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EXHIBIT 99.1
LAMAR ADVERTISING COMPANY
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
January 1997
From time to time, Lamar Advertising Company through its management
may make forward-looking public statements, such as statements concerning then
expected future revenues or earnings or concerning projected plans and
performance, as well as other estimates relating to future operations.
Forward-looking statements may be in reports filed under the Securities
Exchange Act of 1934, as amended, in press releases or in oral statements made
with the approval of an authorized executive officer. The words or phrases
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project," or similar expressions are intended to identify
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933,
as enacted by the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers not to place undue reliance on
these forward-looking statements which speak only as of the date on which they
are made. In addition, the Company wishes to advise readers that the factors
listed below, as well as other factors not currently identified by management,
could affect the Company's financial or other performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods or events in
any current statement.
The Company will not undertake and specifically declines any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events which may cause management to re-evaluate such
forward-looking statements.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is hereby filing
cautionary statements identifying factors that could cause the Company's actual
results to differ materially from those projected in forward-looking statements
of the Company made by or on behalf of the Company.
FLUCTUATIONS IN ECONOMIC AND ADVERTISING TRENDS
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. A reduction in advertising
expenditures available for the Company's displays could result from a general
decline in economic conditions, a decline in economic
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conditions in particular markets where the Company conducts business or a
reallocation of advertising expenditures to other available media by
significant users of the Company's displays. Although the Company believes
that in recent years outdoor advertising expenditures have increased more
rapidly than total U.S. advertising expenditures, there can be no assurance
that this trend will continue or that in the future outdoor advertising
expenditures will not grow more slowly than the advertising industry as a
whole.
REGULATION OF OUTDOOR ADVERTISING
The outdoor advertising business is subject to regulation by federal,
state and local governments. Federal law requires states, as a condition to
federal highway assistance, to restrict billboards on federally-aided primary
and interstate highways to commercial and industrial areas and imposes certain
additional size, space and other limitations on billboards. Some states have
adopted standards more restrictive than the federal requirements. Local
governments generally control billboards as part of their zoning regulations,
and some local governments prohibit construction of new billboards and
reconstruction of substantially damaged billboards or allow new construction
only to replace existing structures. In addition, some jurisdictions
(including certain of those within the Company's markets) have adopted
amortization ordinances under which owners and operators of outdoor advertising
displays are required to remove existing structures at some future date, often
without condemnation proceeds being available. Federal and corresponding state
outdoor advertising statutes require payment of compensation for removal by
governmental order in some circumstances. Ordinances requiring the removal of
a billboard without compensation, whether through amortization or otherwise,
have been challenged in various state and federal courts on both statutory and
constitutional grounds, with conflicting results. Although the Company has
been successful in the past in negotiating acceptable arrangements in
circumstances in which its displays have been subject to removal or
amortization, there can be no assurance that the Company's will be successful
in the future and what effect, if any, such regulations may have on the
Company's operations. In addition, the Company is unable to predict what
additional regulation may be imposed on outdoor advertising in the future.
Legislation regulating the content of billboard advertisements has been
introduced in Congress from time to time in the past, although no laws which,
in the opinion of management, would materially affect the Company's business
have been enacted to date. Changes in laws and regulations affecting the
outdoor advertising at any level of government may have a material adverse
effect on the Company's results of operations.
SUBSTANTIAL INDEBTEDNESS OF THE COMPANY
The Company presently has substantial indebtedness ($132.0 million at
October 31, 1996), and in November 1996 issued $255 million aggregate principal
amount of 9 5/8% Senior Subordinated Notes. In addition, in December 1996 the
Company entered into a new bank credit facility, which would increase the
Company's loan commitment to $225 million and would provide for additional
borrowing of up to $75 million at the discretion of the
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lenders. Furthermore, at October 31, 1996, the Company had $3.6 million of
Class A Preferred Stock, $638 par value per share, outstanding which is
entitled to an aggregate annual cumulative preferential dividend of $364,903.
A substantial part of the Company's cash flow from operations will be dedicated
to debt service and will not be available for other purposes. Further, if the
Company's net cash provided by operating activities were to decrease from
present levels, the Company could experience difficulty in meeting its debt
service obligations without additional financing. There can be no assurance
that, in the event the Company were to require additional financing, such
additional financing would be available or, if available, would be available on
favorable terms. In addition, any such additional financing could be incurred
only upon satisfaction of the debt incurrence provisions of its existing debt
instruments and may require the consent of its lenders or holders of other debt
of the Company. The level of the Company's indebtedness could have important
consequences to stockholders, including a reduction in the Company's
flexibility to respond to changing business and economic conditions. Certain
of the Company's competitors currently operate on a less leveraged basis and
may have greater operating and financial flexibility than the Company.
ACQUISITION AND GROWTH STRATEGY RISKS
The Company's growth has been enhanced materially by strategic
acquisitions that have substantially increased the Company's inventory of
advertising displays. One element of the Company's operating strategy is to
make strategic acquisitions in markets in which it currently competes as well
as in new markets. While the Company believes that the outdoor advertising
industry is highly fragmented and that significant acquisition opportunities
are available, there can be no assurance that suitable acquisition candidates
can be found, and the Company is likely to face competition from other outdoor
advertising companies for available acquisition opportunities. In addition, if
the prices sought by sellers of outdoor advertising displays continue to rise,
as management believes may happen, the Company may find fewer acceptable
acquisition opportunities. There can be no assurance that the Company will
have sufficient capital resources to complete acquisitions or be able to obtain
any required consents of its bank lenders or that acquisitions can be completed
on terms acceptable to the Company. In addition, the Company recently has
entered into the transit advertising business and, while the Company believes
that it will be able to utilize its expertise in outdoor advertising to operate
this business, it has had limited experience in transit advertising and there
is no assurance that it will be successful.
Since October 31, 1996, the Company has completed the acquisition of,
and has entered into agreements to acquire, two complementary businesses. The
process of integrating these businesses into the Company's operations may
result in unforeseen operating difficulties and could require significant
management attention that would otherwise be available for the development of
the Company's existing business. Moreover, there can be no assurance that the
Company may realize anticipated benefits and cost savings or that any future
acquisitions will be consummated.
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DECLINING TOBACCO ADVERTISING
Approximately 10% of the Company's outdoor advertising net revenues in
fiscal 1996 came from the tobacco products industry, compared to 9% for fiscal
1995, 7% for fiscal 1994 and 1993, 12% for fiscal 1992 and 17% for fiscal 1991.
Manufacturers of tobacco products, principally cigarettes, were historically
major users of outdoor advertising displays. Beginning in 1992, the leading
tobacco companies substantially reduced their domestic advertising expenditures
in response to societal and governmental pressures and other factors. There can
be no assurance that the tobacco industry will not further reduce advertising
expenditures in the future either voluntarily or as a result of governmental
regulations or as to what affect any such reduction may have on the Company.
Tobacco advertising is currently subject to regulation and legislation has been
introduced from time to time in Congress that would further regulate
advertising of tobacco products. In August 1996, President Clinton signed an
executive order adopting rules proposed by the United States Food and Drug
Administration which would prohibit the use of pictures and color in tobacco
advertising and restrict the proximity of outdoor tobacco advertising to
schools and playgrounds. Although certain advertising industry and tobacco
industry organizations have filed lawsuits challenging these rules and certain
members of Congress have indicated that they may sponsor legislation to prevent
these rules from going into effect, there can be no assurance that such
lawsuits will be successful or that such legislation, if proposed, will be
adopted. Subject to the outcome of litigation or legislation action, these
rules would become effective in August 1997. Further, there can be no
assurance that national or local legislation or regulations restricting tobacco
advertising will not be adopted in the future, or as to the effect any such
legislation or the voluntarily curtailment of advertising by the tobacco
companies would have on the Company.
COMPETITION
In addition to competition from other forms of media, including
television, radio, newspapers and direct mail advertising, the Company faces
competition in its markets from other outdoor advertising companies, some of
which may be larger and better capitalized than the Company. The Company also
competes with a wide variety of other out-of-home advertising media, the range
and diversity of which have increased substantially over the past several years
to include advertising displays in shopping centers, malls, airports, stadiums,
movie theaters and supermarkets, and on taxis, trains and buses. The Company
believes that its local orientation, including the maintenance of local
offices, has enabled it to compete successfully in its markets to date.
However, there can be no assurance that the Company will be able to continue to
compete successfully against current and future sources of outdoor advertising
competition and competition from other media or that the competitive pressures
faced by the Company will not adversely affect its profitability or financial
performance. In its logo sign business, the Company currently faces
competition for state franchises from four other national logo sign providers
as well as local companies. Competition from these sources is encountered both
when a franchise is first privatized and upon renewal thereafter.
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POTENTIAL LOSSES FROM HURRICANES
A significant portion of the Company's structures are located in the
mid-Atlantic and Gulf Coast regions of the United States. These areas are
highly susceptible to hurricanes during the late summer and early fall. In the
past, severe storms have caused the Company to incur material losses resulting
from structural damage, overtime compensation, loss of billboards that could
not legally be replaced and reduced occupancy because billboards are out of
service. The Company has determined that it is not economical to obtain
insurance against losses from hurricanes and other storms. The Company has
developed contingency plans to deal with the threat of hurricanes, including
plans for early removal of advertising faces to permit the structures to better
withstand high winds and the replacement of such faces after storms have
passed. As a result of these contingency plans, the Company has experienced
lower levels of losses from recent storms and hurricanes. Structural damage
attributable to Hurricane Andrew in 1992 was less than $500,000, and three
hurricanes caused aggregate damage of less than $1,000,000 in 1995, and the
Company suffered no significant structural damage as a result of hurricanes in
1996. There can be no assurance, however, that the Company's contingency plans
will continue to be effective.
RISKS IN OBTAINING AND RETAINING LOGO SIGN FRANCHISES
Logo sign franchises represent a growth portion of the Company's
revenues and operating income. The Company cannot predict the number of
remaining states, if any, that will initiate logo sign programs or convert
state-run logo sign programs to privately operated programs. Competition for
new state logo sign franchises is intense and, even after a favorable award,
franchises may be subject to challenge under state contract bidding
requirements, resulting in delays and litigation costs. In addition, state
logo sign franchises are generally, with renewal options, ten to twenty-year
franchises subject to earlier termination by the state, in most cases upon
payment of compensation. 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 are due to terminate
in the next two years; only two are subject to renewal during that period and,
in one case, the state authority has verbally agreed to renew the franchise for
five years. There can be no assurance that the Company will be successful in
obtaining new logo sign franchises or renewing existing franchises.
Furthermore, following the receipt by the Company of a new state logo sign
franchise, the Company generally incurs significant start-up capital
expenditures and there can be no assurance that the Company will continue to
have access to capital to fund such expenditures.
RELIANCE ON KEY EXECUTIVES
The Company's success depends to a significant extent upon the
continued services of its executive officers and other key management and sales
personnel, in particular Kevin P. Reilly, Jr., the Company's Chief Executive
Officer, the Company's five regional managers
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and the manager of its logo sign business. Although the Company believes it
has incentive and compensation programs designed to retain key employees, the
Company has no employment contracts with any of its employees, and none of its
executive officers are bound by non-compete agreements. The Company does not
maintain key man insurance on its executives. The unavailability of the
continuing services of its executive officers and other key management and
sales personnel could have an adverse effect on the Company's business.
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