UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 2003
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 (I.R.S. Employer or
incorporation organization) Identification No.)
5551 Corporate Blvd., Baton Rouge, LA 70808
(Address of principle 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 ( )
Indicate by check mark whether Lamar Advertising Company is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act: Yes (X) No ( )
Indicate by check mark whether Lamar Media Corp. is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act: Yes ( ) No (X)
The number of shares of Lamar Advertising Company's Class A common stock
outstanding as of August 8, 2003: 86,831,208
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of August 8, 2003: 16,417,073
The number of shares of Lamar Media Corp. common stock outstanding as of
August 8, 2003: 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 about the Company's, and Lamar Media's:
o expected operating results;
o market opportunities;
o acquisition opportunities;
o ability to compete; and
o stock price.
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 the performance of the U.S. economy generally and the level of
expenditures on outdoor advertising particularly;
o the Company's ability to renew expiring contracts at favorable rates;
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 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; and
o the regulation of the outdoor advertising industry by federal, state
and local governments.
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, 2002 of the Company and
Lamar Media (the "2002 Combined Form 10-K") under the caption "Factors 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 26,
2003.
The forward-looking statements contained in this combined Quarterly Report on
Form 10-Q speak only as of the date of this combined report. Lamar Advertising
Company and Lamar Media Corp. expressly disclaim any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statement
contained in this combined Quarterly Report to reflect any change in their
expectations with regard thereto or any change in events, conditions or
circumstances on which any forward-looking statement is based.
CONTENTS
Page
-------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of June 30, 2003 and
December 31, 2002 1
Condensed Consolidated Statements of Operations for the three months
ended June 30, 2003 and 2002 and six months ended June 30, 2003 and
2002 2
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2003 and 2002 3
Notes to Condensed Consolidated Financial Statements 4 - 8
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of June 30, 2003 and
December 31, 2002 9
Condensed Consolidated Statements of Operations for the three months
ended June 30, 2003 and 2002 and six months ended June 30, 2003 and
2002 10
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2003 and 2002 11
Notes to Condensed Consolidated Financial Statements 12
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 13 - 20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks 21
ITEM 4. Controls and Procedures 21
PART II - OTHER INFORMATION
ITEM 4. Submission of matters to a vote of security holders 22
ITEM 6. Exhibits and Reports on Form 8-K 22
Signatures 22
Index to Exhibits 23 - 24
PART I - FINANCIAL INFORMATION
ITEM 1.- FINANCIAL STATEMENTS
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
June 30, December 31,
ASSETS 2003 2002
- ------ ---------- ------------
Current assets:
Cash and cash equivalents $ 10,692 $ 15,610
Cash on deposit for debt extinguishment 301,198 266,657
Receivables, net of allowance for doubtful accounts of $4,808 and $4,914
in 2003 and 2002, respectively 98,594 92,382
Prepaid expenses 43,293 30,091
Deferred tax asset 6,097 6,428
Other current assets 10,320 7,315
---------- ----------
Total current assets 470,194 418,483
---------- ----------
Property, plant and equipment 1,906,285 1,850,657
Less accumulated depreciation and amortization (621,492) (566,889)
---------- ----------
Net property, plant and equipment 1,284,793 1,283,768
---------- ----------
Goodwill 1,232,822 1,178,428
Intangible assets, net 1,026,573 988,953
Other assets - non-current 22,202 18,474
---------- ----------
Total assets $4,036,584 $3,888,106
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 10,421 $ 10,051
Current maturities of long-term debt 4,852 4,687
Current maturities related to debt extinguishment 287,500 255,000
Accrued expenses 44,510 38,881
Deferred income 12,971 13,942
---------- ----------
Total current liabilities 360,254 322,561
---------- ----------
Long-term debt 1,801,094 1,734,746
Deferred income taxes 100,718 114,260
Other liabilities 44,287 7,366
---------- ----------
Total liabilities 2,306,353 2,178,933
---------- ----------
Stockholders' equity:
Series AA preferred stock, par value $.001, $63.80 cumulative dividends, authorized
5,720 shares; 5,719 shares issued and outstanding at 2003 and 2002 -- --
Class A preferred stock, par value $638, $63.80 cumulative dividends, 10,000 shares
authorized; 0 shares issued and outstanding at 2003 and 2002 -- --
Class A common stock, par value $.001, 175,000,000 shares authorized, 86,816,208
and 85,077,038 shares issued and outstanding at 2003 and 2002, respectively 87 85
Class B common stock, par value $.001, 37,500,000 shares authorized, 16,417,073
shares issued and outstanding at 2003 and 2002 16 16
Additional paid-in capital 2,092,420 2,036,709
Accumulated deficit (362,292) (327,637)
---------- ----------
Stockholders' equity 1,730,231 1,709,173
---------- ----------
Total liabilities and stockholders' equity $4,036,584 $3,888,106
========== ==========
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)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ----------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net revenues $ 208,178 $ 202,529 $ 392,399 $ 379,067
------------ ------------ ------------ ------------
Operating expenses (income)
Direct advertising expenses 73,361 66,632 144,918 133,859
General and administrative expenses 35,216 33,317 71,517 68,132
Corporate expenses 5,364 6,100 11,910 12,491
Depreciation and amortization 69,560 69,401 137,073 136,501
Gain on disposition of assets (828) (81) (858) (170)
------------ ------------ ------------ ------------
182,673 175,369 364,560 350,813
------------ ------------ ------------ ------------
Operating income 25,505 27,160 27,839 28,254
Other expense (income)
Loss on extinguishment of debt 5,754 -- 16,927 --
Interest income (66) (166) (184) (387)
Interest expense 22,587 27,241 46,347 54,017
------------ ------------ ------------ ------------
28,275 27,075 63,090 53,630
------------ ------------ ------------ ------------
(Loss) income before income tax expense
(benefit) and cumulative effect of a change
in accounting principle (2,770) 85 (35,251) (25,376)
Income tax (benefit) expense (569) 393 (12,457) (8,905)
------------ ------------ ------------ ------------
Loss before cumulative effect of a change in
accounting principle (2,201) (308) (22,794) (16,471)
Cumulative effect of a change in accounting
principle, net of tax -- -- (11,679) --
------------ ------------ ------------ ------------
Net loss (2,201) (308) (34,473) (16,471)
Preferred stock dividends 91 91 182 182
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (2,292) $ (399) $ (34,655) $ (16,653)
============ ============ ============ ============
Loss per common share:
Loss before cumulative effect of a change
in accounting principle $ (0.02) $ -- $ (0.23) $ (0.17)
Cumulative effect of a change in
accounting principle -- -- (0.11) --
------------ ------------ ------------ ------------
Net loss $ (0.02) $ (--) $ (0.34) $ (0.17)
============ ============ ============ ============
Weighted average common shares
outstanding - basic and diluted 102,481,555 100,967,615 102,076,725 100,756,037
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
-2-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
----------------------------
2003 2002
---------- ----------
Cash flows from operating activities:
Net loss $ (34,473) $ (16,471)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 137,073 136,501
Gain on disposition of assets (858) (170)
Deferred tax benefit (12,197) (3,763)
Provision for doubtful accounts 4,268 4,678
Loss on debt extinguishment 16,927 --
Cumulative effect of a change in accounting principle 11,679 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (10,293) (18,056)
Prepaid expenses (13,038) (13,482)
Other assets (4,776) (5,980)
Increase (decrease) in:
Trade accounts payable 370 (768)
Accrued expenses 4,646 (2,724)
Other liabilities (1,014) 721
--------- ----------
Net cash provided by operating activities 98,314 80,486
--------- ----------
Cash flows from investing activities:
Acquisition of new markets (102,804) (55,481)
Capital expenditures (40,767) (36,080)
Proceeds from disposition of assets 2,448 1,636
--------- ----------
Net cash used in investing activities (141,123) (89,925)
--------- ----------
Cash flows from financing activities:
Debt issuance costs (9,050) (1,062)
Net proceeds from issuance of common stock 4,303 11,682
Principal payments on long-term debt (370,939) (33,283)
Net borrowings under credit agreements 40,000 60,000
Cash from deposits for debt extinguishment 266,657 --
Deposits for debt extinguishment (301,198) --
Net proceeds from note offerings and new note payable 408,300 --
Dividends (182) (182)
--------- ----------
Net cash provided by financing activities 37,891 37,155
--------- ----------
Net increase (decrease) in cash and cash equivalents (4,918) 27,716
Cash and cash equivalents at beginning of period 15,610 12,885
--------- ----------
Cash and cash equivalents at end of period $ 10,692 $ 40,601
--------- ----------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 36,422 $ 54,041
========= ==========
Cash paid for state and federal income taxes $ 291 $ 1,652
========= ==========
Common stock issuance related to acquisitions $ 50,630 $ 53,000
========= ==========
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 condensed consolidated
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 2002 Combined 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 net loss.
2. Acquisitions
On March 3, 2003, the Company purchased the stock of Delite Outdoor, Inc. for
$18,000. The purchase price consisted of 588,543 shares of Lamar Advertising
Class A common stock valued at $18,000.
Effective May 1, 2003, the Company purchased the assets of Outdoor Media Group,
Inc. for $40,000. The purchase price consisted of 307,134 shares of Lamar
Advertising Class A common stock as well as approximately $30,000 cash.
On June 2, 2003, the Company purchased the stock of Adams Outdoor, Inc. for
approximately $40,137. The purchase price included 501,626 shares of Lamar
Advertising Class A common stock and approximately $22,637 cash.
During the six months ended June 30, 2003, the Company completed 42 additional
acquisitions of outdoor advertising assets for a total purchase price of
approximately $56,635, which consisted of the issuance of 152,792 shares of
Lamar Advertising Class A common stock and 51,505 cash.
Each of these acquisitions was accounted for under the purchase method of
accounting, and, accordingly, the accompanying consolidated 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.
Delite Adams Outdoor
Outdoor Outdoor Media
Inc. Inc. Group, Inc. Other Total
------------- ------------ -------------- -------- ----------
Current assets 911 1,327 -- 276 2,514
Property, plant and equipment 4,580 2,299 2,773 7,345 16,997
Goodwill 47 23,474 17,150 13,723 54,394
Site locations 10,048 16,221 16,335 31,067 73,671
Non-competition agreements 145 -- -- 230 375
Customer lists and contracts 2,732 3,716 3,742 5,020 15,210
Current liabilities 108 403 -- 644 1,155
Long-term liabilities 355 6,497 -- 382 7,234
---------- ---------- ---------- --------- ---------
18,000 40,137 40,000 56,635 154,772
========== ========== ========== ========= =========
-4-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
Summarized below are certain unaudited pro forma statements of operations data
for the three months and six months ended June 30, 2003 and June 30, 2002 as if
each of the above acquisitions and the acquisitions occurring in 2002, which
were fully described in the 2002 Combined Form 10-K, had been consummated as of
January 1, 2002 and the adoption of SFAS No. 143 as of January 1, 2002. This pro
forma information does not purport to represent what the Company's results of
operations actually would have been had such transactions occurred on the date
specified or to project the Company's results of operations for any future
periods.
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- -------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net revenues $210,004 $209,835 $399,338 $392,852
-------- -------- -------- --------
Net loss applicable to common stock $ (2,473) $ (1,841) $(35,522) $(20,076)
-------- -------- -------- --------
Net loss per common share $ (0.02) $ (0.02) $ (0.35) $ (0.20)
-------- -------- -------- --------
3. Goodwill and Other Intangible Assets
The following is a summary of intangible assets at June 30, 2003 and December
31, 2002.
June 30, 2003 December 31, 2002
Estimated -------------------------------- ---------------------------------
Life Gross Carrying Accumulated Gross Carrying Accumulated
Amortizable Intangible Assets: (Years) Amount Amortization Amount Amortization
--------- -------------- ------------ -------------- ------------
Debt issuance costs and fees 7 - 10 $ 65,978 $ 30,865 $ 52,202 $ 27,533
Customer lists and contracts 7 - 10 386,997 222,086 371,787 196,084
Non-competition agreements 3 - 15 57,398 42,917 57,023 39,458
Site locations 15 1,011,444 209,243 937,773 177,016
Other 5 - 15 16,544 6,677 15,997 5,738
---------- -------- ---------- --------
1,538,361 511,788 1,434,782 445,829
Unamortizable Intangible Assets:
Goodwill $1,486,457 $253,635 $1,432,063 $253,635
The changes in the gross carrying amount of goodwill for the six months ended
June 30, 2003 are as follows:
Balance as of December 31, 2002 $1,432,063
Goodwill acquired during the six months ending June 30, 2003 54,394
Impairment losses --
----------
Balance as of June 30, 2003 $1,486,457
==========
-5-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
4. Long-Term Debt
On December 23, 2002, Lamar Media Corp. completed an offering of $260,000 7 1/4%
Senior Subordinated Notes due 2013. These notes are unsecured senior
subordinated obligations and will be subordinated to all of Lamar Media's
existing and future senior debt, rank equally with all of Lamar Media's existing
and future senior subordinated debt and rank senior to any future subordinated
debt of Lamar Media. The net proceeds from the issuance and sale of these notes,
together with additional cash, was used to redeem all of the outstanding
$255,000 principal amount of Lamar Media's 9 5/8% Senior Subordinated Notes due
2006 on January 22, 2003 at a redemption price equal to 103.208% of the
aggregate principal amount thereof plus accrued interest through the redemption
date of approximately $3,477 for a total redemption price of approximately
$266,657. The Company recorded a loss on the extinguishment of debt of $11,173
in the first quarter of 2003 which consists of a prepayment premium of $8,180
and associated debt issuance costs of $2,993.
On June 12, 2003, Lamar Media Corp. issued $125,000 7 1/4% Senior Subordinated
Notes due 2013 as an add on to the $260,000 issued in December 2002. The issue
price of the $125,000 7 1/4% Notes was 103.661% which yields an effective rate
of 6 5/8% . The proceeds of the issuance were used to redeem approximately
$100,000 of Lamar Media's 8 5/8% senior subordinated notes for a redemption
price equal to 104.313% of the principal amount of the notes. The Company
recorded a loss on extinguishment of debt of $5,754 in the second quarter 2003
related to this prepayment. Approximately $100,000 in aggregate principal amount
of our 8 5/8% notes remain outstanding following this redemption.
On June 16, 2003, the Company issued $287,500 2 7/8% Convertible Notes due 2010.
The net proceeds from these notes together with additional cash were used on
July 16, 2003 to redeem all of the Company's outstanding 5 1/4% convertible
notes due 2006 in aggregate principal amount of approximately $287,500, on July
16, 2003 for a redemption price equal to 103.0% of the principal amount of
notes. The Company will record a loss on the early extinguishment of debt in the
third quarter of 2003 of approximately $12,566 related to this redemption.
5. Asset Retirement Obligation
Effective January 1, 2003, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 143, "Accounting for Asset Retirement Obligations," and
recorded a loss of $11,679 as the cumulative effect of a change in accounting
principle, which is net of a tax benefit of $7,467. Prior to its adoption of
SFAS No. 143, the Company expensed these costs at the date of retirement. Also,
as of January 1, 2003, the Company recorded additions to property, plant and
equipment totaling $23,114 under the provisions of SFAS No. 143.
All of the Company's asset retirement obligations relate to the Company's
structure inventory that it considers would be retired upon dismantlement of the
advertising structure. The following table reflects information related to our
asset retirement obligations:
June 30, 2003
-------------
Balance at beginning of period $33,467
Additions to asset retirement obligations 1,207
Accretion expense 1,163
Liabilities settled (177)
-------
Balance at end of period $35,660
=======
The following pro forma data summarizes the Company's net loss and net loss per
common share as if the Company had adopted the provisions of SFAS No. 143 on
January 1, 2002, including an associated pro forma asset retirement obligation
on that date of $30,875.
Six months ended
June 30, 2002
----------------
Net loss applicable to common stock, as reported $(16,653)
Pro forma adjustments to reflect retroactive adoption
of SFAS No. 143 (11,614)
--------
Proforma net loss applicable to common stock $(28,267)
========
Net loss per common share - basic and diluted:
Net loss, as reported $ (0.17)
Net loss, pro forma $ (0.28)
-6-
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. Stock-Based Compensation
The Company accounts for its stock option plan under the intrinsic value method
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
As such, compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeds the exercise price. SFAS
No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure an amendment of FASB
Statement No. 123" permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 has been
applied.
The following table illustrates the effect on net loss and loss per common share
if we had applied the fair value recognition provisions of SFAS No. 123 to
stock-based employee compensation:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------------
2003 2002 2003 2002
------- ------- -------- --------
Net loss applicable to common stock, as reported $(2,292) $ (399) $(34,655) $(16,653)
Deduct: Total stock based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects (967) (1,793) (1,978) (3,842)
------- ------- -------- --------
Pro forma net loss applicable to common stock (3,259) (2,192) (36,633) (20,495)
======= ======= ======== ========
Net loss per common share - basic and diluted
Net loss, as reported $ (0.02) $ (--) $ (0.34) $ (0.17)
Net loss, pro forma (0.03) (0.02) $ (0.36) $ (0.20)
7. 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 Company has no independent assets or operations, the
guarantees are full and unconditional and joint and several and the only
subsidiary that is not a guarantor is considered to be minor. Lamar Media's
ability to make distributions to Lamar Advertising is restricted under the terms
of its bank credit facility and the indentures relating to Lamar Media's
outstanding notes. As of June 30, 2003 and December 31, 2002, the net assets
restricted as to transfers from Lamar Media Corp. to Lamar Advertising Company
in the form of cash dividends, loans or advances were $1,937,243 and $1,915,035,
respectively.
8. 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 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 7,513,583 and 6,975,093 for three months ended June 30,
2003 and 2002 and 7,035,955 and 6,941,143 for the six months ended June 30, 2003
and 2002, respectively.
9. Accounting Pronouncements
In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS
No. 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullified Emerging Issues Task Force (EITF)
Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity." The provisions of this Statement are effective
for exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. The adoption of SFAS No. 146 did not have a
material effect on the Company's financial statements.
-7-
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57, and 107
and a rescission of FASB Interpretation No. 34." This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after December 31, 2002 and did not
have a material effect on the Company's financial statements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51." This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003 and to variable interests in variable interest entities
obtained after January 31, 2003. The application of this Interpretation is not
expected to have a material effect on the Company's financial statements as the
Company has no interest in variable interest entities. The Interpretation
requires certain disclosures in financial statements issued after January 31,
2003, if it is reasonably possible that the Company will consolidate or disclose
information about variable interest entities when the Interpretation becomes
effective.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company is
required to adopt SFAS No. 149 for all contracts entered into or modified after
June 30, 2003, except for certain hedging relationships designated after June
30, 2003 pursuant to the guidance in SFAS No. 149. The Company does not expect
adoption to have an impact on its consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." Statement 150
affects the issuer's accounting for three types of freestanding financial
instruments. One type is mandatory redeemable shares, which the issuing company
is obligated to buy back in exchange for cash or other assets. A second type,
which includes put options and forward purchase contracts, involves instruments
that do or may require the issuer to buy back some of its shares in exchange for
cash or other assets. The third type of instruments that are liabilities under
this Statement is obligations that can be settled with shares, the monetary
value of which is fixed, tied solely or predominately to a variable such as a
market index, or varies inversely with the value of the issuers' shares.
Statement 150 does not apply to features embedded in a financial instrument that
is not a derivative in its entirety. Most of the guidance in Statement 150 is
effective for all financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. Because the Company does not have any financial
instruments covered by SFAS No. 150 outstanding, its adoption is not expected to
materially impact the Company's financial position, cash flows or results of
operations.
10. Commitments and Contingent Liabilities
In August 2002, a jury verdict was rendered in a lawsuit filed against the
Company in the amount of $32 in compensatory damages and $2,245 in punitive
damages. As a result of the verdict, the Company recorded a $2,277 charge in its
operating expenses during the quarter ended September 30, 2002. In May 2003, the
Court ordered a reduction to the punitive damage award, which was subject to the
plaintiff's consent. The plaintiff rejected the reduced award and the Court
ordered a new trial. Based on legal analysis, management believes the best
estimate of the Company's potential liability related to this claim is currently
$1,277. The $1,000 reduction in the reserve for this liability was recorded as a
reduction of corporate expenses in the second quarter of 2003.
-8-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
June 30, December 31,
ASSETS 2003 2002
- ------ ---------- ------------
Current assets:
Cash and cash equivalents $ 10,692 $ 15,610
Cash on deposit for debt extinguishment -- 266,657
Receivables, net of allowance for doubtful accounts of $4,808 and $4,914 in
2003 and 2002, respectively 98,380 92,295
Prepaid expenses 43,293 30,091
Deferred income tax asset 6,097 6,428
Other current assets 10,320 7,315
---------- ----------
Total current assets 168,782 418,396
---------- ----------
Property, plant and equipment 1,906,285 1,850,657
Less accumulated depreciation and amortization (621,492) (566,889)
---------- ----------
Net property, plant and equipment 1,284,793 1,283,768
---------- ----------
Goodwill 1,232,822 1,171,595
Intangible assets 1,000,130 975,998
Other assets - non-current 40,024 25,152
---------- ----------
Total assets $3,726,551 $3,874,909
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ 10,421 $ 10,051
Current maturities of long-term debt 4,852 4,687
Current maturities related to debt extinguishment -- 255,000
Accrued expenses 32,415 25,981
Deferred income 12,971 13,942
---------- ----------
Total current liabilities 60,659 309,661
---------- ----------
Long-term debt 1,513,594 1,447,246
Deferred income taxes 120,212 129,924
Other liabilities 44,287 7,366
---------- ----------
Total liabilities 1,738,752 1,894,197
---------- ----------
Stockholder's equity:
Common stock, $0.01 par value, authorized 3,000 shares; 100 shares issued and
outstanding at June 30, 2003 and December 31, 2002, respectively -- --
Additional paid-in capital 2,333,310 2,281,901
Accumulated deficit (345,511) (301,189)
---------- ----------
Stockholder's equity 1,987,799 1,980,712
---------- ----------
Total liabilities and stockholder's equity $3,726,551 $3,874,909
========== ==========
See accompanying notes to condensed consolidated financial statements.
-9-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net revenues $ 208,178 $ 202,529 $ 392,399 $ 379,067
--------- --------- --------- ---------
Operating expenses
Direct advertising expenses 73,361 66,632 144,918 133,859
General and administrative expenses 35,216 33,317 71,517 68,132
Corporate expenses 5,226 6,034 11,745 12,353
Depreciation and amortization 68,654 68,589 135,336 134,877
Gain on disposition of assets (828) (81) (858) (170)
--------- --------- --------- ---------
181,629 174,491 362,658 349,051
--------- --------- --------- ---------
Operating income 26,549 28,038 29,741 30,016
Other expense (income)
Loss on debt extinguishment 5,754 -- 16,927 --
Interest income (66) (166) (184) (387)
Interest expense 18,470 23,467 38,456 46,470
--------- --------- --------- ---------
24,158 23,301 55,199 46,083
--------- --------- --------- ---------
Income (loss) before income tax expense
(benefit) and cumulative effect of a change
in accounting principle 2,391 4,737 (25,458) (16,067)
Income tax expense (benefit) 1,455 2,195 (8,628) (5,278)
--------- --------- --------- ---------
Income (loss) before cumulative effect of
a change in accounting principle 936 2,542 (16,830) (10,789)
Cumulative effect of a change in accounting
principle -- -- (11,679) --
--------- --------- --------- ---------
Net income (loss) $ 936 $ 2,542 $ (28,509) $ (10,789)
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
-10-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
------------------------
2003 2002
--------- ---------
Cash flows from operating activities:
Net loss $ (28,509) $ (10,789)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 135,336 134,877
Gain on disposition of assets (858) (170)
Deferred tax benefit (8,368) (136)
Provision for doubtful accounts 4,268 4,678
Loss on debt extinguishment 16,927 --
Cumulative effect of change in accounting principle 11,679 --
Changes in operating assets and liabilities:
Decrease in:
Receivables (10,165) (20,147)
Prepaid expenses (13,038) (13,482)
Other assets (15,922) (560)
Increase (decrease) in:
Trade accounts payable 370 (768)
Accrued expenses 5,451 (3,258)
Other liabilities (1,014) 721
--------- ---------
Net cash provided by operating activities 96,157 90,966
--------- ---------
Cash flows from investing activities:
Acquisition of new markets (101,599) (55,111)
Capital expenditures (40,767) (35,430)
Proceeds from disposition of assets 2,448 1,636
--------- ---------
Net cash used in investing activities (139,918) (88,905)
--------- ---------
Cash flows from financing activities:
Debt issuance costs (9,050) (1,062)
Dividend (15,813) --
Principal payments on long-term debt (370,939) (33,283)
Net borrowings under credit agreements 40,000 60,000
Cash from deposits for debt extinguishment 266,657 --
Net proceeds from note offering and new note payable 127,988 --
--------- ---------
Net cash provided by financing activities 38,843 25,655
--------- ---------
Net (decrease) increase in cash and cash equivalents (4,918) 27,716
Cash and cash equivalents at beginning of period 15,610 12,885
--------- ---------
Cash and cash equivalents at end of period $ 10,692 $ 40,601
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 28,875 $ 46,694
========= =========
Cash paid for state and federal income taxes $ 291 $ 1,652
========= =========
Parent company stock contributed for acquisitions $ 50,630 $ 53,000
========= =========
See accompanying notes to condensed consolidated financial statements.
-11-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
1. Significant Accounting Policies
The information included in the foregoing interim condensed consolidated
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 2002 Combined 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 consolidated financial
statements as the information in notes 2, 3, 4, 5, 7, 9 and 10 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 Lamar Media Corp. as it is a wholly owned
subsidiary of Lamar Advertising Company.
2. Note Offering for Lamar Advertising Company
On June 16, 2003, Lamar Advertising Company issued $287,500 2 7/8% Convertible
Notes due 2010. The net proceeds from these notes together with additional cash
were used to redeem all of Lamar Advertising Company's outstanding 5 1/4%
convertible notes due 2006 in aggregate principal amount of approximately
$287,500 on July 16, 2003 for a redemption price equal to 103.0% of the
principal amount of notes. In connection with this offering, Lamar Media paid
dividends to Lamar Advertising Company in the amount of $15,813 to fund the
additional cash necessary for Lamar Advertising Company to complete this
transaction.
-12-
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 combined report on Form
10-Q entitled "Note Regarding Forward-Looking Statements" and described in the
2002 Combined Form 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 the Company for the six months and three months ended
June 30, 2003 and 2002. This discussion should be read in conjunction with the
condensed consolidated financial statements of the Company and the related
notes.
OVERVIEW
The Company's net revenues, which represent gross revenues less commissions paid
to advertising agencies that contract for the use of advertising displays on
behalf of advertisers, are derived primarily from the sale of advertising on
outdoor advertising displays owned and operated by the Company.
Since December 31, 2000, the Company has increased the number of outdoor
advertising displays it operates by approximately 13% by completing over 225
strategic acquisitions of outdoor advertising and transit assets for an
aggregate purchase price of approximately $620 million, which included the
issuance of 3,680,559 shares of Lamar Advertising Company Class A common stock
valued at the time of issuance at approximately $135.7 million. The Company has
financed its recent acquisitions and intends to finance its future acquisition
activity from available cash, borrowings under its bank credit agreement and the
issuance of Class A common stock. See "Liquidity and Capital Resources" below.
As a result of acquisitions, the operating performance of individual markets and
of the Company as a whole are not necessarily comparable on a year-to-year
basis. The Company also provides acquisition-adjusted net revenue that includes
adjustments to the 2002 results for acquisitions for the same time frame as
actually owned in 2003. The Company's management believes that this additional
information is useful in evaluating the Company's performance and provides
investors and financial analysts with a better understanding of the Company's
core operating results. In addition, it may be useful to investors when
assessing the Company's period to period results. The Company's presentation of
these measures, however, may not be comparable to similarly titled measures used
by other companies and they should not be used as alternatives to net revenue or
other GAAP measures as indicators of the Company's performance. The Company has
provided a reconciliation of acquisition-adjusted net revenue to reported net
revenue below.
The Company relies on sales of advertising space for its revenues, and its
operating results are therefore affected by general economic conditions, as well
as trends in the advertising industry.
Growth of the Company's business requires expenditures for maintenance and
capitalized costs associated with new billboard displays, logo sign and transit
contracts, and the purchase of real estate and operating equipment. The
following table presents a breakdown of capitalized expenditures for the three
months and six months ended June 30, 2003 and 2002:
Three Months Ended Six Months Ended
June 30, June 30,
(In Thousands) (In Thousands)
------------------ ------------------
2003 2002 2003 2002
------- ------- ------- -------
Billboard $15,121 $13,386 $25,221 $20,846
Logos 1,550 728 4,068 2,130
Transit 221 789 931 2,380
Land and buildings 3,030 4,987 5,919 7,406
PP&E 3,037 2,069 4,628 3,318
------- ------- ------- -------
Total capital expenditures $22,959 $21,959 $40,767 $36,080
======= ======= ======= =======
-13-
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002
Net revenues increased $13.3 million or 3.5% to $392.4 million for the six
months ended June 30, 2003 from $379.1 million for the same period in 2002. This
increase was attributable primarily to (i) an increase in billboard net revenues
of $11.1 million or 3.1%, (ii) a $1.2 million increase in logo sign revenue,
which represents an increase of 6.4% over the prior year, and (iii) a $0.7
million increase in transit revenue, which represents a 19.9% increase over the
prior year.
The increase in billboard net revenues of $11.1 million was due to both
acquisition activity and internal growth while the increase in logo sign revenue
of $1.2 million and transit revenue growth of $0.7 million was generated by
internal growth across various markets within the logo sign and transit
programs. Net revenues for the six months ended June 30, 2003 as compared to
acquisition-adjusted net revenue(1) for the six months ended June 30, 2002,
which includes adjustments for acquisitions for the same time frame as actually
owned in 2003, increased $5.4 million or 1.4% as a result of net revenue
internal growth.
Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $13.8 million or 6.4% to $228.3 million for the six months
ended June 30, 2003 from $214.5 million for the same period in 2002. There was a
$14.4 million increase as a result of additional operating expenses related to
the operations of acquired outdoor advertising assets and increases in
personnel, sign site rent, insurance costs and property taxes. This increase was
offset by a $0.6 million decrease in corporate expenses that is due to the
partial reversal of a charge related to a jury verdict rendered against the
Company discussed below.
In the third quarter of 2002, the Company recorded a charge of $2.3 million
related to a jury verdict rendered in August 2002 against the Company for
compensatory and punitive damages. In May, 2003, the Court ordered a reduction
to the punitive damage award, which was subject to the plaintiff's consent. The
plaintiff rejected the reduced award and the Court ordered a new trial. Based on
legal analysis, management believes the best estimate of the Company's potential
liability related to this claim is currently $1.3 million. The $1.0 million
reduction in the reserve for this liability was recorded as a reduction of
corporate expenses in the second quarter of 2003.
Depreciation and amortization expense increased $0.6 million or 0.4% from $136.5
million for the six months ended June 30, 2002 to $137.1 million for the six
months ended June 30, 2003.
Due to the above factors, operating income decreased $0.5 million to $27.8
million for six months ended June 30, 2003 compared to $28.3 million for the
same period in 2002.
In January 2003, the Company's wholly owned subsidiary, Lamar Media Corp.,
redeemed all of its outstanding 9 5/8% Senior Subordinated Notes due 2006 in
aggregate principal amount of approximately $255.0 million for a redemption
price equal to 103.208% of the principal amount of the notes. In the first
quarter of 2003, the Company recorded approximately $11.2 million as a loss on
extinguishment of debt related to the prepayment of the 9 5/8% Senior
Subordinated Notes due 2006 and the write-off of related debt issuance costs. In
June 2003, Lamar Media Corp., redeemed $100 million in principal amount of its
8 5/8% Senior Subordinated Notes due 2007, for a redemption price equal to
104.313% of the principal amount of the notes. In the second quarter of 2003,
the Company recorded a loss on extinguishment of debt of $5.8 million, related
to this prepayment. Approximately $100 million in aggregate principal amount of
our 8 5/8% notes remain outstanding following this redemption.
Interest expense decreased $7.7 million from $54.0 million for the six months
ended June 30, 2002 to $46.3 million for the six months ended June 30, 2003 as a
result of lower interest rates both on existing and recently refinanced debt.
The decrease in operating income and the loss on extinguishment of debt offset
by the decrease in interest expense described above resulted in a $9.9 million
increase in loss before income taxes and cumulative effect of a change in
accounting principle. The increase in this loss resulted in an increase in the
income tax benefit of $3.6 million for the six months ended June 30, 2003 over
the same period in 2002. The effective tax rate for the six months ended June
30, 2003 is 35.3%.
Due to the adoption of SFAS No. 143, the Company recorded a cumulative effect of
a change in accounting principle, net of tax of $11.7 million.
- ----------
(1) Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net Revenue:
Six months ended June 30,
(in thousands)
------------------------
2003 2002
-------- --------
Reported net revenue $392,399 $379,067
Acquisition net revenue - 7,956
-------- --------
Acquisition-adjusted net revenue $392,399 $387,023
======== ========
-14-
As a result of the above factors, the Company recognized a net loss for the six
months ended June 30, 2003 of $34.5 million, as compared to a net loss of $16.5
million for the same period in 2002.
THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002
Net revenues increased $5.7 million or 2.8% to $208.2 million for the three
months ended June 30, 2003 from $202.5 million for the same period in 2002. This
increase was attributable primarily to (i) an increase in billboard net revenues
of $4.9 million or 2.6%, (ii) a $0.6 million increase in logo sign revenue,
which represents an increase of 5.8% over the prior year, and (iii) a $0.1
million increase in transit revenue, which represents a 2.9% increase over the
prior year.
The increase in billboard net revenues of $4.9 million was due to acquisition
activity while the increase in logo sign revenue of $0.6 million and transit
revenue growth of $0.1 million was generated by internal growth across various
markets within the logo sign and transit programs. Net revenues for the three
months ended June 30, 2003 as compared to acquisition-adjusted net revenue(2)
for the three months ended June 30, 2002, which includes adjustments for
acquisitions for the same time frame as actually owned in 2003 were even.
Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $7.9 million or 7.5% to $113.9 million for the three months
ended June 30, 2003 from $106.0 million for the same period in 2002. There was a
$8.6 million increase as a result of additional operating expenses related to
the operations of acquired outdoor advertising assets and increases in
personnel, sign site rent, insurance costs and property taxes. This increase was
offset by a $0.7 million decrease in corporate expenses that is due to the
partial reversal of a charge related to a jury verdict rendered against the
Company discussed below.
In the third quarter of 2002, the Company recorded a charge of $2.3 million
related to a jury verdict rendered in August 2002 against the Company for
compensatory and punitive damages. In May, 2003, the Court ordered a reduction
to the punitive damage award, which was subject to the plaintiff's consent. The
plaintiff rejected the reduced award and the Court ordered a new trial. Based on
legal analysis, management believes the best estimate of the Company's potential
liability related to this claim is currently $1.3 million. The $1.0 million
reduction in the reserve for this liability was recorded as a reduction of
corporate expenses in the second quarter of 2003.
Depreciation and amortization expense increased $0.2 million from $69.4 million
for the three months ended June 30, 2002 to $69.6 million for the three months
ended June 30, 2003.
Due to the above factors, operating income decreased $1.7 million to $25.5
million for three months ended June 30, 2003 compared to $27.2 million for the
same period in 2002.
In June 2003, Lamar Media Corp., redeemed $100 million in principal amount of
its 8 5/8% Senior Subordinated Notes due 2007, for a redemption price equal to
104.313% of the principal amount of the notes. In the second quarter of 2003,
the Company recorded a loss on extinguishment of debt of $5.8 million related to
this prepayment. Approximately $100 million in aggregate principal amount of
Lamar Media's 8 5/8% notes remain outstanding following this redemption.
Interest expense decreased $4.6 million from $27.2 million for the three months
ended June 30, 2002 to $22.6 million for the three months ended June 30, 2003 as
a result of lower interest rates both on existing and recently refinanced debt.
The decrease in operating income and the loss on extinguishment of debt offset
by the decrease in interest expense described above resulted in a $2.9 million
increase in loss before income taxes and cumulative effect of a change in
accounting principle. The increase in this loss, resulted in an increase in the
income tax benefit of $1.0 million for the three months ended June 30, 2003 over
the same period in 2002. The effective tax rate for the three months ended June
30, 2003 is 20.5%.
As a result of the above factors, the Company recognized a net loss for the
three months ended June 30, 2003 of $2.2 million, as compared to a net loss of
$0.3 million for the same period in 2002.
- ----------
(2) Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net Revenue:
Three months ended June 30,
(in thousands)
--------------------------
2003 2002
-------- --------
Reported net revenue $208,178 $202,529
Acquisition net revenue - 5,547
-------- --------
Acquisition-adjusted net revenue $208,178 $208,076
======== ========
-15-
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and borrowings under its bank credit facility. The
Company's wholly owned subsidiary, Lamar Media Corp., is the borrower under the
bank credit facility and maintains all corporate cash balances. Any cash
requirements of Lamar Advertising, therefore, must be funded by distributions
from Lamar Media. The Company's acquisitions have been financed primarily with
funds borrowed under its bank credit facility and issuance of its Class A common
stock and debt securities. If an acquisition is made by one of the Company's
subsidiaries using the Company's Class A common stock, a permanent contribution
of additional paid-in-capital of Class A common stock is distributed to that
subsidiary.
The Company's net cash provided by operating activities increased to $98.3
million for the six months ended June 30, 2003 due primarily to an increase in
adjustments to reconcile net loss to net cash provided by operating activities
of $19.7 million, which primarily includes the loss on early extinguishment of
debt of $16.9 million and the cumulative effect of a change in accounting
principle of $11.7 million offset by an increase in deferred income tax benefit
of $8.4 million. This increase was offset by an increase in net loss of $18.0
million. In addition as compared to the same period in 2002, there were
decreases in the change in receivables of $7.8 million, in other assets of $1.2
million and in other liabilities of $1.7 million, and increases in the change in
trade accounts payable of $1.1 million and in accrued expenses of $7.4 million.
Net cash used in investing activities increased $51.2 million from $89.9 million
in 2002 to $141.1 million in 2003 primarily due to the increase in merger and
acquisition activity by the Company in 2003 of $47.3 million, and a $4.7 million
increase in capital expenditures. Net cash provided by financing activities
increased to $37.9 million for the six months ended June 30, 2003 due to a
$408.3 million increase in net proceeds from note offerings and new note payable
which is due to the issuance of Lamar Advertising's $287.5 million 2 7/8%
Convertible Notes and Lamar Media's issuance of $125 million 7 1/4% Senior
Subordinated Notes and cash from deposits for debt extinguishment of $266.7
million offset by a $337.7 million increase in principal payments of long-term
debt due primarily to the redemption of Lamar Media's 9 5/8% Senior Subordinated
Notes and 8 5/8% Senior Subordinated Notes, and a $301.2 million increase in
deposits for debt extinguishment. In addition, there was a $7.4 million decrease
in proceeds from issuance of the Company's Class A common stock, a $8.0 million
increase in debt issuance costs and a $20 million decrease in borrowings from
credit agreements.
During the six months ended June 30, 2003, the Company financed its acquisition
activity of approximately $153.4 million with borrowings under Lamar Media's
revolving credit facility and available cash on hand totaling $102.8 million as
well as the issuance of 1,550,095 shares of the Company's Class A common stock
valued at the time of issuance at approximately $50.6 million. As of June 30,
2003, the Company had $179.6 million available under its revolving credit
facility.
The Company's wholly owned subsidiary, Lamar Media Corp., replaced its old bank
credit facility with a new bank credit facility on March 7, 2003. The new bank
credit facility is comprised of a $225.0 million revolving bank credit facility
and a $975.0 million term facility. The new bank credit facility also includes a
$500.0 million incremental facility, which permits Lamar Media to request that
its lenders enter into commitments to make additional term loans to it, up to a
maximum aggregate amount of $500.0 million. The lenders have no obligation to
make additional term loans to Lamar Media under the incremental facility, but
may enter into such commitments in their sole discretion.
In the future, Lamar Media has principal reduction obligations and revolver
commitment reductions under its new bank credit agreement. In addition it has
fixed commercial commitments. These commitments are detailed as follows:
Payments Due by Period
(in millions)
----------------------------------------
Contractual Balance at Less than 1 - 3 4 - 5 After 5
Obligations June 30, 2003 1 Year Years Years Years
- ----------- ------------- --------- ------ ----- -------
Long-Term Debt $ 2,093.5 292.3 93.5 257.9 1,449.8
Billboard site and building leases $ 820.2 111.5 177.0 134.9 396.8
---------- ----- ----- ----- -------
Total Payments due $ 2,913.7 403.8 270.5 392.8 1,846.6
========== ===== ===== ===== =======
Amount of Commitment
Expiration Per Period
--------------------------------------
Other Commercial Total Amount Less than 1 - 3 4 - 5 After 5
Commitments Committed 1 Year Years Years Years
- ---------------- ------------ --------- ----- ----- -------
Revolving Bank Facility* $ 225.0 -- -- -- 225.0
-------- --- --- --- -----
Standby Letters of Credit $ 5.4 1.1 4.3 -- --
======== === === === =====
* Lamar Media had $40 million outstanding at June 30, 2003.
-16-
In January 2003, Lamar Media redeemed all of its outstanding 9 5/8% Senior
Subordinated Notes due 2006 in aggregate principal amount of approximately $255
million for a redemption price equal to 103.208% of the principal amount of the
notes. As a result of this redemption, the Company recorded a loss on
extinguishment of debt of $11.2 million which consisted of a prepayment penalty
of $8.2 million and associated debt issuance costs of approximately $3.0
million.
On June 16, 2003, the Company issued $287.5 million of 2 7/8% Convertible Notes
due 2010. The net proceeds from the issuance of these notes, together with
additional cash, were used on July 16, 2003 to redeem all of the Company's
outstanding 5 1/4% Convertible Notes due 2006 in aggregate principle amount of
approximately $287.5 million for a redemption price equal to 103.0% of the
principle amount of the notes.
In June 2003, the Company's wholly owned subsidiary, Lamar Media Corp., called
for redemption $100 million of its $200 million 8 5/8% Senior Subordinated Notes
due 2007. The redemption was funded by the issuance on June 12, 2003 of a $125
million add on to its $260 million 7 1/4% Notes due 2013 issued in December
2002. The issue price of the $125 million 7 1/4% Notes was 103.661% which yields
an effective rate of 6 5/8%. The redemption price of the $100 million 8 5/8%
senior subordinated notes was equal to 104.313% of the principal amount of the
notes. As a result of this redemption, the Company recorded a loss on
extinguishment of debt of $5.8 million which consisted of a prepayment penalty
of $4.3 million and associated debt issuance costs of approximately $1.5
million.
Currently Lamar Media has outstanding approximately $100.0 million 8 5/8% Senior
Subordinated Notes due 2007 and $385.0 million 7 1/4% Senior Subordinated Notes
due 2013 issued in December 2002 and June 2003. The indentures relating to Lamar
Media's outstanding notes restrict its ability to incur indebtedness other than:
o up to $1.2 billion of indebtedness under its bank credit facility;
o currently outstanding indebtedness or debt incurred to refinance
outstanding debt;
o inter-company debt between Lamar Media and its subsidiaries or between
subsidiaries; and
o certain other debt incurred in the ordinary course of business
(provided that all of the above ranks junior in right of payment to
the notes that has a maturity or mandatory sinking fund payment prior
to the maturity of the notes).
Lamar Media is required to comply with certain covenants and restrictions under
its bank credit agreement. If the Company fails to comply with these tests, the
payments set forth in the above table may be accelerated. At June 30, 2003 and
currently Lamar Media is in compliance with all such tests.
Lamar Media cannot exceed the following financial ratios under its bank credit
facility:
o a total debt ratio, defined as total consolidated debt to EBITDA, as
defined below, for the most recent four fiscal quarters, of 6.00 to 1
(through December 30, 2004) and 5.75 to 1 (after December 30, 2004); and
o a senior debt ratio, defined as total consolidated senior debt to EBITDA,
as defined below, for the most recent four fiscal quarters, of 4.00 to 1
(through December 30, 2004) and 3.75 to 1 (after December 30, 2004).
In addition, the bank credit facility requires that Lamar Media must maintain
the following financial ratios:
o an interest coverage ratio defined as EBITDA as (defined below) for the
most recent four fiscal quarters to total consolidated accrued interest
expense for that period, of at least 2.25 to 1; and
o a fixed charges coverage ratio, defined as the ratio of EBITDA (as defined
below) for the most recent four fiscal quarters to (1) the total payments
of principal and interest on debt for such period (2) capital expenditures
made during such period and (3) income and franchise tax payments made
during such period, of at least 1.05 to 1.
As defined under Lamar Media's bank credit facility, EBITDA is for any period,
operating income for Lamar Media and its restricted subsidiaries (determined on
a consolidated basis without duplication in accordance with GAAP) for such
period (calculated before taxes, interest expense, depreciation, amortization
and any other non-cash income or charges accrued for such period and (except to
the extent received or paid in cash by Lamar Media or any of its restricted
subsidiaries) income or loss attributable to equity in affiliates for such
period) excluding any extraordinary and unusual gains or losses during such
period and excluding the proceeds of any casualty events whereby insurance or
other proceeds are received and certain dispositions not in the ordinary course.
Any dividend payment made by Lamar Media or any of its restricted subsidiaries
to Lamar Advertising Company
-17-
during any period to enable Lamar Advertising Company to pay certain qualified
expenses on behalf of Lamar Media and its subsidiaries, shall be treated as
operating expenses of Lamar Media for the purposes of calculating EBITDA for
such period. EBITDA under the bank credit agreement is also adjusted to reflect
certain acquisitions or dispositions as if such acquisitions or dispositions
were made on the first day of such period.
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 2003. All debt obligations are on
the Company's balance sheet.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", ("Statement 146") which addresses financial
accounting and reporting for costs associated with exit or disposal activities.
It nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The principle difference between Statement
146 and Issue 94-3 relates to the recognition of a liability for a cost
associated with an exit or disposal activity. Statement 146 requires that a
liability be recognized for those costs only when the liability is incurred,
that is, when it meets the definition of a liability in the FASB's conceptual
framework. In contrast, under Issue 94-3, a company recognized a liability for
an exit cost when it committed to an exit plan. Statement 146 also establishes
fair value as the objective for initial measurement of liabilities related to
exit or disposal activities. The Statement is effective for exit or disposal
activities that are initiated after December 31, 2002 and did not have an impact
on the Company's consolidated financial statements. The Company adopted the
provisions related to Statement No. 146 as of January 1, 2003.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34". This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after December 31, 2002 and did not
have a material effect on the Company's consolidated financial statements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51." This
interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. The application of the Interpretation is not
expected to have an effect on the Company's consolidated financial statements as
the Company has no variable interest entities. The Interpretation requires
certain disclosures in financial statements issued after January 31, 2003 if it
is reasonably possible that the Company will consolidate or disclose information
about variable interest entities.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company is
required to adopt SFAS No. 149 for all contracts entered into or modified after
June 30, 2003, except for certain hedging relationships designated after June
30, 2003 pursuant to the guidance in SFAS No. 149. The Company does not expect
adoption to have an impact on its consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." Statement 150
affects the issuer's accounting for three types of freestanding financial
instruments. One type is mandatory redeemable shares, which the issuing company
is obligated to buy back in exchange for cash or other assets. A second type,
which includes put options and forward purchase contracts, involves instruments
that do or may require the issuer to buy back some of its shares in exchange for
cash or other assets. The third type of instruments that are liabilities under
this Statement is obligations that can be settled with shares, the monetary
value of which is fixed, tied solely or predominately to a variable such as a
market index, or varies inversely with the value of the issuers' shares.
Statement 150 does not apply to features embedded in a financial instrument that
is not a derivative in its entirety. Most of the guidance in Statement 150 is
effective for all financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. Because the Company does not have any financial
instruments covered by SFAS No. 150 outstanding, its adoption is not expected to
materially impact the Company's financial position, cash flows or results of
operations.
-18-
LAMAR MEDIA CORP.
SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002
Net revenues increased $13.3 million or 3.5% to $392.4 million for the six
months ended June 30, 2003 from $379.1 million for the same period in 2002. This
increase was attributable primarily to (i) an increase in billboard net revenues
of $11.1 million or 3.1%, (ii) a $1.2 million increase in logo sign revenue,
which represents an increase of 6.4% over the prior year, and (iii) a $0.7
million increase in transit revenue, which represents a 19.9% increase over the
prior year.
The increase in billboard net revenues of $11.1 million was due to both
acquisition activity and internal growth while the increase in logo sign revenue
of $1.2 million and transit revenue growth of $0.7 million was generated by
internal growth across various markets within the logo sign and transit
programs. Net revenues for the six months ended June 30, 2003 as compared to
acquisition-adjusted net revenue(3) for the six months ended June 30, 2002,
which includes adjustments for acquisitions for the same time frame as actually
owned in 2003, increased $5.4 million or 1.4% as a result of net revenue
internal growth.
Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $13.9 million or 6.5% to $228.2 million for the six months
ended June 30, 2003 from $214.3 million for the same period in 2002. There was a
$14.4 million increase as a result of additional operating expenses related to
the operations of acquired outdoor advertising assets and increases in
personnel, sign site rent, insurance costs and property taxes. This increase was
offset by a $0.6 million decrease in corporate expenses that is due to the
partial reversal of a charge related to a jury verdict rendered against Lamar
Advertising Company discussed below.
In the third quarter of 2002, Lamar Media recorded a charge of $2.3 million
related to a jury verdict rendered in August 2002 against Lamar Advertising
Company for compensatory and punitive damages. In May, 2003, the Court ordered a
reduction to the punitive damage award, which was subject to the plaintiff's
consent. The plaintiff rejected the reduced award and the Court ordered a new
trial. Based on legal analysis, management believes the best estimate of the
Company's potential liability related to this claim is currently $1.3 million.
The $1.0 million reduction in the reserve for this liability was recorded as a
reduction of corporate expenses in the second quarter of 2003.
Due to the above factors, operating income decreased $0.3 million to $29.7
million for the six months ended June 30, 2003 compared to $30.0 million for the
same period in 2002.
In January 2003, Lamar Media redeemed all of its outstanding 9 5/8% Senior
Subordinated Notes due 2006 in aggregate principal amount of approximately
$255.0 million for a redemption price equal to 103.208% of the principal amount
of the notes. In the first quarter of 2003, Lamar Media recorded approximately
$11.2 million as a loss on extinguishment of debt related to the prepayment of
the 9 5/8% Senior Subordinated Notes due 2006 and the write-off of related debt
issuance costs.
In June 2003, Lamar Media redeemed $100 million in principal amount of its
8 5/8% Senior Subordinated Notes due 2007, for a redemption price equal to
104.313% of the principal amount of the notes. In the second quarter of 2003,
Lamar Media recorded a loss on extinguishment of debt of $5.8 million, related
to this prepayment. Approximately $100 million in aggregate principal amount of
our 8 5/8% notes remain outstanding following this redemption.
Interest expense decreased $8.0 million from $46.5 million for the six months
ended June 30, 2002 to $38.5 million for the six months ended June 30, 2003 as a
result of lower interest rates both on existing and recently refinanced debt.
The decrease in operating income, the loss on extinguishment of debt offset by
the decrease in interest expense described above resulted in a $9.4 million
increase in loss before income taxes and cumulative effect of change in
accounting principle. The increase in this loss, resulted in an increase in the
income tax benefit of $3.4 million for the six months ended June 30, 2003 over
the same period in 2002. The effective tax rate for the six months ended June
30, 2003 is 33.9%.
Due to the adoption of SFAS 143, Lamar Media recorded a cumulative effect of a
change in accounting principle, net of tax of $11.7 million.
As a result of the above factors, Lamar Media recognized a net loss for the six
months ended June 30, 2003 of $28.5 million, as compared to a net loss of $10.8
million for the same period in 2002.
- ----------
(3) Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net Revenue:
Six months ended June 30,
--------------------------
(in thousands)
2003 2002
-------- --------
Reported net revenue $392,399 $379,067
Acquisition net revenue - 7,956
-------- --------
Acquisition-adjusted net revenue $392,399 $387,023
======== ========
-19-
THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002
Net revenues increased $5.7 million or 2.8% to $208.2 million for the three
months ended June 30, 2003 from $202.5 million for the same period in 2002. This
increase was attributable primarily to (i) an increase in billboard net revenues
of $4.9 million or 2.6%, (ii) a $0.6 million increase in logo sign revenue,
which represents an increase of 5.8% over the prior year, and (iii) a $0.1
million increase in transit revenue, which represents a 2.9% increase over the
prior year.
The increase in billboard net revenues of $4.9 million was due to acquisition
activity while the increase in logo sign revenue of $0.6 million and transit
revenue growth of $0.1 million was generated by internal growth across various
markets within the logo sign and transit programs. Net revenues for the three
months ended June 30, 2003 as compared to acquisition-adjusted net revenue(3)
for the three months ended June 30, 2002, which includes adjustments for
acquisitions for the same time frame as actually owned in 2003 were even.
Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $7.8 million or 7.4% to $113.8 million for the three months
ended June 30, 2003 from $106.0 million for the same period in 2002. There was a
$8.6 million increase as a result of additional operating expenses related to
the operations of acquired outdoor advertising assets and increases in
personnel, sign site rent, insurance costs and property taxes. This increase was
offset by a $0.8 million decrease in corporate overhead expenses that is due to
the reversal of a jury verdict rendered against Lamar Advertising discussed
below.
In the third quarter of 2002, Lamar Media recorded a charge of $2.3 million
related to a jury verdict rendered in August 2002 against Lamar Advertising
Company for compensatory and punitive damages. In May, 2003, the Court ordered a
reduction to the punitive damage award, which was subject to the plaintiff's
consent. The plaintiff rejected the reduced award and the Court ordered a new
trial. Based on legal analysis, management believes the best estimate of the
Company's potential liability related to this claim is currently $1.3 million.
The $1.0 million reduction in the reserve for this liability was recorded as a
reduction of corporate expenses in the second quarter of 2003.
Due to the above factors, operating income decreased $1.5 million to $26.5
million for three months ended June 30, 2003 compared to $28.0 million for the
same period in 2002.
In June 2003, Lamar Media redeemed $100 million in principal amount of its
8 5/8% Senior Subordinated Notes due 2007, for a redemption price equal to
104.313% of the principal amount of the notes. In the second quarter of 2003,
Lamar Media recorded a loss on extinguishment of debt of $5.8 million, related
to this prepayment. Approximately $100 million in aggregate principal amount of
our 8 5/8% notes remain outstanding following this redemption.
Interest expense decreased $5.0 million from $23.5 million for the three months
ended June 30, 2002 to $18.5 million for the three months ended June 30, 2003 as
a result of lower interest rates both on existing and recently refinanced debt.
The decrease in operating income and the loss on extinguishment of debt offset
by the decrease in interest expense described above resulted in a $2.3 million
decrease in income before income taxes and cumulative effect of a change in
accounting principle. As a result of the above factors, the Company recognized
net income for the three months ended June 30, 2003 of $0.9 million, as compared
to net income of $2.5 million for the same period in 2002.
- ----------
(1) Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net Revenue:
Three months ended June 30,
--------------------------
(in thousands)
2003 2002
-------- --------
Reported net revenue $208,178 $202,529
Acquisition net revenue - 5,547
-------- --------
Acquisition-adjusted net revenue $208,178 $208,076
======== ========
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
LAMAR ADVERTISING COMPANY AND LAMAR MEDIA CORP.
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 information below summarizes the Company's interest rate risk
associated with its principal variable rate debt instruments outstanding at June
30, 2003.
Loans under Lamar Media Corp.'s bank credit agreement bear interest at variable
rates equal to the JPMorgan Chase Prime Rate or LIBOR plus the applicable
margin. Because the JPMorgan Chase Prime Rate or LIBOR may increase or decrease
at any time, the Company is 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 net income.
At June 30, 2003, there was $1,015.0 million of aggregate indebtedness
outstanding under the bank credit agreement, or approximately 56.4% of the
Company's outstanding long-term debt on that date, bearing interest at variable
rates. The aggregate interest expense for 2003 with respect to borrowings under
the bank credit agreement was approximately $17.9 million, and the weighted
average interest rate applicable to borrowings under this credit facility during
2003 was 3.5%. Assuming that the weighted average interest rate was 200-basis
points higher (that is 5.5% rather than 3.5%), then the Company's 2003 interest
expense would have been approximately $9.9 million higher resulting in a $6.0
million increase in the Company's 2003 net loss.
The Company has mitigated the interest rate risk resulting from its variable
interest rate long-term debt instruments by 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.
ITEM 4. CONTROLS AND PROCEDURES.
a) Evaluation of disclosure controls and procedures.
The Company's and Lamar Media's management, with the participation of the
principal executive officer and principal financial officer of the Company and
Lamar Media, have evaluated the effectiveness of the design and operation of the
Company's and Lamar Media's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended) as of the end of the period covered by this quarterly report. Based on
this evaluation, the principal executive officer and principal financial officer
of the Company and Lamar Media concluded that these disclosure controls and
procedures are effective and designed to ensure that the information required to
be disclosed in the Company's and Lamar Media's reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the requisite time periods.
b) Changes in internal controls.
There was no change in the internal control over financial reporting (as defined
in Rules 13a-15(f) and 15d - 15(f) under the Securities Exchange Act of 1934,
as amended) of the Company and Lamar Media identified in connection with the
evaluation of the Company's and Lamar Media's internal control performed during
the last fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's and Lamar Media's internal control over
financial reporting.
-21-
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of stockholders on Thursday, May 22, 2003.
Kevin P. Reilly, Jr., Charles W. Lamar, III, Anna Reilly Cullinan, Stephen P.
Mumblow, John Maxwell Hamilton and Thomas Reifenheiser were elected as directors
of the Company, each to hold office until the next annual meeting of
stockholders or until his or her successor has been elected and qualified.
The results of voting at the Company's annual meeting of stockholders were as
follows:
PROPOSAL NO. 1 (ELECTION OF DIRECTORS)
Votes Votes
Nominee For Withheld
--------------------- ----------- ----------
Kevin P. Reilly, Jr. 226,091,065 14,830,915
Charles W. Lamar, III 239,622,325 1,299,655
Anna Reilly Cullinan 226,083,555 14,838,425
Stephen P. Mumblow 239,839,815 1,082,165
John Maxwell Hamilton 239,839,815 1,082,165
Thomas Reifenheiser 239,839,815 1,082,165
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
On May 7, 2003, Lamar Advertising Company filed a Current Report on Form 8-K in
order to furnish to the Commission its earnings press release for the quarter
ended March 31, 2003.
On June 2, 2003 and June 5, 2003. Lamar Media Corp. and Lamar Advertising
Company, respectively, each filed a Current Report on Form 8-K regarding the
pricing of Lamar Media Corp.'s institutional private placement f $125,000,000 of
senior subordinated notes, which closed on June 12, 2003, and filing the related
press releases as exhibits thereto.
On June 16, 2003, Lamar Advertising Company filed a Current Report on Form 8-K
relating to the sale of $287,500,000 of convertible notes through J.P. Morgan
Securities Inc. and Morgan Stanley & Co. Incorporated as underwriters and filed
certain exhibits for incorporation into its previously filed Registration
Statement on Form S-3.
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: August 12, 2003 BY: /s/ Keith A. Istre
----------------------
Chief Financial and Accounting Officer and Treasurer
LAMAR MEDIA CORP.
DATED: August 12, 2003 BY: /s/ Keith A. Istre
----------------------
Chief Financial and Accounting Officer and Treasurer
-22-
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Merger dated as of July 20, 1999 among Lamar
Media Corp., Lamar New Holding Co., and Lamar Holdings Merge Co.
Previously filed as exhibit 2.1 to the Company's Current Report on
Form 8-K filed on July 22, 1999 (File No. 0-30242) and incorporated
herein by reference.
3.1 Certificate of Incorporation of Lamar New Holding Co. Previously
filed as exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1999 (File No. 0-20833) filed on August
16, 1999 and incorporated herein by reference.
3.2 Certificate of Amendment of Certificate of Incorporation of Lamar New
Holding Co. (whereby the name of Lamar New Holding Co. was changed to
Lamar Advertising Company). Previously filed as exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1999 (File No. 0-20833) filed on August 16, 1999 and incorporated
herein by reference.
3.3 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 December 23, 2002 among
Lamar Media Corp., certain of its subsidiaries and Wachovia Bank of
Delaware, National Association, as Trustee, dated June 9, 2003.
Previously filed as Exhibit 4.31 to Lamar Media's Registration
Statement on Form S-4 (File No. 333-107427) filed on July 29, 2003
and incorporated herein by reference.
4.2 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 June 9, 2003. Previously
filed as Exhibit 4.30 to Lamar Media's Registration Statement on Form
S-4 (File No. 333-107427) filed on July 29, 2003 and incorporated
herein by reference.
4.3 Registration Rights Agreement dated as of June 12, 2003 among Lamar
Media Corp., the guarantors listed on Schedule 1 thereto and J.P.
Morgan Securities Inc., Wachovia Securities, Inc., Goldman, Sachs &
Co. And Morgan Stanley & Co. Incorporated. Previously filed as
Exhibit 4.29 to Lamar Media's Registration Statement on Form S-4
(File No. 333-107427) filed on July 29, 2003 and incorporated herein
by reference.
4.4 Indenture dated June 16, 2003 between Lamar Advertising Company and
Wachovia Bank of Delaware, National Association, as Trustee. Filed
herewith.
4.5 First Supplemental Indenture dated June 16, 2003 between Lamar
Advertising Company and Wachovia Bank of Delaware, National
Association, as Trustee. Filed herewith.
31.1 Certification of the Chief Executive Officer of Lamar Advertising
Company and Lamar Media Corp. pursuant to Securities Exchange Act
Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of
the Sarbanes- Oxley Act of 2002. Filed herewith.
-23-
31.2. Certification of the Chief Financial Officer of Lamar Advertising
Company and Lamar Media Corp. pursuant to Securities Exchange Act
Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. Filed herewith.
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
-24-