 $ 1,410,953
============
</Table>
-5-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
The following table illustrates the effect of the adoption of SFAS 142 on prior
periods and its effect on the Company's earnings per share.
<Table>
<Caption>
Three Months Ended March 31,
2002 2001
------------ ------------
Reported net loss $ (16,163) $ (34,290)
Add back goodwill amortization, net of tax -- 17,057
------------ ------------
Adjusted net loss $ (16,163) $ (17,233)
============ ============
Earnings per common share - basic and diluted
Reported net loss per share $ (.16) $ (.35)
Goodwill amortization -- .17
------------ ------------
Adjusted net loss per share $ (.16) $ (.18)
============ ============
</Table>
In accordance with SFAS No. 142 "Goodwill and Other Intangible Assets", which
the Company adopted on January 1, 2002, the Company has conducted an impairment
review of goodwill. Based upon the review as of March 31, 2002, no impairment
charge was required.
4. Long-term Debt
On January 11, 2002, the Company activated $200,000 in new borrowings under the
incremental facility of its bank credit agreement. The proceeds were used to
reduce the outstanding balance of the revolving bank credit facility by $160,000
and approximately $10,000 was used for operations resulting in excess cash on
hand of $30,000. Also, on January 30, 2002, JP Morgan Chase Bank issued a
standby letter of credit of approximately $3,203 to benefit American Casualty
Insurance Company, the provider of the Company's general liability and workman's
compensation coverage. This issuance reduces the Company's availability under
its revolving credit facility. On March 31, 2002, in accordance with the
Company's bank credit agreement, required quarterly principle payments of
$15,750 were made and commitments under the revolving facility of the bank
credit agreement were reduced by $8,750. As a result of these transactions the
Company had $337,738 available under the revolving credit facility.
5. Summarized Financial Information of Subsidiaries
Separate financial statements of each of the Company's direct or indirect wholly
owned subsidiaries that have guaranteed Lamar Media'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.
-6-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
6. Earnings Per Share
Earnings per share are computed in accordance with SFAS No. 128, "Earnings Per
Share." The calculations of basic earnings per share excludes any dilutive
effect of stock options and convertible debt while diluted earnings per share
includes the dilutive effect of stock options and convertible debt. The number
of potentially dilutive shares excluded from the calculation because of their
anti-dilutive effect are 6,957,782 and 6,738,378 for three months ended March
31, 2002 and 2001, respectively.
7. New Accounting Pronouncements
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 requires 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 also requires 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" and subsequently SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets", after its adoption.
In August, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144). SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This Statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by
the amount by which the carrying amount of the asset exceeds the fair value of
the asset. SFAS No. 144 requires companies to separately report discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, abandonment, or in a distribution to owners) or
is classified as held for sale. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell. The Company
adopted SFAS No. 144 on January 1, 2002.
-7-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<Table>
<Caption>
March 31, December 31,
Assets 2002 2001
- ------ ----------- -----------
Current assets:
Cash and cash equivalents $ 27,121 $ 12,885
Receivables, net 99,382 93,043
Prepaid expenses 39,659 27,176
Other current assets 23,958 17,688
----------- -----------
Total current assets 190,120 150,792
----------- -----------
Property, plant and equipment 1,807,741 1,777,399
Less accumulated depreciation and amortization (481,806) (451,686)
----------- -----------
Net property, plant and equipment 1,325,935 1,325,713
----------- -----------
Intangible assets 2,191,107 2,156,079
Other assets - non-current 16,149 16,580
----------- -----------
Total assets $ 3,723,311 $ 3,649,164
=========== ===========
Liabilities and Stockholder's Equity
- ------------------------------------
Current liabilities:
Trade accounts payable $ 11,701 $ 10,048
Current maturities of long-term debt 81,976 66,559
Accrued expenses 14,992 22,362
Deferred income 14,004 11,618
----------- -----------
Total current liabilities 122,673 110,587
----------- -----------
Long-term debt 1,487,822 1,457,526
Deferred income taxes 132,151 127,241
Other liabilities 8,086 7,724
----------- -----------
Total liabilities 1,750,732 1,703,078
----------- -----------
Stockholder's equity:
Common stock, $.01 par value, authorized 3,000 shares;
issued and outstanding 100 shares at March 31, 2002 and
December 31, 2001 -- --
Additional paid-in capital 2,262,141 2,222,317
Accumulated deficit (289,562) (276,231)
----------- -----------
Stockholder's equity 1,972,579 1,946,086
----------- -----------
Total liabilities and stockholder's equity $ 3,723,311 $ 3,649,164
=========== ===========
</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
March 31,
2002 2001
------------ ------------
Net revenues $ 176,538 $ 170,385
------------ ------------
Operating expenses:
Direct advertising expenses 67,227 61,536
General and administrative expenses 41,134 37,645
Depreciation and amortization 66,288 84,509
Gain on disposition of assets (89) (216)
------------ ------------
174,560 183,474
------------ ------------
Operating income (loss) 1,978 (13,089)
------------ ------------
Other expense (income):
Interest income (221) (244)
Interest expense 23,003 33,263
------------ ------------
22,782 33,019
------------ ------------
Loss before income tax benefit (20,804) (46,108)
Income tax benefit (7,473) (13,962)
------------ ------------
Net loss $ (13,331) $ (32,146)
============ ============
</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>
Three Months Ended
March 31,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (13,331) $ (32,146)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 66,288 84,509
Gain on disposition of assets (89) (216)
Deferred tax benefit (2,200) (14,289)
Provision for doubtful accounts 2,744 1,803
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (7,791) (6,479)
Prepaid expenses (11,773) (10,103)
Other assets (7,274) (721)
Increase (decrease) in:
Trade accounts payable 1,652 895
Accrued expenses (7,152) (18,475)
Deferred income 2,085 1,846
Other liabilities 57 504
------------ ------------
Net cash provided by operating activities 23,216 7,128
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable -- (197)
Acquisition of new markets (37,842) (100,772)
Capital expenditures (14,121) (15,571)
Proceeds from disposition of assets 701 1,036
------------ ------------
Net cash used in investing activities (51,262) (115,504)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (16,668) (1,345)
Proceeds from issuance of long-term debt 60,000 42,000
Debt issuance costs (1,050) (389)
------------ ------------
Net cash provided by financing activities 42,282 40,266
------------ ------------
Net increase (decrease) in cash and cash equivalents 14,236 (68,110)
Cash and cash equivalents at beginning of period 12,885 72,340
------------ ------------
Cash and cash equivalents at end of period $ 27,121 $ 4,230
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 30,343 $ 35,786
============ ============
Cash paid for state and federal income taxes $ 311 $ 368
============ ============
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
(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 the 2001 Combined 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.
Certain footnotes are not provided for the accompanying financial statements as
the information in notes 2, 3, 4, 5 and 7 to the consolidated financial
statements of Lamar Advertising Company included elsewhere in this report is
substantially equivalent to that required for the consolidated financial
statements of Lamar Media Corp. Earnings per share data is not provided for the
operating results of Lamar Media Corp. as it is a wholly-owned subsidiary of
Lamar Advertising Company.
-11-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements. Actual results could differ
materially from those anticipated by the forward-looking statements due to the
risks and uncertainties described in the section of this report on Form 10-Q
entitled "Note Regarding Forward-Looking Statements" and described in the 2001
Combined 10-K under the caption "Factors Affecting Future Operating Results."
You should consider carefully each of these risks and uncertainties in
evaluating the Company's and Lamar Media's financial condition and results of
operations.
LAMAR ADVERTISING COMPANY
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Advertising Company for the three months ended
March 31, 2002 and 2001. This discussion should be read in conjunction with the
consolidated financial statements of the Company and the related notes.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001
Net revenues increased $6.2 million or 3.6% to $176.5 million for the three
months ended March 31, 2002 as compared to the same period in 2001. This
increase was attributable to an increase in billboard net revenues of $5.5
million or 3.6%, and a $0.7 million increase in logo sign revenue, which
represents an 8.8% increase over the prior year.
Operating expenses, exclusive of depreciation and amortization, increased $9.2
million or 9.3% for the three months ended March 31, 2002 as compared to the
same period in 2001. This was primarily the result of additional operating
expenses related to the operations of acquired outdoor advertising assets.
EBITDA decreased $3.1 million or 4.4% to $68.1 million for the three months
ended March 31, 2002 from $71.2 million for the same period in 2001.
For the three months ended March 31, 2002 same store net revenue and EBITDA
declined 1.6% and 6.9% respectively as compared to the same period in 2001.
Same store is defined by the Company as outdoor markets owned and operated for
twelve months or longer. The decline in same store net revenue and EBITDA was
due primarily to adverse economic conditions in 2002.
Depreciation and amortization expense decreased $18.3 million or 21.4% from
$85.4 million for the three months ended March 31, 2001 to $67.1 million for the
three months ended March 31, 2002 as a result of the Company's adoption of SFAS
No. 142 "Goodwill and Other Intangible Assets" which eliminated the amortization
expense for goodwill.
Due to the above factors, operating income increased $15.1 million to $1.1
million for three months ended March 31, 2002 compared to an operating loss of
$14.0 million for the same period in 2001.
Interest expense decreased $9.0 million from $35.8 million for the three months
ended March 31, 2001 to $26.8 million for the same period in 2002 as a result of
lower interest rates for the three months ended March 31, 2002 as compared to
the same period in 2001.
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There was an income tax benefit of $9.3 million for the three months ended March
31, 2002 as compared to an income tax benefit of $15.3 million for the same
period in 2001. The effective tax rate for the three months ended March 31, 2002
was approximately 36.5% which is less than statutory rates due to permanent
differences resulting from non-deductible expenses.
As a result of the above factors, the Company recognized a net loss for the
three months ended March 31, 2002 of $16.2 million, as compared to a net loss of
$34.4 million for the same period in 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and revolving credit borrowings. Its acquisitions have been
financed primarily with borrowed funds and the issuance of Class A common stock.
During the three months ended March 31, 2002, the Company financed the cash
portion of its acquisition activity of approximately $38 million with borrowings
under the Company's bank credit facility. On January 11, 2002 the Company
activated $200 million in new borrowings under the incremental facility of its
bank credit agreement. The proceeds were used to reduce the balance of the
revolving bank credit facility balance by $160 million and approximately $10
million was used for operations resulting in excess cash on hand of $30 million.
Also on January 30, 2002, JPMorgan Chase issued a standby letter of credit of
approximately $3.2 million to benefit American Casualty Insurance Company, the
provider of the Company's general liability and workman's compensation coverage.
This issuance reduces the Company's availability under its revolving bank credit
facility. On March 31, 2002, in accordance with the Company's bank credit
agreement, required quarterly principle payments of $15.75 million were made and
commitments under the revolving facility of the bank credit agreement were
reduced by $8.75 million. As a result of these transactions the Company had
$337.8 million available under the revolving credit facility.
The Company's net cash provided by operating activities increased $11.2 million
for the three months ended March 31, 2002 due primarily to a decrease in net
loss of $18.1 million, a decrease in receivables of $0.7 million and an increase
in accrued expenses of $7.0 million. These changes were offset primarily by an
increase in other assets of $7.9 million and a decrease in noncash items of $5.7
million. The decrease in non cash items includes a decrease in depreciation and
amortization of $18.3 million, a decrease in the deferred income tax benefit of
$11.6 million and an increase in the provision for doubtful accounts of $0.9
million. Net cash used in investing activities decreased $64.3 million from
$115.9 million for the three months ended March 31, 2001 to $51.6 million for
the same period in 2002. This decrease was due to a $63.0 million decrease in
acquisitions of new markets. Net cash provided by financing activities for the
three months ended March 31, 2002 is $48.5 million primarily due to $60.0
million in net borrowings under credit agreements used to finance acquisition
activity and working capital requirements during the period.
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In the future the Company has principal reduction obligations and revolver
commitment reductions under its bank credit agreement. In addition it has fixed
commercial commitments which consists of various operating leases for production
facilities and sites upon which advertising structures are built. The leases
expire at various dates, generally during the next five years, and have varying
options to renew and to cancel. These commitments are detailed as follows:
<Table>
<Caption>
Payments Due by Period
(in millions)
Balance at Less
Contractual March 31 than 1 1 - 3 4 - 5 After 5
Obligations 2002 Year Years Years Years
- ---------------------------------- ----------- ----------- ----------- ----------- -----------
Long-Term Debt $ 1,857.3 82.0 299.9 1,200.2 275.2
Billboard site and building leases $ 754.3 95.9 167.7 125.5 365.2
----------- ----------- ----------- ----------- -----------
Total Payments due $ 2,611.6 177.9 467.6 1,325.7 640.4
=========== =========== =========== =========== ===========
</Table>
<Table>
<Caption>
Amount of Commitment
Expiration per Period
(in millions)
Total Amount
Other Committed at Less
Commercial March 31 than 1 1 - 3 4 - 5 After 5
Commitments 2002 Year Years Years Years
- ------------------------- ------------ ----------- ----------- ----------- -----------
Revolving Bank Facility(1) $ 341.3 35.0 161.9 144.4 --
=========== =========== =========== =========== ===========
Standby Letter of Credit $ 3.5 0.3 3.2 -- --
=========== =========== =========== =========== ===========
</Table>
(1) The Company had no outstanding balance at March 31, 2002.
The Company believes that its current level of cash on hand, availability under
its bank credit agreement and future cash flows from operations are sufficient
to meet its operating needs through the year 2002. All debt obligations are on
the Company's balance sheet.
LAMAR MEDIA CORP.
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Media for the three months ended March 31, 2002
and 2001. This discussion should be read in conjunction with the consolidated
financial statements of Lamar Media and the related notes.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001
Net revenues increased $6.2 million or 3.6% to $176.5 million for the three
months ended March 31, 2002 as compared to the same period in 2001. This
increase was attributable to Lamar Media's increase in billboard net revenues of
$5.5 million or 3.6%, which was primarily related to acquired outdoor
advertising assets yielding a same store net revenue decrease of 1.6% as
compared to the same period in 2001. Same store is defined by the Company as
outdoor markets owned and operated for twelve months or longer. In addition
there was a $0.7 million increase in logo sign revenue, which represents an 8.8%
increase over the prior year.
Operating expenses, exclusive of depreciation and amortization, increased $9.2
million or 9.3% for the three months ended March 31, 2002 as compared to the
same period in 2001. This was primarily the result of additional operating
expenses related to the operations of acquired outdoor advertising assets.
-14-
EBITDA decreased $3.0 million or 4.2% to $68.2 million for the three months
ended March 31, 2002 from $71.2 million for the same period in 2001.
For three months ended March 31, 2002 same store net revenue and EBITDA declined
1.6% and 6.9% respectively as compared to the same period in 2001. Same store is
defined by the Company as outdoor markets owned and operated for twelve months
or longer. The decline in same store net revenue and EBITDA was due primarily to
adverse economic conditions in 2002.
Depreciation and amortization expense decreased $18.2 million or 21.6% from
$84.5 million for the three months ended March 31, 2001 to $66.3 million for the
three months ended March 31, 2002 as a result of Lamar Media's adoption of SFAS
No. 142 "Goodwill and Other Intangible Assets" which eliminated the amortization
expense for goodwill.
Due to the above factors, operating income increased $15.1 million to $2.0
million for three months ended March 31, 2002 compared to an operating loss of
$13.1 million for the same period in 2001.
Interest expense decreased $10.3 million from $33.3 million for the three months
ended March 31, 2001 to $23.0 million for the same period in 2002 as a result of
lower interest rates for the three months ended March 31, 2002 as compared to
the same period in 2001.
There was an income tax benefit of $7.5 million for the three months ended March
31, 2002 as compared to an income tax benefit of $14.0 million for the same
period in 2001. The effective tax rate for the three months ended March 31, 2002
was approximately 35.9%.
As a result of the above factors, Lamar Media recognized a net loss for the
three months ended March 31, 2002 of $13.3 million, as compared to a net loss of
$32.1 million for the same period in 2001.
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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 March 31, 2002.
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 March 31, 2002, there was approximately $1,023 million of aggregate
indebtedness outstanding under the bank credit agreement, or approximately 57.6%
of the Company's and 68.7% of Lamar Media's outstanding long-term debt on that
date, bearing interest at variable rates. The aggregate interest expense for the
three months ended March 31, 2002 with respect to borrowings under the bank
credit agreement was $10.3 million, and the weighted average interest rate
applicable to borrowings under these credit facilities during the three months
ended March 31, 2002 was 3.9%. Assuming that the weighted average interest rate
was 200-basis points higher (that is 5.9% rather than 3.9%), then the Company's
and Lamar Media's March 31, 2002 interest expense would have been approximately
$5.1 million higher resulting in a $3.1 million decrease in the Company's and
Lamar Media's three months ended March 31, 2002 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, with unanimous approval of
the participants in the bank credit agreement, 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.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The Exhibits filed as part of this report are listed on the
Exhibit Index immediately following the signature page hereto,
which Exhibit Index is incorporated herein by reference.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAMAR ADVERTISING COMPANY
DATED: May 8, 2002 BY: /s/ Keith A. Istre
-----------------------------------------
Keith A. Istre
Chief Financial and Accounting
Officer, Treasurer and Director
LAMAR MEDIA CORP.
BY: /s/ Keith A. Istre
-----------------------------------------
Keith A. Istre
Chief Financial and Accounting
Officer, Treasurer and Director
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INDEX TO EXHIBITS
<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
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 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
November 12, 2001 delivered by Trans West Outdoor Advertising,
Inc. 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
November 12, 2001 delivered by Trans West Outdoor Advertising,
Inc. Filed herewith.
</Table>
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<Table>
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
November 12, 2001 delivered by Trans West Outdoor Advertising,
Inc. Filed herewith.
10.1 Joinder Agreement dated November 12, 2001 to the Lamar Media
Corp. Credit Agreement dated August 13, 1999 by Trans West
Outdoor Advertising, Inc. Filed herewith.
10.2 Series C Incremental Loan Agreement among Lamar Advertising
Company, Lamar Media Corp. and certain of its subsidiaries,
the Series C Lenders and JPMorgan Chase Bank, as
Administrative Agent, dated as of January 8, 2002. Filed
herewith.
21.1 Subsidiaries of the Company. Filed herewith.
</Table>
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