1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1996
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 0-20833
LAMAR ADVERTISING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 72-1205791
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5551 Corporate Blvd., Baton Rouge, LA 70808
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (504) 926-1000
Securities Registered Pursuant To Section 12(b) of the Act:
Senior Subordinated Notes due 2006
Name of Each Exchange on which Registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: Class A Common
Stock, $0.001 par value.
Indicate by check mark whether the 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of January 20, 1997: $281,014,441
The number of shares of the registrant's Class A Common Stock outstanding as of
January 20, 1997: 17,612,565
The number of shares of the registrant's Class B
Common Stock outstanding as of January 20, 1997: 13,716,387
2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the annual meeting of
stockholders to be held March 20, 1997 are incorporated by reference into Part
III of this Form 10-K.
PART I.
ITEM 1. BUSINESS
General
Lamar Advertising Company is one of the largest and most experienced owners and
operators of outdoor advertising structures in the United States. It conducts
a business that has operated under the Lamar name since 1902. As of October
31, 1996, the Company operated approximately 24,000 outdoor advertising
displays in 13 southeastern, midwestern and mid-Atlantic states. After giving
effect to the acquisitions of FKM Advertising Co., Inc. in November 1996 and
Outdoor East L.P. in December 1996, the Company operates approximately 30,000
outdoor advertising displays in 15 states. In each of the Company's primary
markets, the Company believes that it is the only full-service outdoor
advertising company serving such markets. The Company also operates the
largest logo sign business in the United States. Logo signs are erected
pursuant to state-awarded franchises on public rights-of-way near highway exits
and deliver brand name information on available gas, food, lodging and camping
services. As of October 31, 1996, the Company operated logo sign franchises in
15 of 21 states which have a privatized logo sign program. In addition, the
Company was awarded the logo sign franchise for the state of Florida in
November 1996, and in October 1996 was selected to operate a tourism signing
franchise for the province of Ontario, Canada. The Company has also recently
acquired the existing logo sign franchises for the states of Kentucky and
Nevada. As of October 31, 1996, the Company maintained over 18,000 logo sign
structures containing over 51,000 logo advertising displays under these
franchises. The Company has recently expanded into the transit advertising
business through the operation of displays on bus shelters, benches and buses
in eight of its primary markets.
The Company's strategy is to be the leading provider of outdoor advertising in
each of the markets it serves, with an emphasis on markets with a media
industry ranking based on population between 50 and 250. Important elements of
this strategy are the Company's decentralized management structure and its
focus on providing high quality local sales and service. In order to be more
responsive to local market demands, the Company offers a full complement of
outdoor advertising services coupled with local production facilities,
management and account executives through its local offices. While maintaining
its local focus, the Company seeks to expand it operations within existing and
contiguous markets. The Company also pursues expansion opportunities,
including acquisitions, in additional markets. In the logo sign business, the
Company's strategy is to maintain its position as the largest operator of logo
signs in the U.S. by expanding through the addition of state logo franchises as
they are awarded and through
3
possible acquisitions. The Company may also pursue expansion opportunities in
transit and other out-of-home media which the Company believes will enable it
to leverage its management skills and market position.
Management believes that operating in small to medium-sized markets provides
the Company with certain advantages, including a diverse and reliable mix of
local advertisers, geographic diversification and an ability to package
inventory effectively. Local advertising constituted approximately 80% of the
Company's outdoor advertising net revenues in fiscal 1996, which management
believes is higher than the industry average.
MARKETS
As of October 31, 1996, the Company's 35 primary outdoor advertising markets
were:
Mobile, Alabama Lake Charles, Louisiana
Montgomery, Alabama Monroe, Louisiana
Colorado Springs, Colorado Shreveport, Louisiana
Daytona Beach, Florida Gulfport, Mississippi
Fort Myers, Florida Jackson, Mississippi
Fort Walton, Florida Dayton, Ohio
Lakeland, Florida Clarksville, Tennessee
Panama City, Florida Knoxville, Tennessee
Pensacola, Florida Nashville, Tennessee
Tallahassee, Florida Beaumont, Texas
Albany, Georgia Brownsville, Texas
Augusta, Georgia Corpus Christi, Texas
Savannah, Georgia Laredo, Texas
Lexington, Kentucky Wichita Falls, Texas
Alexandria, Louisiana Richmond, Virginia
Baton Rouge, Louisiana Roanoke, Virginia
Houma, Louisiana Wheeling, West Virginia
Lafayette, Louisiana
In addition, the Company acquired outdoor advertising properties in Youngstown,
Ohio and along interstate highways throughout the state of Pennsylvania through
the acquisition of FKM Advertising Company, Inc. in November 1996 and
additional properties in seven markets in the states of Florida, Georgia, North
Carolina, South Carolina, Virginia and West Virginia through the acquisition of
Outdoor East, L.P. in December 1996.
As of October 31, 1996, the Company operated the logo sign franchises for the
following states:
Georgia Missouri South Carolina
Kansas Nebraska Tennessee
Michigan New Jersey Texas
Minnesota Ohio Utah
Mississippi Oklahoma Virginia
4
Since October 31, 1996, the Company has been awarded the logo sign franchise
for the state of Florida, acquired the logo sign franchises for the states of
Kentucky and Nevada, and has been awarded the tourism signing franchise for the
province of Ontario, Canada.
BUSINESS STRATEGY
Outdoor Advertising
The Company's overall business strategy is to be the leading provider of
outdoor advertising in each of the markets it serves, with an emphasis on
markets with a population ranking between 50 and 250. This strategy includes
the following elements:
Operating Strategy
Small and Medium-Sized Market Focus. The Company's leading position in each of
its primary outdoor advertising markets is a result of a successful operating
strategy dedicated to growth and acquisitions primarily within the target range
of markets having a population ranking between 50 and 250. Management believes
that operating in these markets provides certain advantages, including the
benefits of a diverse and reliable mix of local advertisers, geographic
diversification and an ability to package inventory effectively.
High Quality Local Sales and Service. The Company identifies and closely
monitors the needs of its customers and seeks to provide them with quality
advertising products at a lower cost than competitive media. The Company
believes it has a reputation for providing excellent customer service and
quality outdoor advertising space and displays.
At October 31, 1996 the Company's 120-person sales force was supported by 35
full service offices. In each primary market, the Company has recruited and
trained a skilled sales force, placing an emphasis on market research and use
of artistic creativity. Each salesperson is compensated under a
performance-based compensation system and supervised by a local sales manager
executing a coordinated marketing plan. Art departments assist local customers
in the development and production of creative, effective advertisements. The
Company believes repeat sales are evidence that the Company delivers quality
products and services.
Centralized Control/Decentralized Management. Management believes that, in its
primary markets, the Company is the only full-service outdoor advertising
company offering a full complement of outdoor advertising services coupling
with local production facilities, management and account executives. Local
offices operate in defined geographic areas and function essentially as
independent business units, consistent with senior management's philosophy that
a decentralized organization is more responsive to particular local market
demands.
5
The Company maintains centralized accounting and financial control over its
local operations, but local managers are responsible for the day-to-day
operations in each local market and are compensated according to that market's
financial performance. Each local manager reports to one of five regional
managers who in turn report to the Company's Chief Executive Officer.
Management believes empowering local management and sales personnel to respond
to market conditions has been a major factor in the Company's success.
Effective Inventory Management. The Company believes that the local presence
of sales personnel contributes to the Company's ability to increase occupancy
rates by attracting and servicing local customers. Additionally, a national
sales office at corporate headquarters allows the Company to package inventory
effectively to take advantage of national advertising campaigns in the
Company's markets. The Company's inventory is managed by state-of-the-art
mapping, charting and accounting software.
GROWTH STRATEGY
Internal Growth. Within its existing markets, the Company enhances revenue and
cash flow growth by employing highly targeted local marketing efforts to
improve display occupancy rates and by selectively increasing advertising
rates. This strategy is facilitated through its local sales and service
offices which allow management to respond quickly to the demands of its local
customer base. In addition, the Company routinely invests in upgrading its
existing structures and constructing new display faces in order to provide
quality service to its current customers and to attract new advertisers.
Acquisitions. Aggressive internal growth is enhanced by focused acquisitions
in small to medium-sized markets, resulting in increased operating
efficiencies, greater geographic diversification and increased market
penetration. The Company has demonstrated its ability to grow successfully
through acquisitions, having completed over 80 acquisitions since 1983. In
addition to acquiring positions in new markets, the Company purchases smaller
outdoor advertising properties within existing or contiguous markets.
Acquisitions offer opportunities for inter-market cross-selling and the
opportunity to centralize and combine accounting and administrative functions,
thereby achieving economies of scale.
The Company believes that there will be future opportunities for implementing
the Company's acquisition strategy given the industry's fragmentation and
current consolidation trends. Additionally, the small to medium sized markets
which fit the Company's growth strategy offer a large number of potential
acquisition opportunities.
6
Logo Signs
The Company entered the business of logo sign advertising in 1988. The Company
is now the largest provider of logo sign services in the United States
operating 18 of the 22 privatized state logo sign franchises awarded to date.
The Company's strategy is to be the leading logo sign provider in the country.
The Company was also selected to operate the tourism signing franchise for the
province of Ontario, Canada in October 1996.
Adopting many of the decentralized operational strategies of the outdoor
advertising division, the Company's logo sign division maintains contacts and
local sales offices in each of the states in which it operates. Relationships
with customers are developed and maintained at the state level; accounting, MIS
and certain administrative functions are centralized at the Company's
headquarters.
In competing for state-awarded logo sign franchises, the Company seeks to form
strategic alliances with premier signing contractors in order to present to
state highway departments the combined benefits of entities with substantial
local presence and national resources. As the industry leader, the Company has
gained significant operating experience and compiled a database of information
it believes is unequaled in this industry. The Company shares its knowledge
and database information with state highway departments initiating new logo
sign programs, and believes this interaction provides significant advantages
when seeking new logo sign franchises.
After securing a franchise, the Company generally contracts with an independent
construction firm for the erection and maintenance of the logo sign structures
in order to avoid the expense of staffing and maintaining a construction
presence. The Company then processes orders for logo sign services through its
corporate staff and a small sales force in the state.
The Company believes its market-leading position in the logo sign industry will
continue to increase as additional states privatize their logo sign programs
and recognize the track record and core competency of the Company in building
and servicing logo sign programs. The Company plans to pursue additional logo
sign franchises, through both new franchise awards and, possibly, the
acquisition of other logo sign franchise operators. Logo sign opportunities
arise periodically, both from states initiating new logo sign programs and
states converting from government owned and operated programs to privately
owned and operated programs. Furthermore, the Company plans to pursue tourism
signing programs in Canada and is seeking to expand into other state-authorized
signage programs, such as those involving directional signs providing tourist
information.
Transit and Other
The Company has recently expanded into the transit advertising business through
the operation of displays on bus shelters, benches
7
and buses in eight of its primary markets. The Company plans to continue
pursuing transit advertising opportunities that arise in its primary markets
and to expand into other markets.
With the growth in wireless communication, particularly the build- out of
personal communications services systems following the recent FCC allocation of
radio spectrum, the Company is exploring ways to realize additional revenue by
contracting with communications providers for use of the Company's billboard
structures to attach transmission and reception devices. The Company has
agreements with two of the largest potential wireless communication service
providers regarding possible future use of its billboards.
COMPANY OPERATIONS
Outdoor Advertising
Sales and Service
The Company conducts its outdoor advertising operations through its 35 local
offices. Local offices operate in defined geographic areas and function
essentially as independent business units, consistent with senior management's
philosophy that a decentralized organization is more responsive to particular
local market demands and provides greater incentives to employees. The
Company's management policy is one of centralized accounting and financial
control coupled with decentralized sales and production. Local managers in
each of the Company's primary markets are responsible for the day-to-day
operations of their outdoor office and are compensated according to the
Company's financial performance in that market. Each local manager reports to
one of five regional mangers who in turn report to the Company's Chief
Executive Officer.
Inventory
The Company operates the following types of outdoor advertising displays:
Bulletins generally are 14 feet high and 48 feet wide (672 square feet) and
consist of panels on which advertising copy is displayed. The advertising copy
is either handpainted onto the panels at the Company's facilities in accordance
with design specifications supplied by the advertiser and attached to the
outdoor advertising structure, or printed with computer-generated graphics on a
single sheet of vinyl that is "wrapped" around the structure. On occasion, to
attract more attention, some of the panels may extend beyond the linear edges
of the display face and may include three- dimensional embellishments. Because
of their greater impact and higher cost, bulletins are usually located on major
highways.
Standardized posters are generally 12 feet high by 25 feet wide (300 square
feet) and are the most common type of billboard.
8
Advertising copy for these posters consists of lithographed or silk-screened
paper sheets supplied by the advertiser that are pasted and applied like
wallpaper to the face of the display, or single sheets of vinyl with
computer-generated advertising copy that are wrapped around the structure.
Standardized posters are concentrated on major traffic arteries.
Junior posters usually are 6 feet high by 12 feet wide (72 square feet).
Displays are prepared and mounted in the same manner as standardized posters,
except that vinyl sheets are not typically used on junior posters. Most junior
posters, because of their smaller size, are concentrated on city streets and
target pedestrian traffic.
For the Company's fiscal year ended October 31, 1996, approximately 57% of the
Company's outdoor advertising net revenues were derived from bulletin sales and
43% from poster sales. Over the same period, bulletin and poster occupancy
averaged approximately 82% and 76%, respectively. The Company regularly donates
unoccupied display space for use by charitable and civic organizations.
The physical structures are owned by the Company and are built on locations the
Company either owns or leases. In each local office one employee typically
performs site leasing activities for the markets served by that office. See
Item 2. - Properties.
Bulletin space is generally sold as individually selected displays which remain
in one location, usually an interstate highway or other main road, for the
duration of the advertising contract. Bulletins may also be sold as part of a
rotary plan where advertising copy is periodically rotated from one location to
another within a particular market. Poster space is generally sold in packages
called "showings," which comprise a given number of displays in a market area.
Posters provide advertisers with access either to a specified percentage of the
general population or to a specific targeted audience. Displays making up a
showing are placed in well-traveled areas and are distributed so as to reach a
wide audience in a particular market.
Production
The Company's production staff in each of its primary markets performs the full
range of activities required to create and install outdoor advertising in all
of its markets. Production work includes creating the advertising copy design
and layout, painting the design or coordinating its printing and installing the
designs on displays. The Company provides its production services to local
advertisers and to advertisers that are not represented by advertising
agencies, since national advertisers represented by advertising agencies often
use preprinted designs that require only installation. The Company's creative
and production personnel typically develop new designs or adopt copy from other
media for use on billboards. The Company's artists also often assist in the
development of marketing presentations, demonstrations and
9
strategies to attract new advertisers.
With the increased use of vinyl and pre-printed advertising copy furnished to
the outdoor advertising company by the advertiser or its agency, outdoor
advertising companies require less labor-intensive production work. In
addition, increased use of vinyl and preprinted copy is also attracting more
customers to the outdoor advertising medium. The Company believes that this
trend over time will reduce operating expenses associated with production
activities.
Categories of Business
The following table sets forth the top ten categories of business from which
the Company derived its outdoor advertising revenues for fiscal 1996 and the
respective percentages of such revenue. These business categories accounted
for approximately 72% of the Company's total outdoor advertising net revenues
in the fiscal year ended October 31, 1996. No one advertiser accounted for
more than 3% of the Company's total outdoor advertising net revenues in that
period.
Percentage Net
Categories Advertising Revenues
- ---------- --------------------
Restaurants 13%
Retailers 11%
Tobacco products 10%
Hotels and motels 7%
Automotive 6%
Hospitals and medical care 6%
Gaming 5%
Amusement - entertainment and sport 5%
Service 5%
Media 4%
---
Total 72%
===
Beginning in 1992, the leading tobacco companies substantially reduced their
domestic advertising expenditures in response to societal and governmental
pressure and other factors. Because tobacco advertisers tend to occupy
displays in highly desirable locations, the Company historically has been able
to attract substitute advertising for space which has become unoccupied as a
result of reduced tobacco product advertisements, and management believes that
the Company will continue to be able to attract such substitute advertising
should tobacco advertisers further reduce their spending in the future.
Logo Signs
The Company is the largest provider of logo sign services in the United States
and operates over 18,000 logo sign structures containing over 51,000 logo
advertising displays. As of October
10
31, 1996, the Company had been awarded exclusive franchises to erect and
operate logo signs in the states of Florida, Georgia, Michigan, Mississippi,
Nebraska, New Jersey, Ohio, Oklahoma, South Carolina, Texas, Utah, Virginia,
through a 66.7% owned partnership in the state of Missouri and through a 95.0%
owned partnership in the state of Minnesota. In addition, the Company has
recently acquired the logo sign franchises in Tennessee, Kansas, Kentucky and
Nevada. In addition, in October, 1996, the Company was also selected to
operate the tourism signing franchise for the province of Ontario, Canada.
State logo sign franchises represent the exclusive contract right to erect and
operate logo signs within a state. The term of the contracts vary, but
generally range from ten to twenty years, including renewal terms. The logos
sign contracts generally provide for termination by the state prior to the end
of the term of the franchise, in most cases with compensation to be paid to the
Company. Typically, at the end of the term of the franchise, ownership of the
structures is transferred to the state without compensation to the Company.
None of the Company's logo sign franchises terminates in the next two years and
only two are subject to renewal during that period. In one of those cases, the
state authority has verbally agreed to the renewal of the term for five years.
The Company expects to be able to complete effectively for retention of
franchises when their terms expire.
The Company also designs and produces logo sign plates for customers throughout
the country, including for use in states which have not yet privatized their
logo sign programs.
Employees
The Company employed approximately 800 persons at October 31, 1996. Of
these, 45 were engaged in overall management and general administration at the
Company's management headquarters and the remainder were employed in the
Company's operating offices. Of these, approximately 120 were direct sales and
marketing personnel.
The Company has three local offices covered by collective bargaining
agreements, consisting of painters, billposters and construction personnel. A
union is organized in one other local office, but this union is currently
operating without a collective bargaining agreement. The Company believes that
its relations with its employees, including its 25 unionized employees, are
good, and the Company has never experienced a strike or other labor dispute.
The Company believes its employee retention record evidences it good employee
relations. The average tenure for the Company's employees is six years. The
Company offers most employees a range of benefits including a profit
sharing/401(k) plan and life, health and dental insurance.
11
COMPETITION
Outdoor Advertising
The Company competes in each of its markets with other outdoor advertisers as
well as other media, including broadcast and cable television, radio, print
media and direct mail marketers. In addition, the Company also competes with a
wide variety of out-of-home media, including advertising in shopping centers,
malls, airports, stadiums, movie theaters and supermarkets, as well as on
taxis, trains and buses. Advertisers compare relative costs of available media
and cost- per-thousand impressions, particularly when delivering a message to
customers with distinct demographic characteristics. In competing with other
media, outdoor advertising relies on its relative cost efficiency and its
ability to reach a broad segment of the population in a specific market or to
target a particular geographic area or population with a particular set of
demographic characteristics within that market.
The outdoor advertising industry is highly fragmented, consisting of several
large outdoor advertising media companies with operations in multiple markets
as well as smaller and local companies operating a limited number of structures
in single or a few local markets. Although some consolidation has occurred
over the past few years, according to the Outdoor Advertising Association of
America there are approximately 1,000 companies in the outdoor advertising
industry operating approximately 396,000 billboard displays. In several of its
markets, the Company encounters direct competition from other major outdoor
media companies, including Outdoor Systems, Inc., Eller Media, Inc. (formerly
Patrick Media Group) and 3M National Advertising Co. (a division of Minnesota
Mining and Manufacturing Company), each of which has a larger national network
and greater total resources than the Company. The Company believes that its
strong emphasis on sales and customer service and its position as a major
provider of advertising services in each of its primary markets enables it to
compete effectively with the other outdoor advertising companies, as well as
other media, within those markets.
Logo Signs
The Company faces competition in obtaining new logo sign franchises and in
bidding for renewals of expiring franchises. The Company faces competition
from four other national providers of logo signs in seeking logo franchises.
In addition, local companies within each of the states which solicit bids will
compete against the Company in the open-bid process. Competition from these
sources is also encountered at the end of each contract period. The Company
believes its operations model, which includes local sales offices,
comprehensive databases of information and strategic alliances and its
knowledge of the industry, should provide a competitive advantage in pursuing
future franchises.
In marketing logo signs to advertisers, the Company competes with other forms
of out-of-home advertising. The Company believes, however, that logo sign
advertising offers an effective, low-cost
12
directional advertising service, which makes it attractive to potential
advertisers.
REGULATION
Outdoor advertising is subject to governmental regulation at the federal, state
and local levels. Federal law, principally the Highway Beautification Act of
1965 (the "HBA") regulates outdoor advertising on federally aided primary and
interstate highways. The HBA requires, as a condition to federal highway
assistance, states to restrict billboards on such highways to commercial and
industrial areas, and requires certain additional size, spacing and other
limitations. All states have passed state billboard control statutes and
regulations at least as restrictive as the federal requirements, including
removal at the owner's expense and without compensation of any illegal signs on
such highways. The Company believes that the number of its billboards that may
be subject to removal as illegal is immaterial. No state in which the Company
operates has banned billboards, but some have adopted standards more
restrictive than the federal requirements. Municipal and county governments
generally also have sign controls as part of their zoning laws. Some local
governments prohibit construction of new billboards and some allow new
construction only to replace existing structures, although most allow
construction of billboards subject to restrictions on zones, size, spacing and
height.
Federal law does not require removal of existing lawful billboards, but does
require payment of compensation if a state or political subdivision compels the
removal of a lawful billboard along a federally aided primary or interstate
highway. State governments have purchased and removed legal billboards for
beautification in the past, using federal funding for transportation
enhancement programs, and may do so in the future. Governmental authorities
from time to time use the power of eminent domain to remove billboards. Thus
far, the Company has been able to obtain satisfactory compensation for any of
its billboards purchased or removed as a result of governmental action,
although there is no assurance that this will continue to be the case in the
future. Local governments do not generally purchase billboards for
beautification, but some have attempted to force removal of legal but
nonconforming billboards (billboards which conformed with applicable zoning
regulations when built but which do not conform to current zoning regulations)
after a period of years under a concept called "amortization", by which the
governmental body asserts that just compensation is earned by continued
operation over time. Although there is some question as to the legality of
amortization under federal and many state laws, amortization has been upheld in
some instances. The Company generally has been successful in negotiating
settlements with applicable localities for billboards required to be removed.
Restrictive regulations also limit the Company's ability to rebuild or replace
nonconforming billboards.
13
In recent years, bills have been introduced in Congress that would affect
billboard advertising of tobacco or alcohol products. No bills have become law
except those requiring the familiar health hazard warnings appearing on
cigarette packages and advertisements. It is uncertain whether such regulation
will be enacted in the future, what such regulation might provide or what
impact such regulation might have on the Company's business. Federal law
generally prevents state or local restrictions on the content of billboard
advertisements.
In August 1996, President Clinton signed an executive order adopting rules
proposed by the U.S. Food and Drug Administration regulating the advertising of
certain tobacco products. These rules, which will become effective on August
22, 1997, prohibit the placement of tobacco products advertising within 1,000
feet of playgrounds and primary and secondary schools and limit such
advertising to a format consisting of black text on a white background.
Certain advertising industry and tobacco industry organizations have filed
lawsuits challenging these regulations, seeking an Injunction to keep them from
going into effect. In addition, some members of Congress have indicated that
they may sponsor legislation to prevent the regulations from going into effect.
If these regulations are not modified or nullified by legislative or judicial
action, the Company's outdoor advertising revenues could be adversely affected.
To date, however, regulations in the Company's markets have not materially
adversely affected its operations. However, the outdoor advertising industry
is heavily regulated and at various times and in various markets can be
expected to be subject to varying degrees of regulatory pressure affecting the
operation of advertising displays. Accordingly, although the Company's
experience to date is that the regulatory environment can be managed, no
assurance can be given that existing or future laws or regulations will not
materially and adversely affect the Company.
ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company are as follows:
Name Age Title
---- --- -----
Kevin P. Reilly, Jr. . . . . . . . . . . . . 42 Chairman, President and Chief Executive Officer
Keith A. Istre . . . . . . . . . . . . . . . 44 Chief Financial Officer and Treasurer
Charles W. Lamar, III . . . . . . . . . . . 48 General Counsel and Secretary
14
Gerald H. Marchand . . . . . . . . . . . . . 65 Vice President, Regional Manager of Baton Rouge Region
T. Everett Stewart, Jr. . . . . . . . . . . 42 President of Interstate Logos, Inc., a wholly-owned
subsidiary of the Company
Robert E. Campbell . . . . . . . . . . . . . 48 Vice President, Regional Manager of Central Region
Phillip C. Durant . . . . . . . . . . . . . 50 Vice President, Regional Manager of Eastern Region
Myron A. LaBorde . . . . . . . . . . . . . . 47 Vice President, Regional Manager of Florida Region
Thomas F. Sirmon . . . . . . . . . . . . . . 41 Vice President, Regional Manager of Mobile Region
Robert B. Switzer . . . . . . . . . . . . . 44 Vice President of Operations
Each officer's term of office extends until the meeting of the Board
of Directors following the next annual meeting of stockholders and until a
successor is elected and qualified or until his or her earlier resignation or
removal.
Kevin P. Reilly, Jr. has served as the Company's President and Chief
Executive Officer since February 1989 and as a director of the Company since
February 1984. Mr. Reilly served as President of the Company's Outdoor
Division from 1984 to 1989. Mr. Reilly, an employee of the Company since 1978,
has also served as Assistant and General Manager of the Company's Baton Rouge
Region and Vice President and General Manager of the Louisiana Region. Mr.
Reilly received a B.A. from Harvard University in 1977.
Keith A. Istre has been Chief Financial Officer of the Company since
February 1989 and a director of the Company since February 1991. Mr. Istre
joined the Company as Controller in 1978 and became Treasurer in 1985. Prior
to joining the Company, Mr. Istre was employed by a public accounting firm in
Baton Rouge from 1975 to 1978. Mr. Istre graduated from the University of
Southwestern Louisiana in 1974 with a degree in accounting.
Charles W. Lamar, III joined the Company in 1982 as General Counsel
and has been a director of the Company since June 1973. Prior to joining the
Company, Mr. Lamar maintained his own law practice and was employed by a law
firm in Baton Rouge. Mr. Lamar received a B.A. in Philosophy from Harvard
University in 1971, a M.A., in Economics from Tufts University in 1972 and a
J.D. from Boston University in 1975.
15
Gerald H. Marchand has been Regional Manager of the Baton Rouge
Region, which encompasses operations in Louisiana, Mississippi and Texas, since
1988 and a director of the Company since 1978. He began his career with the
Company in leasing and went on to become President of the Outdoor Division. He
has served as General Manager of the Lake Charles and Mobile operations. Mr.
Marchand received a Masters in Education from Louisiana State University in
1955.
T. Everett Stewart, Jr. has been President of Interstate Logos, Inc.
since 1988, and was named a director in 1996. He served as Regional Manager of
the Company's Baton Rouge Region from 1984 to 1988. Previously, he served the
Company as Sales Manager in Montgomery and General Manager of the Monroe and
Alexandria operations. Before joining the Company in 1979, Mr. Stewart was
employed by the Lieutenant Governor in the State of Alabama and by a United
States Senator from the State of Alabama. Mr. Stewart received a B.S. in
Finance from Auburn University in 1976.
Robert E. Campbell has been Regional Manager of the Central Region,
which encompasses operations in Alabama, Colorado, Kentucky, Ohio, Texas and
Virginia, since 1983. Mr. Campbell served from 1972 to 1983 as Sales Manager
of the Company's Mobile operation and as General Manager of the Company's
Midland and Mobile operations. Mr. Campbell received a B.A. in Political
Science and History from the University of South Alabama in 1971.
Phillip C. Durant joined the Company in 1974 in Pensacola, Florida and
is currently the Regional Manager of the Eastern Region, which encompasses
operations in Tennessee and West Virginia. Previously he served as Sales
Manager in Pensacola and General Manager of Monroe, Alexandria, Lake Charles
and Lafayette, Louisiana and Nashville.
Myron A. LaBorde joined the Company in 1972 as an account executive in
Baton Rouge and is currently the Regional Manager of the Florida Region and
General Manager of the Shreveport, Louisiana operation. Previously he served
as General Manager of the Company's Lake Charles, Louisiana and Tallahassee,
Florida operations. Mr. LaBorde received a degree in Marketing from the
University of Southwestern Louisiana.
Thomas F. Sirmon has served the Company as Regional Manager of the
Mobile Region, which encompasses operations in Alabama, Florida and Georgia,
since 1990. He began his career with the Company as an Account Executive in
the Mobile operation in 1979. In 1981, he was appointed General Manager in
Augusta; in 1984, General Manager in Nashville; and in 1988, General Manager in
Mobile. Mr. Sirmon received a degree in Marketing from the University of South
Alabama in 1978.
Robert B. Switzer has been Vice President of the Company since 1984.
In 1976, he joined the Company as Posting
16
Superintendent in Mobile and became Operations Manager in Pensacola. Since
1991, he has also served as General Manager of the Pensacola operation and,
since 1993, as General Manager of the Fort Walton operation. Mr. Switzer
received a B.S. in Zoology from the University of South Florida in 1975.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in Baton Rouge, Louisiana. The
Company owns 27 local operating facilities with front office administration and
sales office space connected to back-shop poster and bulletin production space,
and leases an additional 29 operating facilities at an aggregate lease expense
in 1996 of approximately $820,000.
The Company owns approximately 450 parcels of property beneath outdoor
structures. As of October 31, 1996, the Company had approximately 13,000
active outdoor site leases accounting for a total annual lease expense of $15.7
million. This amount represented 14.9% of total net outdoor advertising
revenues for that period, which is consistent with the Company's historical
lease expense experience. The Company's leases are for varying terms ranging
from month-to-month to in some cases a term of over ten years, and many provide
the Company with renewal options. There is no significant concentration of
displays under any one lease or subject to negotiation with any one landlord.
The Company believes that an important part of its management activity is to
manage its lease portfolio and negotiate suitable lease renewals and
extensions.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time is involved in litigation in the ordinary course
of business, including disputes involving advertising contracts, site leases,
employment claims and construction matters. The Company is also involved in
routine administrative and judicial proceedings regarding billboard permits,
fees and compensation for condemnations. The Company is not a party to any
lawsuit or proceedings which, in the opinion of management, is likely to have a
material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Since August 2, 1996, the Company's Class A Common Stock has traded on
the over-the-counter market and prices have been quoted on the Nasdaq National
Market under the symbol "LAMR." Prior to August 2, 1996, the day on which the
Class A Common Stock was first publicly traded, there was no public market for
the Class A Common Stock. As of January 20, 1997, there were 288 shareholders
of record of the Class A Common Stock.
The following table sets forth, for the period indicated, the high and
low sale prices for the Class A Common Stock as reported by Nasdaq.
High Low
---- ---
Fiscal year ended October 31, 1996:
Fourth Quarter (beginning August 2, 1996) $42.50 20.13
The Company's Class B Common Stock is not publicly traded and is held
of record by one person.
The Company does not anticipate paying dividends on either class of
its common stock in the foreseeable future. The Company's Class A Preferred
Stock is entitled to preferential dividends, in an annual aggregate amount of
$364,903, before any dividends may be paid on the common stock. Any future
determination as to the payment of dividends will be subject to such
limitations, will be at the discretion of the Company's Board of Directors and
will depend on the Company's results of operations, financial condition,
capital requirements and other factors deemed relevant by the Board of
Directors.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated statement of operations and balance sheet data
presented below are derived from the consolidated financial statements of the
Company. The financial statements of the Company for each of the years in the
three year period ended
18
October 31, 1996 were audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their report included elsewhere herein. The data presented
below should be read in conjunction with the audited consolidated financial
statements, related notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations included herein.
Year Ended October 31,
---------------------------------------------------------
Statement of Operations Data: 1992 1993 1994 1995 1996
-------- -------- ------- -------- --------
Revenues:
Net advertising revenues $ 60,760 $ 65,365 $83,627 $101,871 $119,900
Other income 1,195 1,159 846 537 702
-------- -------- ------- -------- --------
Total net revenues 61,955 66,524 84,473 102,408 120,602
-------- -------- ------- -------- --------
Operating expenses:
Direct advertising expenses 22,783 23,830 28,959 34,386 41,184
General and administrative expenses 18,225 19,504 24,239 27,057 29,466
Depreciation and amortization 8,881 8,924 11,352 14,090 15,549
-------- -------- ------- ------- --------
Total operating expenses 49,889 52,258 64,550 75,533 86,199
-------- -------- ------- ------- --------
Operating income 12,066 14,266 19,923 26,875 34,403
-------- -------- ------- ------- --------
Non-operating expense (income):
Interest income (96) (218) (194) (199) (240)
Interest expense 10,454 11,502 13,599 15,783 15,441
Loss (gain) on disposition of assets (1,309) 729 675 2,328 1,012
Other expense 392 576 616 655 242
-------- -------- ------- ------- --------
Total non-operating expense 9,441 12,589 14,696 18,567 16,455
-------- -------- ------- ------- --------
Earnings before income taxes and
extraordinary item 2,625 1,677 5,227 8,308 17,948
Income tax expense (benefit)(1) 270 476 (2,072) (2,390) 7,099
-------- -------- ------- ------- --------
Extraordinary loss on debt
extinguishment, net of income tax
benefit of $98 - (1,854) - - -
-------- -------- ------- ------- --------
Net earnings (loss) 2,355 (653) 7,299 10,698 10,849
Preferred stock dividends - - - - (365)
-------- -------- ------- ------- --------
Net earnings (loss) applicable to
common stock 2,355 (653) 7,299 10,698 10,484
======== ======== ======= ======= ========
Earnings per common share before
extraordinary item (2) $ .07 $ .03 $ .21 $ .32 $ .38
======== ======== ======= ======= ========
Net earnings (loss) per common share (2) $ .07 $ (.02) $ .21 $ .32 $ .38
======== ======== ======= ======= ========
Other Data:
EBITDA (3) 20,947 23,190 31,275 40,965 49,952
EBITDA margin 34% 35% 37% 40% 41%
Cash flows from operating activities (5) 12,930 12,411 15,214 25,065 32,493
Cash flows from investing activities (5) (7,273) (10,064) (53,569) (17,817) (48,124)
Cash flows from financing activities (5) (6,734) 6,802 37,147 (9,378) 18,175
BALANCE SHEET DATA (4):
Cash and cash equivalents 75 9,224 8,016 5,886 8,430
Working capital (7,557) 7,274 1,691 1,737 1,540
Total assets 78,649 92,041 130,008 133,885 173,189
Total debt (including current
maturities) 104,222 115,380 153,929 146,051 131,955
Total long-term obligations 103,567 122,774 147,957 143,944 130,211
Stockholders' equity (deficit) (41,870) (43,249) (37,352) (28,154) 19,041
19
1) The benefit of the Company's net operating loss carryforward was fully
recognized as of October 31, 1995, resulting in the income tax expense shown
for the twelve months ended October 31, 1996 compared to the income tax benefit
for the same period in the prior year.
(2) After giving effect to the approximately 778.9 for 1 split of the Company's
then-existing common stock and the recapitalization effected in August 1996.
(3) "EBITDA" is defined as operating income before deprecation and
amortization. It represents a measure which management believes is customarily
used to evaluate the financial performance of companies in the media industry.
However, EBITDA is not a measure of financial performance under generally
accepted accounting principles and should not be considered an alternative to
operating income or net earnings as an indicator of the Company's operating
performance or to net cash provided by operating activities as a measure of its
liquidity.
(4) As of the end of the period.
(5) Cash flows from operating, investing, and financing activities are obtained
from the Company's consolidated statements of cash flows prepared in accordance
with generally accepted accounting principles.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three fiscal years ended October
31, 1996. This discussion should be read in conjunction with the consolidated
financial statements of the Company and the related notes. References herein
to specific years refer to the Company's fiscal year ending on October 31 of
such years.
The future operating results of the Company may differ materially from the
results described below. Please refer to Exhibit 99.1 hereto for a discussion
of certain factors which may affect the Company's future operating performance.
20
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. In recent
years, the Company's logo sign business has expanded rapidly and may in the
future have an increasing impact on the Company's revenues and operating
income.
The Company has grown significantly during the last three years, primarily as
the result of (i) internal growth in its existing outdoor advertising business
resulting from construction of additional outdoor advertising displays, general
improvements in occupancy and operating efficiency and increases in advertising
rates, (ii) acquisitions of outdoor advertising businesses and structures, the
most significant of which was the Company's acquisition of the 50.6% interest
that it did not already own in Lamar Holdings Corporation ("LHC") in 1994, and
(iii) the rapid expansion of the Company's logo sign business. The Company's
net advertising revenues increased by $36.3 million, representing a compound
annual growth rate of 19.8%, from $83.6 million for the fiscal year ended
October 31, 1994 to $119.9 million for the fiscal year ended October 31, 1996.
During the same period, EBITDA increased $18.7 million, representing a compound
annual growth rate of 26.4%, from $31.3 million for the fiscal year ended
October 31, 1994 to $50.0 million for the fiscal year ended October 31, 1996.
The Company plans to continue a strategy of expanding through both internal
growth and acquisitions. As a result of acquisitions, principally the LHC
acquisition, the operating performance of certain markets and of the Company as
a whole are not necessarily comparable on a year-to-year basis. All recent
acquisitions have been accounted for using the purchase method of accounting
and, consequently, operating results from acquired operations are included from
the respective dates of those acquisitions.
During the fourth quarter of 1996, the Company acquired certain outdoor
advertising properties for an aggregate cash cost of approximately $13 million
and the logo sign franchises for the states of Kansas and Tennessee for a
purchase price of $1.4 million. Subsequent to the end of the Company's fiscal
year, the Company acquired FKM Advertising Company, Inc. and Outdoor East, L.P.
for an aggregate cash purchase price of approximately $100 million. For the
twelve months ending July 31, 1996, FKM and Outdoor East had $19.5 million in
aggregate net outdoor advertising revenues. In addition, since the end of the
Company's fiscal year the Company has also acquired the logo sign franchises
for the states of Kentucky and Nevada for $3.8 million in cash and was awarded
the logo sign franchises for Florida and
21
the province of Ontario, Canada. The Company has also executed a letter of
intent to acquire the assets of Headrick Outdoor, Inc. for a cash purchase
price of approximately $75 million. The consummation of this acquisition is
subject to certain conditions, including the negotiation of a definitive
acquisition agreement, receipt of regulatory clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and completion of
satisfactory due diligence. Until all of such conditions are met, there can be
no assurance that the acquisition will be completed as contemplated.
As a result of this recent acquisition activity, the Company currently operates
30,000 outdoor advertising displays in 41 primary markets in 15 southeastern,
midwestern and mid-Atlantic states as well as 61,000 logo advertising displays
through exclusive franchises in 18 states and one province in Canada.
The Company has financed its recent acquisitions, and intends to finance future
acquisition activity, from the proceeds of its public stock offering that was
completed in November 1996, the proceeds of the Company's offering in November
1996 of Senior Subordinated Notes and borrowings under the Company's $225
million credit facility. See "Liquidity and Capital Resources".
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.
The Company believes that in recent years outdoor advertising expenditures have
increased more rapidly than total U.S. advertising expenditures, but there can
be no assurance that this trend will continue or that in the future outdoor
advertising will not grow more slowly than the advertising industry as a whole.
Manufacturers of tobacco products, primarily cigarettes, were historically
major users of outdoor advertising displays. Due to societal and governmental
pressures and other factors, in the early 1990's, leading tobacco
manufacturers substantially reduced their domestic advertising expenditures.
The Company's tobacco revenues, as a percentage of total net revenues, declined
from 17% in fiscal 1991 to 10% in fiscal 1996. During this period, the Company
has replaced the reduced tobacco advertising by diversifying its customer base
and increasing sales to local advertisers.
Growth of the Company's business requires significant capital expenditures to
finance internal growth, acquisitions and the up-front costs associated with
new logo sign franchises. The Company expended $13.4 million on capital
expenditures in fiscal 1994, $14.0 million in fiscal 1995 and $25.9 million in
fiscal 1996. Of these amounts, $2.8 million, $1.6 million and $13.1 million,
respectively, were attributable to the logo sign business.
22
In the fiscal years ended October 31, 1994 and 1995, the Company recognized an
income tax benefit from a net operating loss carryforward. The benefit of the
Company's net operating loss carryforward was fully recognized as of October
31, 1995. Therefore, the Company recognized income tax expense in fiscal 1996.
The following table presents certain items in the Consolidated Statements of
Earnings as a percentage of net revenues for the years ended October 31, 1994,
1995 and 1996:
Year Ended October 31
----------------------------
1994 1995 1996
------ ------ ------
Net revenues 100 .0% 100 .0% 100 .0%
Operating expenses
Direct advertising expenses 34.3 33.6 34.1
General & administrative expenses 28.7 26.4 24.4
EBITDA 37.0 40.0 41.4
Depreciation and amortization 13.4 13.8 12.9
Operating income 23.6 26.2 28.5
Interest expense 16.1 15.4 12.8
Other expense 17.4 18.1 13.6
Net earnings 8.6 10.4 9.0
YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995
Total revenues increased $18.2 million or 17.8% to $120.6 million for the
twelve months ended October 31, 1996 from $102.4 million for the same period in
1995. This was predominately attributable to an increase in billboard net
revenues of $11.6 million or 12.1%, principally due to increases in number of
displays and advertising rates, with occupancy rates remaining relatively
steady. Logo sign revenue increased $6.5 million, which represents a 100%
increase over the prior fiscal year. This significant increase was due to the
build-out of the following logo sign franchises awarded in 1995 and 1996:
Georgia, Minnesota, South Carolina, Virginia, New Jersey and Michigan. In
addition, during this period the Company also acquired the Kansas and Tennessee
franchises and was awarded the right to build-out and operate logo signs along
additional highways in Texas, where it currently has the logo sign franchise.
Operating expenses, exclusive of depreciation and amortization, increased $9.2
million or 15.0% to $70.7 million for the twelve months ended October 31, 1996
from $61.4 million for the same period in 1995. This increase was the result
of an increase in personnel costs, sign site rent, graphics expense, other
costs related to the increase in revenue and additional operating expenses
related to outdoor asset acquisitions and the continued development of the logo
sign business.
23
Depreciation and amortization expense increased $1.5 million or 10.4% from
$14.1 million for the twelve months ended October 31, 1995 to $15.5 million for
the twelve months ended October 31, 1996. This increase in deprecation and
amortization was generated by the assets purchased during fiscal years 1995 and
1996.
Because the Company's operating expenses declined as a percentage of net
revenues to 71.5% for fiscal 1996 from 73.8% for fiscal 1995, operating income
increased $7.5 million or 28% from $26.9 million for the twelve months ended
October 31, 1995 to $34.4 million for the twelve months ended October 31, 1996.
Interest expense remained relatively constant for both periods as did total
outstanding debt until August 1996, when proceeds from the Company's initial
public equity offering (the "IPO") were used to retire approximately $43.8
million in outstanding bank debt.
Income tax expense for the twelve months ended October 31, 1996 increased $9.5
million over the same period in 1995. For the past several years the Company
has had a substantial net operating loss carryforward. The benefit of the
Company's net operating loss carryforward was fully recognized as of October
31, 1995.
As a result of the foregoing factors, net earnings remained relatively constant
for the twelve months ended October 31, 1996 as compared to the same period in
1995.
YEAR ENDED OCTOBER 31, 1995 COMPARED TO YEAR ENDED OCTOBER 31, 1994
Net revenues increased $17.9 million or 21.2% to $102.4 million for the twelve
months ended October 31, 1995 from $84.5 million for the same period in 1994.
This increase was predominantly attributable to higher billboard net revenues,
which rose $17.9 million or 23.0% during this period. The increase was
principally attributable to increases in number of displays and advertising
rates, with occupancy rates remaining relatively steady. Operations acquired
subsequent to fiscal 1993 generated $9.1 million of this increase. This
increase in outdoor advertising net revenues was partially offset by a decrease
in management fees resulting from the LHC acquisition. Continued development
of the logo sign business resulted in logo advertising revenue increasing $0.3
million or 5.5% for the twelve months ended October 31, 1995 as compared to the
prior fiscal year.
24
Operating expenses, exclusive of depreciation and amortization, increased $8.2
million or 15.5% to $61.4 million for the twelve months ended October 31, 1995
from $53.2 million for the same period in 1994. The LHC operations acquired in
May 1994 generated $5.5 million of this increase in operating expenses; the
remaining $2.7 million increase was the result of increases in costs related to
higher revenues generated by previously existing operations.
Depreciation and amortization expense increased $2.7 million or 24% from $11.4
million for the twelve months ended October 31, 1994 to $14.1 million for the
twelve months ended October 31, 1995. This increase in depreciation and
amortization was generated by the assets purchased during fiscal years 1994 and
1995.
Because the Company's operating expenses declined as a percentage of net
revenues to 73.8% for fiscal 1995 from 76.4% for fiscal 1994, operating income
increased $7.0 million or 34.9% from $19.9 million for the twelve months ended
October 31, 1994 to $26.9 million for the twelve months ended October 31, 1995.
Interest expense increased $2.2 million or 16.1% to $15.8 million for the
twelve months ended October 31, 1995 from $13.6 million for the same period in
1994. Approximately $1.8 million of the increase in interest expense reflected
an additional $35.0 million in debt incurred in May 1994 to finance the LHC
acquisitions. The remaining $0.4 million increase in interest expense was due
to increased working capital borrowings throughout fiscal 1995.
The Company had a significant net operating loss carryforward and, therefore,
income tax expense for this period reflected the alternative minimum tax, state
income tax and the recognition in the current year of the deferred tax benefit
generated by the net operating loss carryforward.
As a result of the foregoing factors, net earnings increased $3.4 million or
46.6% to $10.7 million for the twelve months ended October 31, 1995 from $7.3
million for the same period in 1994.
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.
In August 1996, the Company sold pursuant to the IPO 4,294,041 shares of its
Class A Common Stock at a price of $16.00 per share. The net proceeds to the
Company from the sale of the 4,294,041 shares were approximately $63.2 million
after deducting expenses and underwriting discounts.
25
The Company used a portion of the net proceeds from the IPO to repay
outstanding secured indebtedness under its bank facilities in the aggregate
principal amount of approximately $43.8 million, consisting of (i) $37.8
million in term loans and (ii) $6.0 million in outstanding loans under a
revolving credit facility. The Company used approximately $5.0 million of the
net proceeds from the IPO to pay a portion of the contingent consideration
payable to stockholders whose shares of common stock were repurchased by the
Company in October 1995 and March 1996. The Company issued to such
stockholders $20.0 million aggregate principal amount of ten-year subordinated
notes as the balance of the contingent consideration. A portion of the
remaining net proceeds were used to purchase certain outdoor advertising
properties for an aggregate cash price of approximately $13.0 million.
In November and December of 1996, the Company engaged in several transactions
which significantly changed its capital structure and positioned it to expand
operations through acquisitions. These transactions were: (i) an equity
offering of 2,530,000 shares of Class A common stock at $23 per share, (ii) a
tender offer that retired approximately $98.5 million of the $100 million
outstanding 11% Senior Secured Notes due 2003, (iii) an offering of $255
million of 9 5/8% Senior Subordinated Notes due 2006, and (iv) a new bank
credit facility consisting of a committed $225 million revolving credit
facility and a $75 million incremental facility funded at the discretion of the
lenders. The new credit facility replaced the Company's previous bank credit
facilities. Presently there are no loans outstanding under the new bank credit
facility.
Net proceeds to the Company, after underwriting discounts, from the equity and
Senior Subordinated Note offerings were $55.4 million and $248.0 million,
respectively. These proceeds were used to extinguish outstanding bank debt of
approximately $47.0 million, fund the tender offer for the Senior Secured
Notes, purchase Outdoor East for $60.5 million and pay investment banking fees
as well as other related costs of approximately $12.0 million related to the
above transactions. The balance of approximately $85 million is available for
future acquisitions and other corporate purposes.
The Company's net cash provided by operating activities increased to $25.1
million in fiscal 1995 due primarily to a $3.4 million increase in net earnings
and the addition of non-cash items, including a $2.7 million increase in
depreciation and amortization. Net cash used in investing activities decreased
from $53.6 million in fiscal 1994 to $17.8 million in fiscal 1995 due primarily
to a $37.6 million decrease in purchase of new markets attributable in fiscal
year 1994 to the purchase of new markets in the LHC acquisition, that was
offset by a $1.8 million increase in capital expenditures and purchases of
intangibles. Net cash provided by financing activities decreased $46.5 million
in fiscal 1995 due to a $44.5 million decrease in proceeds from issuance of
long term debt compared to fiscal 1994.
26
The Company's net cash provided by operating activities increased to $32.5
million in fiscal 1996 due primarily to an increase in non-cash items of $5.8
million, which includes an increase in deferred tax expense of $5.6 million due
to the extinguishment of the Company's net operating loss carryforward. There
was also an increase in deferred income of $1.7 million, and an increase in
accrued expenses of $1.2 million offset by an increase in receivables of $1.3
million. Net cash used in investing activities increased $30.3 million from
$17.8 million in fiscal 1995 to $48.1 million in fiscal 1996. This increase
was due to a $18.3 million increase in purchase of new markets and a $11.9
million increase in capital expenditures primarily due to the build-out of the
Company's new logo sign franchises. Net cash provided by financing activities
increased $27.6 million in fiscal 1996 due to a $63.1 million increase in
proceeds from issuance of common stock, a $5 million increase in proceeds from
issuance of long-term debt, primarily used to finance the new logo sign
franchise build-out, offset by a $33.3 million increase in principal payments
on long-term debt consisting primarily of the payout of loan obligations under
the Company's previous bank credit facility, a $7.0 million increase in
redemption of common stock due to the March 1996 stock redemption and
additional consideration paid from the IPO proceeds to selling stockholders of
the December 1995 and March 1996 redemptions, and a $0.2 million increase in
dividends.
INFLATION
In the last three years, inflation has not had a significant impact on the
Company.
SEASONALITY
The Company's revenues and operating results have exhibited some degree of
seasonality in past periods. Typically, the Company experiences it strongest
financial performance in the fourth fiscal quarter and its lowest revenues in
the first fiscal quarter. The Company expects this trend to continue in the
future. Because a significant portion of the Company's expenses are fixed, a
reduction in revenues in any quarter is likely to result in a period to period
decline in operating performance and net earnings.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 121. "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", which established a new accounting principle for accounting for
the impairment of certain loans, certain investments in debt and equity
securities, long-lived assets that will be held and used including certain
27
identifiable intangibles and goodwill related to those assets and long-lived
assets and certain identifiable intangibles to be disposed of. This statement
is effective for fiscal years beginning after December 15, 1995. While the
Company has not completed its evaluation of the impact that will result from
adopting this statement, it does not believe that adoption of the statement
will have a significant impact on the Company's financial position and results
of operations.
ITEM 8. FINANCIAL STATEMENTS
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of October 31, 1995
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Earnings for the years
ended October 31, 1994, 1995 and 1996 . . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity
(Deficit) for the years ended October 31, 1994,
1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the years
ended October 31, 1994, 1995 and 1996 . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . F-9
28
Independent Auditors' Report
Board of Directors
Lamar Advertising Company
Baton Rouge, Louisiana:
We have audited the accompanying consolidated balance sheets of Lamar
Advertising Company and subsidiaries as of October 31, 1995 and 1996,
and the related consolidated statements of earnings, stockholders'
equity (deficit) and cash flows for each of the years in the three-year period
ended October 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lamar Advertising
Company and subsidiaries as of October 31, 1995 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended October 31, 1996, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
January 20, 1997
F-2
29
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
October 31, 1995 and 1996
Assets 1995 1996
------ --------- -------
Current assets:
Cash and cash equivalents $ 5,886 8,430
Receivables:
Trade accounts, less allowance for
doubtful accounts of $551 in 1995
and 1996 10,741 12,855
Affiliates, related parties and employees 583 348
Other 109 327
--------- -------
11,433 13,530
Prepaid expenses 1,247 1,973
Other current assets 1,266 1,544
--------- -------
Total current assets 19,832 25,477
--------- -------
Property, plant and equipment (note 3) 168,402 207,071
Less accumulated depreciation and
amortization (77,524) (87,343)
--------- -------
90,878 119,728
--------- -------
Investment securities (note 1) 1,250 4,414
Intangible assets (note 4) 13,406 18,223
Receivables - noncurrent 918 737
Deferred taxes (note 9) 5,951 2,463
Other assets 1,650 2,147
--------- -------
Total assets $ 133,885 173,189
========= =======
(Continued)
F-3
30
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(In thousands, except share and per share data)
1995 1996
--------- -------
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Trade accounts payable $ 2,435 3,263
Current maturities of long-term debt
(note 8) 3,479 3,815
Accrued expenses (note 7) 9,733 11,066
Deferred income 2,448 5,793
--------- -------
Total current liabilities 18,095 23,937
Long-term debt (note 8) 142,572 128,140
Deferred income 749 811
Other liabilities 623 1,260
--------- -------
162,039 154,148
--------- -------
Stockholders' equity (deficit) (note 11):
Class A preferred stock, par value $638,
$63.80 cumulative, 10,000 shares authorized,
5,719 shares issued and outstanding in 1996 - 3,649
Class A common stock, par value $.001,
50,000,000 shares authorized, 15,657,623
and 15,004,340 shares issued and out-
standing at 1995 and 1996, respectively 16 15
Class B common stock, par value, $.001
25,000,000 shares authorized, 16,897,379
and 13,791,387 shares issued and out-
standing at 1995 and 1996, respectively 17 14
Additional paid-in capital - 38,060
Accumulated deficit (28,187) (24,681)
Unrealized gain on investment securities - 1,984
--------- -------
Stockholders' equity (deficit) (28,154) 19,041
Commitments and contingencies (notes 6 and 12)
--------- -------
Total liabilities and stockholders'
equity (deficit) $ 133,885 173,189
========= =======
See accompanying notes to consolidated financial statements.
F-4
31
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except share and per share data)
Years ended October 31, 1994, 1995 and 1996
1994 1995 1996
-------- ------- -------
Revenues:
Outdoor advertising, net $ 83,627 101,871 119,900
Other income 846 537 702
-------- ------- -------
84,473 102,408 120,602
-------- ------- -------
Operating expenses:
Direct advertising expenses 28,959 34,386 41,184
General and administrative expenses 24,239 27,057 29,466
Depreciation and amortization 11,352 14,090 15,549
-------- ------- -------
64,550 75,533 86,199
-------- ------- -------
Operating income 19,923 26,875 34,403
-------- ------- -------
Other expense (income):
Interest income (194) (199) (240)
Interest expense 13,599 15,783 15,441
Loss on disposition of assets 675 2,328 1,012
Other expenses 616 655 242
-------- ------- -------
14,696 18,567 16,455
-------- ------- -------
Earnings before income taxes 5,227 8,308 17,948
Income tax expense (benefit) - (note 9) (2,072) (2,390) 7,099
-------- ------- -------
Net earnings 7,299 10,698 10,849
Preferred stock dividends - - (365)
-------- ------- -------
Net earnings applicable to common stock $ 7,299 10,698 10,484
======== ======= =======
Net earnings per common share $ .21 .32 .38
======== ======= =======
See accompanying notes to consolidated financial statements.
F-5
32
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands, except share and per share data)
Years ended October 31, 1994, 1995 and 1996
Unrealized
Class A Class A Class B Additional gain on
preferred common common paid-in Accumulated investment
stock stock stock capital deficit securities Total
--------- ------- ------- --------- ----------- ---------- -------
Balance, October 31, 1993 $ -- 18 17 131 (43,415) -- (43,249)
Redemption of 1,327,985
shares of common stock -- (1) -- (131) (771) -- (903)
Net earnings -- -- -- -- 7,299 -- 7,299
Dividends ($.01 per share) -- -- -- -- (499) -- (499)
------- ------- ------- ------- ------- ------- -------
Balance, October 31, 1994 -- 17 17 -- (37,386) -- (37,352)
Redemption of 1,220,500
shares of common stock -- (1) -- -- (999) -- (1,000)
Net earnings -- -- -- -- 10,698 -- 10,698
Dividends ($.01 per share) -- -- -- -- (500) -- (500)
------- ------- ------- ------- ------- ------- -------
Balance, October 31, 1995 -- 16 17 -- (28,187) -- (28,154)
Conversion of 4,454,779
shares of common stock to
5,719.49 shares of
preferred stock 3,649 (2) (2) -- (3,645) -- --
Redemption of 3,618,203
shares of common stock -- (4) -- -- (2,958) -- (2,962)
Issuance of 4,294,041 shares
of common stock -- 4 -- 62,745 -- -- 62,749
Conversion of 510,150 shares
of Class B common stock
to Class A common stock -- 1 (1) -- -- -- --
Additional consideration for
redemption of common stock -- -- -- (25,000) -- -- (25,000)
Exercise of options -- -- -- 315 -- -- 315
Unrealized gain on investment
securities, net of deferred
taxes of $1,180 -- -- -- -- -- 1,984 1,984
Net earnings -- -- -- -- 10,849 -- 10,849
Dividends ($.009 per common
share and $15.95 per
preferred share) -- -- -- -- (740) -- (740)
------- ------- ------- ------- ------- ------- -------
Balance, October 31, 1996 $ 3,649 15 14 38,060 (24,681) 1,984 19,041
======= ======= ======= ======= ======= ======= =======
See accompanying notes to consolidated financial statements.
F-6
33
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands, except share and per share data)
Years ended October 31, 1994, 1995 and 1996
1994 1995 1996
-------- ------- -------
(C)
Cash flows from operating activities:
Net earnings $ 7,299 10,698 10,849
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 11,352 14,090 15,549
Loss on disposition of assets 675 2,328 1,012
Deferred taxes (2,650) (3,301) 2,308
Provision for doubtful accounts 508 502 580
Changes in operating assets and
liabilities:
(Increase) decrease in:
Receivables (1,391) (1,344) (2,677)
Prepaid expenses (321) (47) 9
Other assets (1,640) (418) (594)
Increase (decrease) in:
Trade accounts payable (69) 1,312 828
Accrued expenses 1,356 86 1,302
Deferred income (113) 950 2,690
Other liabilities 208 209 637
-------- ------- -------
Net cash provided by
operating activities 15,214 25,065 32,493
-------- ------- -------
Cash flows from investing activities:
Capital expenditures (13,357) (14,046) (25,944)
Purchase of new markets (40,482) (2,885) (21,200)
Proceeds from sale of property and
equipment 733 717 849
Purchase of intangible assets (463) (1,603) (1,829)
-------- ------- -------
Net cash used in investing
activities (53,569) (17,817) (48,124)
-------- ------- -------
(Continued)
F-7
34
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(In thousands, except share and per share data)
1994 1995 1996
-------- ------ -------
Cash flows from financing activities:
Net proceeds from issuance of
common stock $ - - 63,064
Proceeds from issuance of long-term
debt 44,515 - 5,000
Principal payments on long-term debt (5,966) (7,878) (41,187)
Redemption of common stock (903) (1,000) (7,962)
Dividends (499) (500) (740)
-------- ------ ------
Net cash provided by (used
in) financing activities 37,147 (9,378) 18,175
-------- ------ ------
Net increase (decrease) in
cash and cash equivalents (1,208) (2,130) 2,544
Cash and cash equivalents at
beginning of year 9,224 8,016 5,886
-------- ------ ------
Cash and cash equivalents
at end of year $ 8,016 5,886 8,430
======== ====== ======
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 13,461 15,825 15,659
======== ====== ======
Cash paid for income taxes $ 267 1,028 3,756
======== ====== ======
See accompanying notes to consolidated financial statements.
F-8
35
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
October 31, 1994, 1995 and 1996
(1) Significant Accounting Policies
(a) Nature of Business
Lamar Advertising Company ("LAC" or the "Company") is engaged in the
outdoor advertising business operating approximately 24,000 outdoor
advertising displays in 13 southeastern, midwestern and mid-Atlantic
states. The Company's operating strategy is focused on small and
medium sized markets with a population ranking between 50 and 250 in
the United States.
In addition, the Company operates its logo sign business in 15 states
throughout the country. Logo signs are erected pursuant to
state-awarded franchises on public rights-of-way near highway exits
and deliver brand name information on available gas, food, lodging
and camping services. Revenues of the logo sign business contributed
approximately 7%, 6% and 10% of the Company's net revenues for the
years ended October 31, 1994, 1995, and 1996 respectively.
(b) Principles of Consolidation
The accompanying consolidated financial statements include Lamar
Advertising Company, its wholly-owned subsidiaries, The Lamar
Corporation ("TLC"), their majority-owned subsidiaries and Interstate
Logos, Inc., a subsidiary of both LAC and TLC. All intercompany
transactions and balances have been eliminated.
(c) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated using accelerated and straight-line methods over the
estimated useful lives of the assets.
(d) Intangible Assets
Debt issuance costs are deferred and amortized over the terms of the
related credit facilities using the interest method. Other
intangible assets are initially recorded at cost and amortized using
the straight-line method over the assets' estimated useful lives,
generally from 5 to 15 years.
(Continued)
F-9
36
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(e) Investment Securities
Investment securities consist of the Company's investment in
approximately 340,000 shares of common stock of Wireless One, Inc., a
publicly-held company in the wireless cable business. The Chief
Executive Officer of Wireless One, Inc. is a member of the Reilly
family, who are the principal shareholders of the Company.
The Wireless One, Inc. shares are classified as available-for-sale
at October 31, 1996 and are carried at fair value with the unrealized
gain, net of the related tax effect, reported as a separate component
of stockholders' equity. The investment is carried at cost in the
accompanying October 31, 1995 balance sheet due to restrictions which
prohibit the sale of the stock by the Company until October 1997.
The cost of the Wireless One, Inc. shares owned by the Company is
$1,250, and the market value was $3,995 and $4,414 at October 31,
1995 and 1996, respectively. As of January 17, 1997, the aggregate
market value was $1,742.
(f) Deferred Income
Deferred income consists principally of advertising revenue received
in advance and gains resulting from the sale of certain assets to
related parties. Deferred advertising revenue is recognized in income
as services are provided over the term of the contract. Deferred
gains are recognized in income in the consolidated financial
statements at the time the assets are sold to an unrelated party or
otherwise disposed of.
(g) Revenue Recognition
The Company recognizes revenue from outdoor and logo sign advertising
contracts, net of agency commissions, on an accrual basis ratably
over the term of the contracts, as advertising services are provided.
(Continued)
F-10
37
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(h) Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
(i) Earnings Per Share
Earnings per common share are computed by dividing net earnings
applicable to common stock by the weighted average number of common
shares outstanding during each year (35,089,188 shares in 1994,
33,772,107 shares in 1995 and 27,562,564 shares in 1996). Weighted
average shares in 1996 include the effect of 139,579 shares issuable
upon exercise of stock options, calculated using the treasury stock
method. Such amounts have been adjusted to reflect the approximate
778.9 for 1 stock split and the recapitalization discussed in note
11.
(j) Cash and Cash Equivalents
The Company considers all highly-liquid investments with original
maturities of three months or less to be cash equivalents.
(k) Reclassification of Prior Year Amounts
Certain amounts in the prior years consolidated financial statements
have been reclassified to conform with the current year presentation.
These reclassifications had no effect on previously reported net
earnings.
(Continued)
F-11
38
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(m) Stock Options
The FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation," effective for fiscal years beginning after December
15, 1995. The new statement encourages, but does not require,
companies to measure stock-based compensation cost using a fair value
method, rather than the intrinsic value method prescribed by
Accounting Principles Board (APB) Opinion No. 25. Companies
choosing to continue to measure stock-based compensation using the
intrinsic value method must disclose on a pro forma basis net
earnings and net earnings per share as if the fair value method was
used. The Company intends to continue to apply the provisions of APB
25 with regard to financial statement recognition of the cost of
stock-based compensation to employees, and accordingly, will not
recognize compensation expense for stock option grants.
(2) Noncash Financing and Investing Activities
A summary of significant noncash financing and investing activities
follows:
1994 1995 1996
----- ----- ------
Noncash dispositions of assets $ 445 3,788 -
Noncash acquisitions of assets - 4,341 2,104
Noncash issuance of preferred
stock in exchange for common stock - - 3,649
Redemption of common stock for debt - - 20,000
(Continued)
F-12
39
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(3) Property, Plant and Equipment
Major categories of property, plant and equipment at October 31, 1995 and
1996 are as follows:
Estimated
life (years) 1995 1996
------------ --------- -------
Land - $ 7,826 8,595
Building and improvements 10-32 15,553 17,169
Advertising structures 15 131,071 166,230
Automotive and other
equipment 3-7 13,952 15,077
--------- -------
$ 168,402 207,071
========= =======
(4) Intangible Assets
The following is a summary of intangible assets at October 31:
Estimated
life (years) 1995 1996
------------ -------- -------
Debt issuance costs and fees 7-10 $ 4,231 4,033
Customer lists and
unexpired contracts 7 7,103 8,252
Non-compete agreements 7-15 1,036 2,146
Other 5-15 1,036 3,792
-------- -------
$ 13,406 18,223
======== =======
Cost 20,473 28,360
Accumulated amortization (7,067) (10,137)
-------- -------
Net intangible assets $ 13,406 18,223
======== =======
(5) Acquisitions
Prior to May 1994, the Company owned 49.36% of the common stock of Lamar
Holdings Corporation (LHC). LHC was founded in 1989 by TLC, members of its
management and certain institutional investors to provide outdoor
advertising services in markets other than those served by TLC.
(Continued)
F-13
40
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Effective May 1, 1994, LAC acquired substantially all of the assets and
assumed certain liabilities of LHC for a purchase price of $43,500. The
proceeds from the sale of its assets were used by LHC to repay existing
debt and redeem all of its shareholders other than LAC. The acquisition
has been accounted for as a purchase and accordingly, the purchase price
attributable to shareholders other than LAC (50.64%) was allocated to the
assets acquired based on their fair values. The results of operations of
LHC have been included in LAC's consolidated financial statements from May
1, 1994.
The following unaudited pro forma financial information presents the
combined results of operations of LAC and LHC as if the acquisition had
occurred as of the beginning of 1994 after giving effect to certain
adjustments, including additional depreciation expense, increased interest
expense on debt related to the acquisition, and related income tax effects.
The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the companies
constituted a single entity during such period.
Year ended
October 31,
1994
-----------
(unaudited)
Revenues, net $ 92,480
=========
Net income $ 6,265
=========
Earnings per share $ .18
=========
During the year ended October 31, 1996, the Company completed twelve
acquisitions of outdoor advertising businesses, none of which were
individually significant, for an aggregate purchase price of approximately
$24,010. Each purchase 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 Company recorded an aggregate of approximately $6,100 of
intangible assets as a result of these acquisitions. Proforma net
revenues, assuming these acquisitions had occurred on November 1, 1995,
would have been approximately $123,000. The effect on net earnings and net
earnings per share would not have been material.
(Continued)
F-14
41
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(6) Leases
The Company is party to 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. The following is a summary of minimum
annual rental payments required under those operating leases that have
original or remaining lease terms in excess of one year as of October 31:
1997 $ 10,787
1998 9,815
1999 8,379
2000 6,694
2001 5,184
Rental expense related to the Company's operating leases was $14,999,
$17,053, and $19,387 for the years ended October 31, 1994, 1995 and 1996,
respectively.
The Company leases a portion of its corporate office building to tenants
under operating leases. The following is a summary of property held for
lease at October 31:
1995 1996
------- ------
Land $ 53 56
Buildings 1,892 2,004
Less accumulated depreciation (1,124) (1,183)
------- ------
$ 821 877
======= ======
Minimum future rental income for noncancelable leases in effect as of
October 31, 1996 is as follows:
Year ending October 31:
1997 $ 246
1998 155
1999 109
2000 84
2001 24
(Continued)
F-15
42
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(7) Accrued Expenses
The following is a summary of accrued expenses at October 31:
1995 1996
------- ------
Payroll $ 2,134 2,261
Interest 5,400 5,182
Insurance benefits 1,457 1,510
Income taxes 355 1,748
Other 387 365
------- ------
$ 9,733 11,066
======= ======
(8) Long-term Debt
Long-term debt consists of the following at October 31:
1995 1996
--------- -------
Senior Secured Notes $ 100,000 100,000
Term loan payable to bank group 39,250 -
Line of credit, payable to bank group - 5,000
8% unsecured subordinated notes,
payable in monthly installments
through 2006 of $166, plus
interest - 19,667
8% Series A unsecured subordinated
discount debentures, maturing
through 2001 (11.5% effective yield) 2,706 2,309
5% to 10% notes payable to banks and
others with varying maturities
secured by plant and equipment 3,713 3,327
Other notes with various rates and
terms 382 1,652
--------- -------
146,051 131,955
Less current maturities (3,479) (3,815)
--------- -------
Long term debt, excluding current
maturities $ 142,572 128,140
========= =======
(Continued)
F-16
43
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Long term debt matures as follows:
1997 $ 3,815
1998 3,598
1999 3,521
2000 7,888
2001 2,791
Later years 110,342
---------
$ 131,955
=========
The Senior Secured Notes (the "Notes")outstanding in the amount of $100,000
were issued in 1993, bear interest at 11%, payable semiannually, and are
scheduled to mature in 2003. In conjunction with the issuance in November
1996 of the Company's 9-5/8% Senior Subordinated Notes in the aggregate
principal amount of $255,000, the Company funded a tender offer for all of
the Notes. As of January 17, 1997, approximately $98,500 of the Notes have
been tendered to the Company. The Company will recognize a loss on the
early extinguishment of this debt of approximately $9.2 million.
In conjunction with the tender offer, the Company also obtained the
consents of the holders of the Notes to eliminate certain restrictive
covenants and modify others, to release the pledge of the stock of the
Company and its subsidiaries securing the Notes and to release the
guarantees of the Subsidiary Guarantors. The Notes rank senior in right of
payment to all subordinated debt of the Company.
The 9 5/8% Senior Subordinated Notes issued in November 1996 are due
December 1, 2006, with interest payable semi-annually on June 1 and
December 1, commencing June 1, 1997. The notes are senior subordinated
unsecured obligations of the Company and are subordinated in right of
payment to all Senior Indebtedness of the Company, and are senior to all
existing and future subordinated indebtedness of the Company.
The notes are redeemable at the Company's option at any time on or after
December 1, 2001 at redemption prices specified by the indenture, and are
required to be repurchased earlier in the event of a change of control of
the Company. The indenture governing the Senior Subordinated Notes
includes certain restrictive covenants which limit the Company's
(Continued)
F-17
44
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
ability to incur additional debt, pay dividends and make other restricted
payments, consummate certain transactions and other matters.
The term loan payable at October 31, 1995 was outstanding under a Bank
Credit Agreement which previously provided for a term facility of up to
$43,000 and a $50,000 working capital line of credit. A portion of the
proceeds from the Company's initial public equity offering in August 1996
(the "IPO") were used to repay the term loan in full. In addition, in
December 1995, the Company entered into a credit agreement with a bank
which provided for a line of credit in the amount of $15 million to be used
for the continued development of the Company's logo business. At October
31, 1996, the outstanding balance on this line was $5,000.
In December 1996, the Company entered into a New Bank Credit Agreement with
a syndicate of financial institutions which replaced the Company's existing
bank credit facilities. The New Bank Credit Agreement provides the Company
with a committed $225 million revolving credit facility and a $75 million
incremental term facility funded at the discretion of the lenders.
Availability of the line under the revolving facility will be reduced over
a five year period from 1999 to 2003 and will bear interest at a variable
rate of interest based upon an applicable margin over prime or the LIBOR
rate. The term facility would amortize over six years beginning in 1999.
The facilities are guaranteed by the Company's subsidiaries and secured by
the capital stock of the Company's subsidiaries. The New Credit Agreement
contains various restrictive covenants which require that the Company meet
certain minimum leverage and coverage ratios, restrict additional
indebtedness, limit dividends and other restricted payments, limit capital
expenditures and dispositions of assets, and other restrictions.
During 1996, the Company issued $20,000 of ten-year subordinated notes at
the completion of the IPO as a portion of the additional consideration paid
on account of stock redemptions occurring in October 1995 and March 1996.
These notes bear interest at 8%.
(9) Income Taxes
LAC files a consolidated federal income tax return which includes all of
its qualifying subsidiaries.
(Continued)
F-18
45
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Income taxes for the years ended October 31, 1994, 1995 and 1996 consists
of:
Current Deferred Total
------- -------- ------
Attributable to continuing
operations:
1994:
U.S. Federal $ 165 (2,650) (2,485)
State and local 413 - 413
------- ------ ------
$ 578 (2,650) (2,072)
======= ====== ======
1995:
U.S. Federal $ 290 (3,301) (3,011)
State and local 621 - 621
------- ------ ------
$ 911 (3,301) (2,390)
======= ====== ======
1996:
U.S. Federal $ 3,991 2,683 6,674
State and local 800 (375) 425
------- ------ ------
4,791 2,308 7,099
Deferred tax attributable to
unrealized gains on invest-
ment securities in 1996,
included in stockholders'
equity
- 1,180 1,180
------- ------ ------
$ 4,791 3,488 8,279
======= ====== ======
Income taxes attributable to continuing operations in 1994 and 1995 include
adjustments to the beginning-of-the-year valuation allowance on the
Company's deferred tax assets in the amounts of $3,882 and $5,939,
respectively. The improved business conditions and resulting profitability
resulted in a change in management's judgment regarding the realizability
of the deferred tax assets.
(Continued)
F-19
46
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Income tax expense (benefit) attributable to continuing operations for
1994, 1995 and 1996, differs from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to earnings before income taxes as
follows:
1994 1995 1996
------- ------ -----
Computed "expected" tax expense $ 1,777 2,825 6,102
Increase (reduction) in income
taxes resulting from:
Change in beginning of the year
balance of the valuation
allowance for deferred tax
assets (3,882) (5,939) -
State and local income taxes,
net of federal income tax
benefit 273 410 281
Other differences, net (240) 314 716
------- ------ -----
Actual income tax expense
(benefit) $(2,072) (2,390) 7,099
======= ====== =====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at October
31, 1995 and 1996 are presented below:
1995 1996
------- ------
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation $(4,656) (4,002)
Intangibles, due to differences in
amortizable lives (594) -
Unrealized gains on investment
securities - (1,180)
------- ------
Deferred tax liabilities $(5,250) (5,182)
------- ------
(Continued)
F-20
47
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
1995 1996
-------- -----
Deferred tax assets:
Receivables, principally due to
allowance for doubtful accounts
and accounts written off $ 193 205
Plant and equipment, due to basis
differences on acquisitions and
costs capitalized for tax purposes 4,828 4,850
Investment in affiliates and plant and
equipment due to gains recognized
for tax purposes and deferred for
financial reporting purposes 1,719 900
Net operating loss carryforwards 2,262 -
Investment tax credit carryforwards 929 -
Minimum tax credit carryforwards - 849
Other, net 1,270 841
-------- -----
Deferred tax assets 11,201 7,645
-------- -----
Net deferred tax asset $ 5,951 2,463
======== =====
The valuation allowance for deferred tax assets as of November 1, 1994 was
$5,929.
(10) Other Related Party Transactions
Affiliates, as used within these statements, are companies which are
affiliated with Lamar Advertising Company or its subsidiaries through
common ownership and directorate control.
(Continued)
F-21
48
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
The Company receives income and incurs costs in transactions with related
parties and affiliates. The following is a summary of such transactions
for the years ended October 31:
1994 1995 1996
----- ---- ----
Revenues:
Management fee income $ 334 31 61
Interest income 59 8 6
Production of logo plates 143 143 96
Expenses:
Interest expense 308 296 494
Rent expense 71 - -
The Company was a party to a consulting agreement with Kevin P. Reilly,
Sr., a shareholder and former Chairman of the Company which expired in
January 1996. The agreement provided for annual consulting fees of $120,
and an annual bonus of up to $100. The Company continued to pay the
consulting fee on a month-to-month basis until July 1, 1996. Effective
July 1, 1996, a subsidiary of the Company entered into a replacement
consulting agreement with Reilly Consulting Company, LLC, of which Mr.
Reilly, Sr. is the manager and, with his wife, are the sole members. The
agreement has a ten year term and provides for annual consulting fees of
$120. Consulting fees and bonuses paid under the above agreements during
1994, 1995 and 1996 were $180, $230 and $195, respectively.
As of October 31, 1995 and 1996, debentures totaling $2,950 and $2,375,
respectively, are owned by shareholders, directors and employees.
During 1995 and 1996, the Company repurchased 3.6% and 12.9%, respectively,
of its then outstanding common stock (1,220,500 and 3,618,203 shares,
respectively, after giving effect to the 778.9 for 1 split of such stock
and recapitalization occurring after such repurchases) from certain of its
existing stockholders for an aggregate purchase price of approximately $4
million. The terms of the October 1995 and March 1996 repurchases entitled
the selling stockholders to receive additional consideration from the
Company in the event that the Company consummated a public offering of its
common stock at a higher price within 24 months of the repurchase. In
(Continued)
F-22
49
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
satisfaction of that obligation, upon completion of the IPO in August
1996, the Company paid the selling stockholders an aggregate of $5.0
million in cash and issued to them ten-year subordinated notes in the
aggregate principal amount of $20,000. The notes bear interest at 8% (1%
above the ten-year treasury note rate when issued) and are payable in
monthly installments of $167, plus interest.
On December 31, 1995, the Company issued 5,719.49 of its Class A Preferred
Stock with an aggregate liquidation preference of $3.6 million to certain
of its stockholders in exchange for 4,454,779 shares of its then
outstanding common stock.
(11) Stockholders' Equity
In August 1996, the Company completed the IPO of 4,294,041 shares of Class
A Common Stock, $.001 par value per share, at an offering price of $16.00
per share. In conjunction with the IPO, the Company effected a
recapitalization consisting of an approximately 778.9-for-1 stock split
and an exchange of its then outstanding common stock for new Class A and
Class B common stock. The rights of the new Class A and Class B common
stock are equal in all respects, except holders of Class B common stock
have ten votes per share and holders of Class A common stock have one vote
per share. Class B common stock will convert automatically into Class A
common stock upon the sale or transfer to persons other than permitted
transferees. All share information has been adjusted to reflect the
recapitalization.
In connection with the IPO, the Company adopted the 1996 Equity Incentive
Plan (the "1996 Plan"). The purpose of the 1996 Plan is to attract and
retain key employees and consultants of the Company. The 1996 Plan
authorizes the grant of stock options, stock appreciation rights and
restricted stock to employees and consultants of the Company capable of
contributing to the Company's performance. The Company has reserved an
aggregate of 2,000,000 shares of Class A Common Stock for awards under the
1996 Plan. Options granted under the 1996 plan generally become
exercisable over a five year period and expire 10 years from the date of
grant.
(Continued)
F-23
50
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
The following is a summary of activity in the 1996 plan since its adoption
in July 1996.
Number of Exercise
shares price
--------- --------
Outstanding at October 31, 1995 - $ -
Shares granted 1,181,500 16.00
Shares exercised 19,665 16.00
--------- -------
Outstanding at October 31, 1996 1,161,835 $ 16.00
========= =======
Exercisable at October 31, 1996 216,635 $ 16.00
========= =======
(12) Commitments and Other Contingencies
The Company sponsors a partially self-insured group health insurance
program. Coverage is available to all employees who work in excess of 30
hours per week. The Company is obligated to pay all claims under the
program which are in excess of premiums, up to program limits of $150 per
employee, per claim, per year. The Company has purchased third-party
insurance coverage for claims in excess of this amount. The Company is
also self-insured with respect to its income disability benefits and
against casualty losses on advertising structures. Amounts for expected
losses including a provision for losses incurred but not reported, are
included in accrued expenses in the accompanying consolidated financial
statements. The Company maintains a $1,000 letter of credit with a bank to
meet requirements of the Company's workers' compensation insurance
carrier. The Company also maintains a $375 letter of credit with an
insurance company to partially collateralize a surety bond for a logo
company.
The Company sponsors The Lamar Corporation Savings and Profit Sharing Plan
covering employees who have completed one year of service and are at least
21 years of age. The Company matches 50% of employees' contributions up
to 5% of related compensation. Employees can contribute up to 15% of
compensation. Full vesting on the Company's matched contributions occurs
after five years. The Company contributed $230, $512, and $564 for the
years ended October 31, 1994, 1995, and 1996, respectively.
(Continued)
F-24
51
LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
In 1993, LAC established a Deferred Compensation Plan (the "Plan") for the
benefit of certain of its senior management who meet specified age and
years of service criteria. Employees who have attained the age of 30 and
have a minimum of 10 years of service are eligible for annual
contributions to the Plan generally ranging from $3 to $8, depending on
the employee's length of service. LAC's contributions to the Plan are
maintained in a "rabbi" trust and, accordingly, the assets and liabilities
of the Plan are reflected in the balance sheet of LAC. Upon termination,
death or disability, participating employees are eligible to receive an
amount equal to the fair market value of the assets in the employee's
deferred compensation account. The Company has contributed $151, $210,
and $182 to the Plan during 1994, 1995 and 1996, respectively.
Contributions to the Plan are discretionary and are determined by the
Board of Directors.
The Company is the subject of litigation arising during the normal course
of business. In the opinion of management and general counsel of the
Company, those claims will not have a material impact on the financial
position, results of operations or liquidity of the Company.
(13) Subsequent Events
On November 1, 1996, the Company purchased all of the stock of FKM
Advertising Co., Inc. for a cash purchase price of approximately $40,000
and on December 10, 1996, the Company purchased substantially all of the
assets of Outdoor East, L.P. for a total purchase price of approximately
$60,500 in cash. The acquisitions will be accounted for under the
purchase method of accounting.
On November 27, 1996, the Company issued 2,530,000 shares of Class A
common stock, $.001 per share par value, at an offering price of $23.00
per share.
(14) Summarized Financial Information of Subsidiaries
Except as set forth below, separate financial statements of each of the
Company's direct or indirect subsidiaries that have guaranteed the
Company's obligations under its 9 5/8% Senior Subordinated Notes due 2006
(collectively, the "Guarantors") are not included herein because the
Guarantors are jointly and severally liable under the guarantees, and the
aggregate assets, liabilities, earnings and equity of the Guarantors are
substantially equivalent to the assets, liabilities, earnings and equity
of the Company on a consolidated basis.
F-25
52
Summarized financial information for Minnesota Logos, a Partnership, a 95%
owned subsidiary of the Company and the only Guarantor which is not
wholly-owned by the Company, is set forth below:
1994 1995 1996
---- ---- ----
Current assets - 8 53
Total assets - 1,347 1,939
Current liabilities - 1,173 1,502
Total liabilities - 1,343 1,766
Venturers' equity - 4 173
Revenues - 125 867
Net Income - 4 169
In addition, summarized financial information for Missouri Logos, a
Partnership, a 66 2/3% owned subsidiary of the Company and the only
subsidiary of the Company that is not a Guarantor, is set forth below:
1994 1995 1996
---- ---- ----
Current assets 77 58 242
Total assets 127 72 292
Current liabilities 9 5 -
Total liabilities 18 5 225
Venturers' equity 109 67 67
Revenues 745 804 931
Net Income 471 540 545
F-26
53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
54
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is contained in part under the caption
"Executive Officers of the Registrant" in Part II, Item 1A hereof and the
remainder is incorporated herein by reference from the discussion responsive
thereto under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement
relating to the 1997 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated herein by reference from the
discussion responsive thereto under the following captions in the Company's
Proxy Statement relating to the 1997 Annual Meeting of Stockholders: "Election
of Directors - Director Compensation," "Executive Compensation" and
"Compensation Committee Interlocks and Insider Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption "Share Ownership" in the
Company's Proxy Statement relating to the 1997 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption "Certain Relationships and
Related Transactions" in the Company's Proxy Statement relating to the 1997
Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The financial statements are listed under Part II, Item 8 of this
Report.
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedules are listed under Part II, Item 8 of
this Report.
55
3. EXHIBITS
The exhibits are listed below under Part IV, Item 14(C) of this Report.
(B) REPORTS ON FORM 8-K
Reports on Form 8-K were filed with the Commission during the fourth
quarter of fiscal 1996 to report the following items as of the dates
indicated:
o The Company filed on October 25, 1996 a report on Form 8-K
reporting under Item 5 the commencement of a tender offer for all
of its $100 million outstanding 11% Senior Secured Notes due May
15, 2003, together with a consent solicitation to effect
amendments to the indenture under which such Notes were issued.
C) EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
3.1 Amended and Restated Certificate of Incorporation of the Company.
Filed as Exhibit 3.1 to the Company's Registration Statement on Form
S-1 (File No. 333-05479), and incorporated herein by reference.
3.2 By-laws of the Company, as amended. Previously filed as Exhibit 3.2
to the Company's Registration Statement on Form S-1 (File No.
333-05479), and incorporated herein by reference.
4.1 Specimen certificate for the shares of Class A Common Stock of the
Company. Previously filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (File No. 333-05479), and
incorporated herein by reference.
4.2 Senior Secured Note dated May 19, 1993. Previously filed as Exhibit
4.1 to the Company's Registration Statement on Form S-1 (File No.
33-59624), and incorporated herein by reference.
4.3 Subsidiary Guarantees dated May 19, 1993. Previously filed as
Exhibit 4.2 to the Company's Registration Statement on Form S-1
(File No. 33-59624), and incorporated herein by reference.
4.4 Indenture dated May 15, 1993. Previously filed as Exhibit 4.3 to
the Company's Registration Statement on Form S-1 (File No.
33-59624), and incorporated herein by reference.
4.5 First Supplemental Indenture dated July 30, 1996. Previously filed
as Exhibit 4.5 to the Company's Registration Statement on Form S-1
(File No. 333-05479), and incorporated herein by reference.
56
4.6 Form of Second Supplemental Indenture in the form of an Amended and
Restated Indenture dated November 8, 1996. Previously filed as
Exhibit 4.1 to the Company's Current Report on Form 8-K filed on
November 15, 1996 (File No. 0-20833), and incorporated herein by
reference.
4.7 Notice of Trustee dated November 8, 1996 with respect to the release
of the security interest in the Trustee on behalf of the holders of
the Company's Senior Secured Notes. Filed as Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on November 15, 1996
(File No. 0-20833), and incorporated herein by reference.
4.8 Pledge Agreement dated May 19, 1993. Previously filed as Exhibit
4.4 to the Company's Registration Statement on Form S-1 (File No.
33-59624), and incorporated herein by reference.
4.9 Amendment to Pledge Agreement dated July 30, 1996. Previously filed
as Exhibit 4.7 to the Company's Registration Statement on Form S-1
(File No. 333-05479), and incorporated herein by reference.
4.10 Form of Subordinated Note. Previously filed as Exhibit 4.8 to the
Company's Registration Statement on Form S-1 (File No. 333-05479),
and incorporated herein by reference.
4.11 Form of Indenture dated as of November 15, 1996 relating to the
Company's Senior Subordinated Notes. Previously filed as Exhibit
4.11 to the Company's Registration Statement on Form S-3 (File
No.333-14789), and incorporated herein by reference.
4.12 Form of Senior Subordinated Note. Previously filed as Exhibit 4.12
to the Company's Registration Statement on Form S-3 (File
No.333-14789), and incorporated herein by reference.
10.1 Bank Credit Agreement between the Registrant and The Chase Manhattan
Bank (National Association) dated May 19, 1993. Previously filed as
Exhibit 10.1 to the Company's Registration Statement on Form S-1
(File No. 33- 59624), and incorporated herein by reference.
10.2 Consulting Agreement dated July 1, 1996 between the Lamar Texas
Limited partnership and the Reilly Consulting Company, L.L.C., of
which Kevin P. Reilly, Sr. is the manager. Previously filed as
Exhibit 10.2 to the Company's Registration Statement on Form S-1
(File No. 333-05479), and incorporated herein by reference.
10.3 Indenture dated as of September 24, 1986 relating to the Company's
8% Unsecured Subordinated Debentures. Previously filed as Exhibit
10.3 to the Company's Registration Statement on Form S-1 (File No.
33-59624), and incorporated herein by reference.
57
10.4 The Lamar Savings and Profit Sharing Plan Trust. Previously filed
as Exhibit 10.4 to the Company's Registration Statement on Form S-1
(File No. 33-59624), and incorporated herein by reference.
10.5 Amendment and Waiver to the Bank Credit Agreement between the
Company and the Chase Manhattan Bank, dated September 30, 1993.
Previously filed as Exhibit 10.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1995 (File No.
33-59624), and incorporated herein by reference.
10.6 Second Amendment to the Bank Credit Agreement between the Company
and the Chase Manhattan Bank, dated January 1, 1994. Previously
filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1995 (File No. 33-59624), and
incorporated herein by reference.
10.7 Third Amendment to the Bank Credit Agreement between the Company and
the Chase Manhattan Bank, dated May 10, 1994. Previously filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (File No. 33-59624), and
incorporated herein by reference.
10.8 Fourth Amendment to the Bank Credit Agreement between the Company
and the Chase Manhattan Bank, dated October 31, 1994. Previously
filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1995 (File No. 33-59624), and
incorporated herein by reference.
10.9 Fifth Amendment to the Bank Credit Agreement between the Company and
the Chase Manhattan Bank, dated October 15, 1994. Previously filed
as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (File No. 33-59624), and
incorporated herein by reference.
10.10 Sixth Amendment to the Bank Credit Agreement between the Company and
the Chase Manhattan Bank, dated July 12, 1996. Previously filed as
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (File No. 33-59624), and
incorporated herein by reference.
10.11 Trust under The Lamar Corporation, its Affiliates and Subsidiaries
Deferred Compensation Plan dated October 3, 1993. Previously filed
as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (File No. 33-59624), and
incorporated herein by reference.
10.12 Bank Credit Agreement between the Company and the Chase Manhattan
Bank (National Association) dated December 22, 1995. Previously
filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1995 (File No. 33-59624), and
incorporated herein by reference.
10.13 Amendment No. 1 to Bank Credit Agreement between the
58
Company and the Chase Manhattan Bank (National Association) dated
July 12, 1996. Previously filed as Exhibit 10.13 to the Company's
Registration Statement on Form S-1 (File No. 333-05479), and
incorporated herein by reference.
10.14 1996 Equity Incentive Plan. Previously filed as Exhibit 10.14 to
the Company's Registration Statement on Form S-1 (File No.
333-05479), and incorporated herein by reference.
10.15 Seventh Amendment to the Bank Credit Agreement between the Company
and the Chase Manhattan Bank, dated October 31, 1996. Previously
filed as Exhibit 10.15 to the Company's Registration Statement on
Form S-3 (File No.333-14789), and incorporated herein by reference.
10.16 Contract to Sell and Purchase, dated as of October 9, 1996, between
the Company and Outdoor East L.P. Previously filed as Exhibit 10.16
to the Company's Registration Statement on Form S-3 (File
No.333-14677), and incorporated herein by reference.
10.17 Stock Purchase Agreement, dated as of September 25, 1996, between
the Registrant and the shareholders of FKM Advertising, Inc. To be
filed by Amendment. Previously filed as Exhibit 10.17 to the
Company's Registration Statement on Form S-3 (File No.333-14677),
and incorporated herein by reference.
10.18 Bank Credit Agreement between the Company and the Chase Manhattan
Bank (National Association) dated December 18, 1996. Filed herewith.
21.1 Subsidiaries of the Company. Filed herewith.
23.1 Consent of KPMG Peat Marwick LLP, independent accountants of the
Company. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
99.1 Important Factors Regarding Forward-Looking Statements. Filed
herewith.
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LAMAR ADVERTISING COMPANY
(Registrant)
/S/Kevin P. Reilly, Jr.
----------------------------------------------
Kevin P. Reilly, Jr.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
1/27/97 /S/Kevin P. Reilly, Jr.
- --------------------- ----------------------------------------------
Date Kevin P. Reilly, Jr.
Chief Executive Officer and
Director
1/27/97 /S/Keith A. Istre
- --------------------- ----------------------------------------------
Date Keith A. Istre
Chief Financial and Accounting
Officer, and Director
1/27/97 /S/Dudley W. Coates
- --------------------- ----------------------------------------------
Date Dudley W. Coates
Director
1/27/97 /S/Charles W. Lamar, III
- --------------------- ----------------------------------------------
Date Charles W. Lamar, III
Director
1/27/97 /S/Gerald H. Marchand
- --------------------- ----------------------------------------------
Date Gerald H. Marchand
Director
1/27/97 /S/Jack S. Rome
- --------------------- ----------------------------------------------
Date Jack S. Rome
Director
1/27/97 /S/William R. Schmidt
- --------------------- ----------------------------------------------
Date William R. Schmidt
Director
1/27/97 /S/T. Everett Stewart
- --------------------- ----------------------------------------------
Date T. Everett Stewart
Director
60
INDEX TO EXHIBITS
Exhibit Number Description of Exhibits
- -------------- -----------------------
3.1 Amended and Restated Certificate of Incorporation of the Company. Filed as Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (File No. 333-05479), and incorporated herein by reference.
3.2 By-laws of the Company, as amended. Previously filed as Exhibit 3.2 to the Company's Registration Statement
on Form S-1 (File No. 333-05479), and incorporated herein by reference.
4.1 Specimen certificate for the shares of Class A Common Stock of the Company. Previously filed as Exhibit 4.1
to the Company's Registration Statement on Form S-1 (File No. 333-05479), and incorporated herein by
reference.
4.2 Senior Secured Note dated May 19, 1993. Previously filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (File No. 33-59624), and incorporated herein by reference.
4.3 Subsidiary Guarantees dated May 19, 1993. Previously filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-1 (File No. 33-59624), and incorporated herein by reference.
4.4 Indenture dated May 15, 1993. Previously filed as Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (File No. 33-59624), and incorporated herein by reference.
4.5 First Supplemental Indenture dated July 30, 1996. Previously filed as Exhibit 4.5 to the Company's
Registration Statement on Form S-1 (File No. 333-05479), and incorporated herein by reference.
61
4.6 Form of Second Supplemental Indenture in the form of an Amended and Restated Indenture dated November 8,
1996. Previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on November 15, 1996
(File No. 0-20833), and incorporated herein by reference.
4.7 Notice of Trustee dated November 8, 1996 with respect to the release of the security interest in the Trustee
on behalf of the holders of the Company's Senior Secured Notes. Filed as Exhibit 4.2 to the Company's
Current Report on Form 8-K filed on November 15, 1996 (File No. 0-20833), and incorporated herein by
reference.
4.8 Pledge Agreement dated May 19, 1993. Previously filed as Exhibit 4.4 to the Company's Registration Statement
on Form S-1 (File No. 33-59624), and incorporated herein by reference.
4.9 Amendment to Pledge Agreement dated July 30, 1996. Previously filed as Exhibit 4.7 to the Company's
Registration Statement on Form S-1 (File No. 333-05479), and incorporated herein by reference.
4.10 Form of Subordinated Note. Previously filed as Exhibit 4.8 to the Company's Registration Statement on Form
S-1 (File No. 333-05479), and incorporated herein by reference.
4.11 Form of Indenture dated as of November 15, 1996 relating to the Company's Senior Subordinated Notes.
Previously filed as Exhibit 4.11 to the Company's Registration Statement on Form S-3 (File No.333-14789),
and incorporated herein by reference.
4.12 Form of Senior Subordinated Note. Previously filed as Exhibit 4.12 to the Company's Registration Statement
on Form S-3 (File No.333-14789), and incorporated herein by reference.
10.1 Bank Credit Agreement between the Registrant and The Chase Manhattan Bank (National Association) dated May
19, 1993. Previously filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 (File No. 33-
59624), and incorporated herein by reference.
10.2 Consulting Agreement dated July 1, 1996 between the Lamar Texas Limited partnership and the Reilly Consulting
Company, L.L.C., of which Kevin P. Reilly, Sr. is the manager. Previously filed as Exhibit 10.2 to the
Company's Registration Statement on Form S-1 (File No. 333-05479), and incorporated herein by reference.
10.3 Indenture dated as of September 24, 1986 relating to the Company's 8% Unsecured Subordinated Debentures.
Previously filed as Exhibit 10.3 to the Company's Registration Statement on Form S-1 (File No. 33-59624), and
incorporated herein by reference.
62
10.4 The Lamar Savings and Profit Sharing Plan Trust. Previously filed as Exhibit 10.4 to the Company's
Registration Statement on Form S-1 (File No. 33-59624), and incorporated herein by reference.
10.5 Amendment and Waiver to the Bank Credit Agreement between the Company and the Chase Manhattan Bank, dated
September 30, 1993. Previously filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.6 Second Amendment to the Bank Credit Agreement between the Company and the Chase Manhattan Bank, dated January
1, 1994. Previously filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.7 Third Amendment to the Bank Credit Agreement between the Company and the Chase Manhattan Bank, dated May 10,
1994. Previously filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.8 Fourth Amendment to the Bank Credit Agreement between the Company and the Chase Manhattan Bank, dated October
31, 1994. Previously filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.9 Fifth Amendment to the Bank Credit Agreement between the Company and the Chase Manhattan Bank, dated October
15, 1994. Previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.10 Sixth Amendment to the Bank Credit Agreement between the Company and the Chase Manhattan Bank, dated July 12,
1996. Previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.11 Trust under The Lamar Corporation, its Affiliates and Subsidiaries Deferred Compensation Plan dated October
3, 1993. Previously filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.12 Bank Credit Agreement between the Company and the Chase Manhattan Bank (National Association) dated December
22, 1995. Previously filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 (File No. 33-59624), and incorporated herein by reference.
10.13 Amendment No. 1 to Bank Credit Agreement between the
63
Company and the Chase Manhattan Bank (National Association) dated July 12, 1996. Previously filed as Exhibit
10.13 to the Company's Registration Statement on Form S-1 (File No. 333-05479), and incorporated herein by
reference.
10.14 1996 Equity Incentive Plan. Previously filed as Exhibit 10.14 to the Company's Registration Statement on
Form S-1 (File No. 333-05479), and incorporated herein by reference.
10.15 Seventh Amendment to the Bank Credit Agreement between the Company and the Chase Manhattan Bank, dated
October 31, 1996. Previously filed as Exhibit 10.15 to the Company's Registration Statement on Form S-3
(File No.333-14789), and incorporated herein by reference.
10.16 Contract to Sell and Purchase, dated as of October 9, 1996, between the Company and Outdoor East L.P.
Previously filed as Exhibit 10.16 to the Company's Registration Statement on Form S-3 (File No.333-14677),
and incorporated herein by reference.
10.17 Stock Purchase Agreement, dated as of September 25, 1996, between the Registrant and the shareholders of FKM
Advertising, Inc. To be filed by Amendment. Previously filed as Exhibit 10.17 to the Company's
Registration Statement on Form S-3 (File No.333-14677), and incorporated herein by reference.
10.18 Bank Credit Agreement between the Company and the Chase Manhattan Bank (National Association) dated December
18, 1996. Filed herewith.
21.1 Subsidiaries of the Company. Filed herewith.
23.1 Consent of KPMG Peat Marwick LLP, independent accountants of the Company. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
99.1 Important Factors Regarding Forward-Looking Statements. Filed herewith.