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 333-16631
MINNESOTA LOGOS, A PARTNERSHIP
(Exact name of registrant as specified in its charter)
Minnesota 41-1804
(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:
Guarantee 9 5/8% Senior Subordinated Notes due 2006 of Lamar
Advertising Company
Name of Each Exchange on which Registered
New York Stock Exchange
Securities Registered Pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filled 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 No X
--- -----
Indicate by check mark if disclosure of delinquent fliers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form-10K. [ ]
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DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE
Portions of the annual report on Form 10-K of Lamar Advertising Company for the
fiscal year ended October 31, 1996 and portions of Lamar's proxy statement for
its annual meeting of stockholders to be held on March 20, 1997 are
incorporated by reference into Item 5 and part III of this report.
PART I
ITEM 1. BUSINESS
Development of Business
Minnesota Logos, a Partnership (the "Partnership") is 95% owned by Minnesota
Logos, Inc., a wholly owned subsidiary of Interstate Logos, Inc., a subsidiary
of both Lamar Advertising Company ("Lamar") and The Lamar Corporation ("TLC").
The Partnership was formed to secure the state logo sign franchise in the state
of Minnesota, which it was awarded effective August 1, 1995. State Logo sign
franchises represent the exclusive contract right to erect and operate logo
signs within a state.
Financial Information About Industry Segments
The Partnership operates in one industry segment. Information regarding this
segment is below.
Narrative Description of Business
The Partnership's principal service is providing logo sign advertising to
business and industry to advertise their products and services. Interstate logo
signs are erected pursuant to state-awarded franchises on public rights of way
near interstate highway exits that deliver name brand information on available
gas, food, lodging and camping services.
There are no patents or similar rights with respect to the products and
services offered by the partnership.
The Partnership's contract with the state of Minnesota provides for
termination by the state prior to the end of the term of the franchise
according to specific terms of default under the contract. At termination,
ownership of the franchise rights and any rights in the logo signs constructed
passes to the state of Minnesota and the Partnership shall not be entitled to
any compensation from the state of Minnesota. If at the expiration or
termination of the contract the sign franchise is awarded to a third party for
continuation of the franchise program, the Partnership shall sell its logo
signs on terms agreeable to both parties.
The Partnership's franchise is scheduled for renewal December 31, 2005. The
Partnership will face competition in bidding for renewal of the contract upon
expiration. Because a logo contract is
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effectively a state awarded franchise, once a logo contract is secured, there
is virtually no operating competition during the term of the contract.
The Partnership has approximately 3 employees.
ITEM 2. PROPERTIES
The Company leases it's sales office in Burnsville, Minnesota.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
No public or other market exists or is expected to develop for any equity
interest in the Partnership. Exclusive management and control of the business
of the Partnership is vested in Lamar. Information relating to the common
equity of Lamar is incorporated herein by reference from Part II, Item 5 of
Lamar's annual report on Form 10-K for the year ended October 31, 1996.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data of Minnesota Logos, a Partnership, for the period from
February 1, 1995 (inception) to October 31, 1995, and the year ended October
31, 1996 is shown below. The selected financial data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Financial Condition and Results of Operations and
the fiancial statements and the related notes thereto for the two years ended
October 31, 1996 included in Items 7 and 8, respectively.
Period
From February 1 Year Ended
1995, (inception) October 31,
To October 31, 1995 1996
------------------- -----------
REVENUES
Logo advertising $ 150,519 $ 866,960
--------- ---------
OPERATING EXPENSES
Direct expenses 28,506 234,898
General and administrative
expenses 69,688 210,289
Depreciation and
amortization 48,064 171,632
--------- ---------
146,258 616,819
--------- ---------
Operating income 4,261 250,141
--------- ---------
Other expense:
Loss on disposition
of assets - (81,857)
--------- ---------
- (81,857)
--------- ---------
Net income 4,261 168,284
--------- ---------
Cash 2,500 2,500
Total assets 1,349,428 1,939,435
Partners capital 4,361 172,645
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's net cash provided by operating activities is $165,665 for the
twelve months ended October 31, 1996, which consists of the Company's net
income of $168,284, non-cash items of $253,489, an increase in accounts
receivable of $50,707 and net decrease in liablilities of $205,401. Net cash
used in investing activities is $792,789, which consists of captial
expenditures of $787,789 and the purchase of intangible assets of $5,000. Cash
flows provided from financing activities were $627,124 entirely from advances
from affiliates. As a result of the above factors, there is no change in cash
between October 31, 1995 and October 31, 1996.
RESULTS OF OPERATIONS
The Partnership was awarded the state logo franchise effective August 1995;
therefore, the results of operations set forth in the accompanying financial
statements reflect approximately two months of operation for the period ended
October 31, 1995 as compared to twelve months of operations during the year
ended October 31, 1996. Accordingly, results of operations do not reflect
comparative periods.
FISCAL YEAR ENDED OCTOBER 31, 1996 AS COMPARED TO THE PERIOD FROM FEBRUARY 1,
1995 (INCEPTION) TO OCTOBER 31, 1995
Revenues for the twelve months ended October 31, 1996 increased $716,441 to
$886,960 from $150,519 for the period ended 1995. This increase was due to the
continued development of the program.
Operating expenses exclusive of depreciation and amortization for the twelve
months ended October 31, 1996 increased $346,993 to $445,187 from $98,194 for
the period ended 1995.
Depreciation and amortization expense for the twelve months ended October 31,
1996 increased $123,568 as compared to the period ended 1995. This increase was
generated by the build-out of the program and the additional months of
depreciation and amortization in the 1996 period.
Due to the above factors operating income for the twelve months ended October
31, 1996 increased $245,880 to $250,141 from $4,261 for the period ended 1995.
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As a result of the foregoing factors net earnings for the twelve months October
31, 1996 increased $164,023 to $168,284 from $4,261 for the period ended 1995.
ITEM 8. FINANCIAL STATEMENTS
Index to Financial Statements
Independent Auditors' Report ............................................. F-1
Balance Sheets ........................................................... F-2
Statements of Operations ................................................. F-3
Statements of Partners Capital ........................................... F-4
Statements of Cash Flows ................................................. F-5
Notes to Financial Statements ............................................ F-6
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Independent Auditors' Report
The Partners
Minnesota Logos, a Partnership:
We have audited the accompanying balance sheets of Minnesota Logos, a
Partnership, as of October 31, 1995 and 1996, and the related statements of
operations, partners' capital, and cash flows for the period from February 1,
1995 (inception) to October 31, 1995 and for the year ended October 31, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Minnesota Logos, a
Partnership, as of October 31, 1995 and 1996, and the results of its operations
and its cash flows for the period from February 1, 1995 (inception) to October
31, 1995 and for the year ended October 31, 1996 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New Orleans, Louisiana
February 7, 1997
F-1
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MINNESOTA LOGOS, A PARTNERSHIP
Balance Sheets
October 31, 1995 and 1996
Assets 1995 1996
------ ---- ----
Current assets:
Cash $ 2,500 2,500
Accounts receivable - 50,707
----------- -----------
Total current assets 2,500 53,207
----------- -----------
Plant and equipment (note 2) 1,260,365 1,959,015
Less accumulated depreciation (34,601) (171,026)
----------- -----------
1,225,764 1,787,989
----------- -----------
Other assets, net of accumulated
amortization of $13,463 and $41,388
in 1995 and 1996, respectively 121,164 98,239
----------- -----------
$ 1,349,428 1,939,435
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Current liabilities:
Trade accounts payable 279,940 2,327
Accrued expenses 13,000 5,121
Deferred income 184,407 264,498
Advances from affiliates 867,720 1,494,844
----------- -----------
Total current liabilities 1,345,067 1,766,790
----------- -----------
Partners' capital 4,361 172,645
----------- -----------
Total liabilities and
partners' capital $ 1,349,428 1,939,435
=========== ===========
See accompanying notes to financial statements.
F-2
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MINNESOTA LOGOS, A PARTNERSHIP
Statements of Operations
For the period from February 1, 1995 (inception) to October 31, 1995
and the year ended October 31, 1996
1995 1996
---- ----
Logo revenue $ 150,519 866,960
--------- ---------
Operating expenses:
Direct expenses 28,506 234,898
General and administrative expenses 69,688 210,289
Depreciation 34,601 143,707
Amortization 13,463 27,925
--------- ---------
146,258 616,819
--------- ---------
Operating income 4,261 250,141
Other expense - loss on disposition of assets - 81,857
--------- ---------
Net income 4,261 168,284
========= =========
See accompanying notes to financial statements.
F-3
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MINNESOTA LOGOS, A PARTNERSHIP
Statements of Partners' Capital
For the period from February 1, 1995 (inception)to October 31, 1995
and the year ended October 31, 1996
Contributed Accumulated
capital earnings Total
------- -------- -----
Balance, February 1, 1995 $ - - -
Capital contribution 100 - 100
Net income - 4,261 4,261
----- -------- --------
Balance, October 31, 1995 100 4,261 4,361
Net income - 168,284 168,284
----- -------- --------
Balance, October 31, 1996 $ 100 172,545 172,645
===== ======== ========
See accompanying notes to financial statements.
F-4
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MINNESOTA LOGOS, A PARTNERSHIP
Statements of Cash Flows
For the period from February 1, 1995 (inception) to October 31, 1995
and the year ended October 31, 1996
1995 1996
---- ----
Cash flows from operating activities:
Net income $ 4,261 168,284
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 48,064 171,632
Loss on disposition of assets - 81,857
Changes in assets and liabilities:
Decrease (increase) in assets
Accounts receivable - (50,707)
Increase (decrease)in liabilities:
Accounts payable 279,940 (277,613)
Accrued expenses 13,000 (7,879)
Deferred income 184,407 80,091
---------- ----------
Net cash provided by operating
activities 529,672 165,665
Cash flows from investing activities:
Capital expenditures (1,260,365) (787,789)
Purchase of intangible assets (134,627) (5,000)
----------- ----------
Net cash used in investing activities (1,394,992) (792,789)
Cash flows from financing activities:
Capital contributions 100 -
Advances from affiliates 867,720 627,124
---------- ----------
Net cash provided by financing activities 867,820 627,124
Net increase (decrease) in cash 2,500 -
Cash, beginning of year - 2,500
---------- ----------
Cash, end of year $ 2,500 2,500
========== ==========
See accompanying notes to financial statements.
F-5
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MINNESOTA LOGOS, A PARTNERSHIP
Notes to Financial Statements
October 31, 1995 and 1996
(1) Significant Accounting Policies
(a) Organization
Minnesota Logos, a Partnership (the Partnership) is 95% owned by
Minnesota Logos, Inc., whose ultimate parent is Lamar
Advertising Company. Global Contracting, L.L.P. owns the
remaining 5% of the Partnership.
The Partnership was awarded the Minnesota state logo sign
franchise effective August 1, 1995. Their principal business
activity is to provide interstate logo advertising in the state
of Minnesota.
(b) Plant and Equipment
Plant and equipment are stated at cost and are depreciated
primarily using the accelerated method over the estimated useful
lives of the assets.
Maintenance and repairs are charged against operations when
incurred. Additions and betterments are capitalized.
(c) Other Assets
Other assets consist primarily of organizational costs and costs
associated with the acquisition of new logo contracts, which are
being amortized over five years using the straight-line method.
(d) Revenue Recognition
Revenue is recognized in income as services are provided over the
term of the contract. Deferred revenue consists of logo revenue
received in advance.
(e) Income Taxes
No provision is made in the financial statements for income taxes
as the results of operations are allocated directly to the
partners.
(f) Partners Capital
The Company is a general partnership formed under the laws of the
Minnesota Partnership Act. The Partnership Agreement specifies
that each partner shall vote in accordance with their interest in
the
(Continued)
F-6
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2
MINNESOTA LOGOS, A PARTNERSHIP
Notes to Financial Statements
profits and losses of the Partnership and that profits and losses
shall be allocated at year end with 95% being allocated to
Minnesota Logos, Inc. and 5% to Global Contracting, LLP. The
life of the Partnership is indefinite.
(g) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that could affect the reported
amounts of assets at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results and the results of future periods could
differ from those estimates.
(2) Plant and Equipment
Major categories of plant and equipment at October 31, 1995 and 1996 are
as follows:
1995 1996
---- ----
Logo sign structures $ 967,175 1,891,280
Other equipment 13,443 13,443
Construction in progress 279,747 54,292
----------- -----------
$ 1,260,365 1,959,015
=========== ===========
(3) Commitments and Other Contingencies
The Company is a guarantor, jointly and severally with other affiliated
companies, of the payment of approximately $255,000,000 in senior
secured notes issued by its parent company, Lamar Advertising Company.
The Company's employees are covered by the parent company's self-insured
group health program. Coverage is available to all employees who work
in excess of 30 hours per week. The Company and/or parent is obligated
to pay all claims on these policies which are in excess of premiums up
to policy limits of $150,000 per employee, per claim, per year, at which
point reinsurance pays any additional charges. The Company is also
self-insured with respect to its income disability benefits and against
casualty losses on logo sign structures.
F-7
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Exclusive management and control of the business of the Partnership is vested
in Lamar. Accordingly, the information contained in Items 10 through 13 hereof
pertains to Lamar.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is incorporated by reference from Part II, Item 1A of
Lamar's Annual Report on Form 10-K for the year ended October 31, 1996 and from
the discussion responsive thereto under the captions "Election of Directors"
and "Section 16 (a) Beneficial Ownership Reporting Compliance" in Lamar's proxy
statement relating to its 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 Lamar's proxy
statement relating to its 1997 Annual Meeting of Stockholders: "Election of
Directors - Director Compensation, " "Executive Compensation" and "Compensation
Committee Interlocks and
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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 Lamar's
proxy statement relating to its 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 Lamar's proxy statement relating to its 1997 Annual
Meeting of Stockholders.
PART 4.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statement
The financial statements are listed under Part II, Item 8 of this
report.
(2) Financial Statements Schedules
All financial statement schedules have been omitted as the required
information is inapplicable.
(3) Exhibits
All exhibits are listed below under Part IV, Item 14(c) of this
report.
(b) REPORTS ON 8-K
None
(c) EXHIBITS
3.1 Minnesota Logos, A Partnership, Partnership Agreement
10.1 Logo Sign Franchise Contract between Minnesota Logos, a Partnership
and the State of Minnesota
27.1 Financial Data Schedule
SIGNATURES
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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.
MINNESOTA LOGOS, A PARTNERSHIP,
(Registrant), BY THE MINNESOTA LOGOS,
ITS GENREAL PARTNER
/s/ T. EVERETT STEWART, JR.
- ---------------- -------------------------------------
Date T. Everett Stewart, Jr.
President and Chief Executive Officer
/s/ KEITH A. ISTRE
- ---------------- --------------------------------------
Date Keith A. Istre
Treasurer, Chief Financial and
Accounting Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 - Minnesota Logos, A Partnership, Partnership Agreement
10.1 - Logo Sign Franchise Contract between Minnesota Logos, A
Partnership and the State of Minnesota
27 - Financial Data Schedule