1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from
Commission file number 001-12407
LAMAR MEDIA CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1205791
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
5551 Corporate Blvd.,
Baton Rouge, LA 70808
(Address of principal (Zip Code)
executive officers)
Registrant's telephone number, including area code (225) 926-1000
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
--- ---
Outstanding as of
Class November, 10, 1999
------------ ------------------
Common Stock, par value $ .01 per share 100
LAMAR MEDIA CORP. MEETS THE CONDITIONS OF GENERAL INSTRUCTION H(1)(a) AND (b) OF
FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT
AS PERMITTED BY SUCH INSTRUCTION.
2
EXPLANATORY NOTE REGARDING
CORPORATE REORGANIZATION
OF LAMAR ADVERTISING COMPANY
On July 20, 1999, Lamar Advertising Company completed a corporate reorganization
to create a new holding company structure. The reorganization was accomplished
through a merger under section 251(g) of the Delaware General Corporation Law.
At the effective time of the merger, all stockholders of Lamar Advertising
Company became stockholders in a new holding company and Lamar Advertising
Company became a wholly-owned subsidiary of the new holding company. The new
holding company took the Lamar Advertising Company name and the old Lamar
Advertising Company was renamed Lamar Media Corp. In the merger, all outstanding
shares of old Lamar Advertising Company's capital stock were converted into
shares of the new holding company with the same voting powers, designations,
preferences and rights, and the same qualifications, restrictions and
limitations, as the shares of old Lamar Advertising Company.
In this quarterly report, "Lamar," the "company," "we," "us" and "our" refer to
Lamar Media Corp. and its consolidated subsidiaries with respect to periods
following the reorganization and to old Lamar Advertising Company with respect
to periods prior to the reorganization, except where we make it clear that we
are only referring to Lamar Media Corp. or a particular subsidiary.
3
CONTENTS
Page
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998........................................................1
Condensed Consolidated Statements of Operations for the three
months ended September 30, 1999 and September 30, 1998 and
nine months ended September 30, 1999 and September 30, 1998.....................................2
Condensed Consolidated Statements of Comprehensive Income
(Loss) for the three months ended September 30, 1999 and
September 30, 1998 and nine months ended September
30, 1999 and September 30, 1998.................................................................3
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1999 and
September 30, 1998..........................................................................4 - 5
Notes to Condensed Consolidated Financial
Statements..................................................................................6 - 9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................................10 - 13
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risks..............................................................................13 - 14
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds......................................................14
ITEM 6. Exhibits and Reports on Form 8-K..........................................................14 - 17
Signatures.....................................................................................17
4
PART I - FINANCIAL INFORMATION
ITEM 1.- FINANCIAL STATEMENTS
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
September 30, December 31,
1999 1998
------------- ------------
ASSETS
Cash and cash equivalents $ 10,778 $ 128,597
Receivables, net 83,636 40,380
Prepaid expenses 22,235 12,346
Other current assets 18,295 1,736
------------ ------------
Total current assets 134,944 183,059
------------ ------------
Property, plant and equipment 1,410,561 661,324
Less accumulated depreciation and amortization (215,240) (153,972)
------------ ------------
Net property, plant and equipment 1,195,321 507,352
------------ ------------
Intangible assets 1,872,295 705,934
Other assets - non-current 24,634 17,032
------------ ------------
Total assets 3,227,194 1,413,377
============ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 9,806 $ 4,258
Accrued expenses 67,713 25,912
Current maturities of long-term debt 4,670 49,079
Deferred income 13,178 9,589
------------ ------------
Total current liabilities 95,367 88,838
Long-term debt 1,593,690 827,453
Deferred tax liability 124,329 25,613
Deferred income 1,224 1,293
Other liabilities 4,732 3,401
------------ ------------
Total liabilities 1,819,342 946,598
------------ ------------
Common stock, $.01 par value, authorized 3,000
shares; issued and outstanding 100 shares at
September 30, 1999 -- --
Class A preferred stock, par value $638, $63.80
cumulative dividends, authorized 10,000 shares;
5,719.49 shares issued and outstanding at
December 31, 1998 -- 3,649
Class A common stock, $.001 par value, authorized
125,000,000 shares; issued and outstanding
43,392,876 shares at December 31, 1998 -- 43
Class B common stock, $.001 par value, authorized
37,500,000 shares; issued and outstanding
17,699,997 shares at December 31, 1998 -- 18
Additional paid-in capital 1,469,606 505,644
Accumulated deficit (61,754) (42,575)
------------ ------------
Stockholders' equity 1,407,852 466,779
------------ ------------
Total liabilities and stockholders' equity $ 3,227,194 $ 1,413,377
============ ============
See accompanying notes to condensed consolidated financial statements
-1-
5
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net revenues $ 111,039 $ 73,528 $ 294,614 $ 201,600
---------- ---------- ---------- ----------
Operating expenses
Direct advertising expenses 33,236 22,257 93,481 64,696
Selling, general and administrative expenses 23,113 14,954 63,966 43,178
Depreciation and amortization 40,434 20,375 104,647 57,471
---------- ---------- ---------- ----------
96,783 57,586 262,094 165,345
---------- ---------- ---------- ----------
Operating income 14,256 15,942 32,520 36,255
---------- ---------- ---------- ----------
Other expense (income)
Interest income (112) (123) (1,067) (359)
Interest expense 21,092 12,116 57,471 39,357
(Gain) loss on disposition of assets (5,189) 81 (5,666) 473
---------- ---------- ---------- ----------
15,791 12,074 50,738 39,471
---------- ---------- ---------- ----------
Earnings (loss) before income taxes extraordinary
item and cumulative effect of a change in
accounting principle (1,535) 3,868 (18,218) (3,216)
Income tax expense 1,504 2,239 (262) 816
---------- ---------- ---------- ----------
Earnings (loss) before extraordinary item and
cumulative effect of a change in accounting
principle (3,039) 1,629 (17,956) (4,032)
---------- ---------- ---------- ----------
Extraordinary item - loss on debt extinguishment
net of tax benefit of $117 (182) -- (182) --
---------- ---------- ---------- ----------
Earnings (loss) before cumulative effect of a
change in accounting principle (3,221) 1,629 (18,138) (4,032)
---------- ---------- ---------- ----------
Cumulative effect of a change in accounting
principle -- -- (767) --
---------- ---------- ---------- ----------
Net earnings (loss) (3,221) 1,629 (18,905) (4,032)
Preferred stock dividends -- 91 274 365
---------- ---------- ---------- ----------
Net earnings (loss) applicable to common stock $ (3,221) $ 1,538 $ (19,179) $ (4,397)
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements
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LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net earnings (loss) applicable to
common stock $ (3,221) $ 1,538 $ (19,179) $ (4,397)
Other comprehensive income (loss)
unrealized loss on investment
securities (net of deferred tax
benefit of $217 for the nine months
ended September 30, 1998) -- -- -- 354
---------- ---------- ---------- ----------
Comprehensive income (loss) $ (3,221) $ 1,538 $ (19,179) $ (4,043)
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements
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LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
September 30,
1999 1998
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (18,905) $ (4,032)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 104,647 57,471
Cumulative effect of a change in accounting
principle 767 --
(Gain) loss on disposition of assets (5,666) 473
Deferred taxes (9,800) (2,548)
Provision for doubtful accounts 2,114 1,265
Changes in operating assets and liabilities:
Decrease (Increase) in:
Receivables (8,866) (1,520)
Prepaid expenses 445 (714)
Other assets (1,303) 978
Increase (Decrease) in:
Trade accounts payable 2,022 770
Accrued expenses (2,746) 1,288
Other liabilities 18 (144)
Deferred income (5,248) 2,252
---------- ----------
Net cash provided by operating
activities 57,479 55,539
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (1,587) (280)
Acquisition of new markets (830,428) (220,780)
Capital expenditures (53,435) (40,420)
Proceeds from disposition of assets 3,943 1,419
---------- ----------
Net cash used in investing activities (881,507) (260,061)
(continued)
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LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
September 30,
1999 1998
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs (12,207) (2,503)
Net proceeds from issuance of common stock 2,230 181,450
Principal payments on long-term debt (78,040) (4,152)
Proceeds from issuance of notes payable 287,500 70
Net borrowings under credit agreements 507,000 29,000
Dividends (274) (365)
---------- ----------
Net cash provided by financing activities 706,209 203,500
Net decrease in cash and cash equivalents (117,819) (1,022)
Cash and cash equivalents at beginning
of period 128,597 7,246
---------- ----------
Cash and cash equivalents at end of period $ 10,778 $ 6,224
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 56,183 $ 37,328
========== ==========
Cash paid for state and federal income taxes $ 6,500 $ 6,129
========== ==========
Non-cash Contribution from parent $ 952,255 $ 2,505
========== ==========
See accompanying notes to condensed consolidated financial statements
-5-
9
LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. Significant Accounting Policies
Organization
On July 20, 1999, Lamar Advertising Company reorganized into a new holding
company structure. As a result of this reorganization (1) the former Lamar
Advertising Company became a wholly owned subsidiary of a newly formed holding
company, (2) the name of the former Lamar Advertising Company was changed to
Lamar Media Corp., (3) the name of the new holding company became Lamar
Advertising Company, (4) the outstanding shares of capital stock of the former
Lamar Advertising Company, including the Class A common stock, were
automatically converted, on a share for share basis, into identical shares of
capital stock of the new holding company and (5) the Class A common stock of the
new holding company commenced trading on the Nasdaq National Market under the
symbol "LAMR" instead of the Class A common stock of the former Lamar
Advertising Company. In addition, following the holding company reorganization,
substantially all of the former Lamar Advertising Company's debt obligations,
including the bank credit facility and other long-term debt remained the
obligations of the Company. Under Delaware law, the reorganization did not
require the approval of the stockholders of the former Lamar Advertising
Company. The purpose of the reorganization was to provide Lamar Advertising
Company with a more flexible capital structure and to enhance its financing
options. The business operations of the former Lamar Advertising Company and its
subsidiaries, including the Company, will not change as a result of the
reorganization.
New Accounting Pronouncements
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up
Activities. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, and requires that the costs of start-up
activities, including organizational costs, be expensed as incurred. The effect
of SOP 98-5 is recorded as a cumulative effect of a change in accounting
principle as described in Accounting Principles Board Opinion No. 20 "Accounting
Changes".
2. Acquisitions
On January 5, 1999, the Company purchased all of the outdoor advertising assets
of American Displays, Inc. for a cash purchase price of approximately $14,500.
On February 1, 1999, the Company purchased all of the outdoor advertising assets
of KJS, LLC for a cash purchase price of $40,500.
On April 1, 1999, the Company purchased all of the assets of Frank Hardie, Inc.
for a cash purchase price of approximately $20,300.
On June 1, 1999, the Company purchased the assets of Vivid, Inc. for a cash
purchase price of approximately $22,100.
-6-
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LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
On September 15, 1999, the Company purchased the capital stock of Chancellor
Media Outdoor Corporation and Chancellor Media Whiteco Outdoor Corporation
("Chancellor Outdoor") for a combination of approximately $700,000 in cash and
26,227,273 shares of Lamar Advertising Company Class A common stock valued at
approximately $947,000. The stock purchase agreement also contains a post
closing adjustment in the event that the net working capital of Chancellor
Outdoor as shown on the closing balance sheet is greater or less than $12,000.
As of September 30, 1999, the estimated working capital adjustment to be paid by
the Company is $33,053.
During the nine months ended September 30, 1999, the Company completed 45
additional acquisitions of outdoor advertising and transit assets for an
aggregate cash purchase price of approximately $61,000 and the issuance of
135,734 shares of Lamar Advertising Company Class A common stock valued at
approximately $5,300.
Each of these acquisitions were 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
purchase price has been allocated to assets acquired and liabilities assumed
based on fair market value at the dates of acquisition. The following is a
summary of the allocation of the purchase price in the above transactions.
Property
Current Plant & Other Other Current Long-term
Assets Equipment Goodwill Intangibles Assets Liabilities Liabilities
-------- --------- -------- ----------- -------- ----------- -----------
American Displays 87 899 10,532 3,277 -- (284) --
KJS, LLC 46 9,468 30,543 4,489 -- (2,079) (1,921)
Frank Hardie 187 6,595 10,451 3,630 -- (525) --
Vivid, Inc. 357 8,402 9,830 4,085 -- (593) --
Chancellor 55,997 642,210 784,513 293,748 169 (19,829) (106,102)
Other 265 16,098 46,835 6,472 -- (1,271) (1,880)
-------- --------- -------- --------- -------- --------- ---------
56,939 683,672 892,704 315,701 169 (24,581) (109,903)
======== ========= ======== ========= ======== ========= =========
Summarized below are certain unaudited pro forma statements of operations data
as if each of the above acquisitions and the acquisitions occurring in 1998,
which were fully described in the Company's December 31, 1998 Annual Report on
Form 10-K, had been consummated as of January 1, 1998. This pro forma
information does not purport to represent what the Company's results of
operations actually would have been had such transactions occurred on the date
specified or to project the Company's results of operations for any future
periods.
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Revenues, net $ 156,025 $ 146,722 $ 452,063 $ 429,994
========== ========== ========== ==========
Loss before extraordinary item $ (17,218) $ (21,683) $ (67,339) $ (70,580)
========== ========== ========== ==========
Net loss applicable to common stock $ (17,400) $ (21,774) $ (68,562) $ (70,945)
========== ========== ========== ==========
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11
LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. Long-term debt
On August 13, 1999, the Company replaced its existing bank credit facility with
a new bank credit facility under which The Chase Manhattan Bank will serve as
administrative agent. The new $1,000,000 bank credit facility consists of (1) a
$350,000 revolving bank credit facility and (2) a $650,000 term facility with
two tranches, a $450,000 Term A facility and a $200,000 Term B facility. As of
September 30, 1999, the Company had borrowings under this agreement of $757,000.
In connection with the reorganization of Lamar Advertising Company into a new
holding company structure, the Company made a change of control tender offer to
the holders of its 9 1/4% Senior Subordinated Notes due 2007 in aggregate
principal amount of approximately $103,900. Pursuant to the change of control
tender offer and in accordance with the Indenture, the Company offered to
repurchase the Notes for 101% of the principal amount plus accrued interest. A
total of $29,876 aggregate principal amount of Notes were tendered for payment
on August 19, 1999, and the related 1% prepayment penalty is reflected as an
extraordinary item in the Company's income statement, net of tax.
4. Summarized Financial Information of Subsidiaries
Separate financial statements of each of the Company's direct or indirect
wholly-owned subsidiaries that have guaranteed the Company's obligations with
respect to its publicly issued notes (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.
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:
Balance Sheet Information: September 30, 1999 December 31, 1998
------------------ -----------------
Current assets 293 248
Total assets 340 297
Total liabilities 10 7
Venturers' equity 330 290
Income Statement Information: Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
Revenues 339 247 871 748
Net income 226 117 546 416
-8-
12
5. Related Party Transactions
The Company has a related party note payable to its parent corporation, Lamar
Advertising Company, in the amount of $287,500, at 5 1/4% interest. The note
payable is due September 15, 2006, with the related interest expense due
semi-annually. At September 30, 1999, the company had accrued interest payable
of $620 reflected in accrued expenses related to this note.
The Company also has an inter-company receivable at September 30, 1999 from its
parent corporation in the amount of $6,600 as a result of normal operating
activity. This receivable is non-interest bearing with no scheduled maturity and
is reflected in other assets at September 30, 1999.
-9-
13
ITEM 2.
MANAGEMENT'S 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 nine month and three month periods
ended September 30, 1999 and 1998. This discussion should be read in conjunction
with the consolidated financial statements of the Company and the related notes.
The following discussion is a summary of the key factors management considers
necessary in reviewing the Company's results of operations, liquidity and
capital resources. The future operating results of the Company may differ
materially from the results described below. For a discussion of certain factors
which may affect the Company's future operating performance, please refer to
Exhibit 99.1 hereto entitled "Factors Affecting Future Operating Results".
In this quarterly report, "Lamar," the "company," "we," "us" and "our" refer to
Lamar Media Corp. and its consolidated subsidiaries with respect to periods
following the reorganization and to old Lamar Advertising Company and its
consolidated subsidiaries with respect to period prior to the reorganization,
except where we make it clear that we are only referring to Lamar Media Corp.,
old Lamar Advertising Company or a particular subsidiary. See explanatory note
regarding Lamar Advertising Company reorganization and footnote 1 in Item 1 of
the Financial Statements.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998
Net revenues increased $93.0 million or 46.1% to $294.6 million for the nine
months ended September 30, 1999 as compared to the same period in 1998. This
increase was attributable to the Company's acquisitions during 1998 and 1999 and
internal growth within the Company's existing markets.
Operating expenses, exclusive of depreciation and amortization, increased $49.6
million or 46.0% for the nine months ended September 30, 1999 as compared to the
same period in 1998. This was primarily the result of the additional operating
expenses related to acquired outdoor advertising assets and the newly developed
logo sign contracts.
Depreciation and amortization expense increased $47.2 million or 82.1% from
$57.5 million for the nine months ended September 30, 1998 to $104.7 million for
the nine months ended September 30, 1999 as a result of an increase in
capitalized assets resulting from the Company's recent acquisition activity.
Due to the above factors, operating income decreased $3.8 million or 10.3% to
$32.5 million for nine months ended September 30, 1999 from $36.3 million for
the same period in 1998.
Interest income increased $.7 million as a result of earnings on excess cash
investments made during the nine months ended September 30, 1999 as compared to
the same period in 1998 due to proceeds from a public offering of Lamar
Advertising Company's Class A common stock in December, 1998. Interest expense
increased $18.1 million from $39.4 million for the nine months ended September
30, 1998 to $57.5 million for the same period in 1999 as a result of additional
borrowings under the Company's bank credit facility to fund increased
acquisition activity.
-10-
14
There was an income tax benefit of $.3 million for the nine months ended
September 30, 1999 as compared to an income tax expense of $.8 million for the
same period in 1998. The effective tax rate for the nine months ended September
30, 1999 is less than statutory rates due to permanent differences resulting
from non-deductible amortization of goodwill.
An extraordinary loss on debt extinguishment of $.2 million net of income tax
benefit of $.1 million, was incurred during the nine months ended September 30,
1999, as a result of the extinguishment of a portion of the Company's 9 1/4%
Senior Subordinated Notes due 2007 in connection with a change of control tender
offer in July, 1999.
Due to the adoption of SOP 98-5 "Reporting on the Costs of Start-Up Activities"
which requires costs of start-up activities and organization costs to be
expensed as incurred, the Company recognized an expense of $.8 million as a
cumulative effect of a change in accounting principle. This expense is a one
time adjustment to recognize start-up activities and organization costs that
were capitalized in prior periods.
As a result of the above factors, the Company recognized a net loss for the nine
months ended September 30, 1999 of $18.9 million, as compared to a net loss of
$4.0 million for the same period in 1998.
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998
Revenues for the three months ended September 30, 1999 increased $37.5 million
or 51.0% to $111.0 million from $73.5 million for the same period in 1998.
Operating expenses, exclusive of depreciation and amortization, for the three
months ended September 30, 1999 increased $19.1 million or 51.4% over the same
period in 1998.
Depreciation and amortization expense increased $20.0 million or 98.4% from
$20.4 million for three months ended September 30, 1998 to $40.4 million for the
three months ended September 30, 1999.
Operating income decreased $1.6 million or 10.6% to $14.3 million for the three
months ended September 30, 1999 as compared to $15.9 million for the same period
in 1998.
Interest expense increased $9.0 million from $12.1 million for the three months
ended September 30, 1998 to $21.1 million for the same period in 1999.
The Company recognized a net loss for the three months ended September 30, 1999
of $3.2 million.
The results for the three months ended September 30, 1999 were affected by the
same factors as the nine months ended September 30, 1999. Reference is made to
the discussion of the nine month results.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and revolving credit borrowings. Its acquisitions have been
financed primarily with borrowed funds and the issuance of debt and equity
securities.
-11-
15
During the nine months ended September 30, 1999, the Company financed its
acquisition activity of approximately $1.8 billion with remaining proceeds from
the December, 1998 offering of the Lamar Advertising Company's Class A common
stock, borrowings under the Company's bank credit facility and the issuance of
Lamar Advertising Company's Class A Common Stock. At September 30, 1999,
following these acquisitions, the Company had $243 million available under the
revolving bank credit facility.
The Company's net cash provided by operating activities increased $2.0 million
from $55.5 million for the nine months ended September 30, 1998 to $57.5 million
for the nine months ended September 30, 1999 due primarily to an increase in
noncash items of $35.4 million, which includes an increase in depreciation and
amortization of $47.2 million offset by an increase in gain on disposition of
assets of $6.1 million and a decrease in deferred taxes of $7.3 million. The
increase in noncash items was offset by a decrease in net earnings of $14.9
million, an increase in receivables of $7.3 million and a decrease in deferred
income of $7.5 million. Net cash used in investing activities increased $621.4
million from $260.1 million for the nine months ended September 30, 1998 to
$881.5 million for the same period in 1999. This increase was due to a $609.6
million increase in acquisition of outdoor advertising assets and an increase in
capital expenditures of $13.0 million. Net cash provided by financing activities
for the nine months ended September 30, 1999 is $706.2 million due to $507.0
million in net borrowings under credit agreements which was used primarily to
finance acquisitions, $287.5 million from the issuance of notes payable, and
$2.2 million in net proceeds from issuance of common stock under the Company's
1996 Equity Incentive Plan offset by $78.0 million in principal payments on
long-term debt which primarily consists of the payment of approximately $45.0
million in notes to the three principal shareholders of Outdoor Communications,
Inc. which was purchased by the Company in October, 1998.
In August 1999, the Company entered into a new bank credit agreement, replacing
its existing bank credit facility, with The Chase Manhattan Bank serving as
administrative agent. The new $1 billion bank credit facility consists of (1) a
$350 million revolving bank credit facility, (2) a $650 million term facility
with two tranches, a $450 million Term A facility and a $200 million Term B
facility. In addition, the new bank credit facility provides for an uncommitted
$400 million incremental facility available at the discretion of the lenders. As
a result of the holding company reorganization completed on July 20, 1999 and
explained in footnote 1, the new bank credit facility is an obligation of Lamar
Media Corp. and not Lamar Advertising Company.
On September 15, 1999, the Company financed the cash portion of the purchase
price for the acquisition of Chancellor Outdoor with a $50.0 million draw under
the revolving credit facility and a $650.0 million draw under the term facility.
Lamar Advertising Company also issued 26,227,273 shares of its Class A common
stock.
Elimination of Tobacco Advertising
By the end of April, 1999, the Company had removed all of its outdoor
advertising of tobacco products in connection with settlements the states had
reached with the U.S. tobacco companies. Because of these settlements, the
Company's tobacco revenues as a percentage of consolidated net revenue have
declined from 7% for the 12 months ended December 31, 1998 to 3% for the nine
months ended September 30, 1999. When displays formerly occupied by tobacco
advertisers have become available in the recent past, the Company has been able
to attract substitute advertising for the unoccupied space on comparable or more
favorable terms. While both of these trends are positive, the Company cannot
guarantee that it will be able to attract substitute advertising to occupy the
displays which will become unoccupied, or that
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substitute advertisers will pay rates as favorable to the Company as those paid
by tobacco advertisers. If the Company is unable to continue to replace tobacco
advertising, the resulting increase in available inventory could cause the
Company to reduce its rates or limit the Company's ability to raise rates. In
addition, the Company cannot guarantee that substitute advertisers will pay
rates as favorable to the Company as those paid by tobacco advertisers.
Impact of Year 2000
The year 2000 issue is the result of the development of computer programs and
systems using two digits rather than four digits to define the applicable year.
Computer programs and equipment with time-sensitive software may recognize the
date using "00" as the year 1900 rather than the year 2000. The year 2000 date
recognition problem could cause the Company's computer systems to fail,
resulting in miscalculations and incorrect data causing disruption to business
operations.
The Company has conducted an assessment of its software and related systems and
believes they are year 2000 compliant. The Company's year 2000 effort also
included communication with significant third party vendors and customers to
determine the extent to which the Company's systems are vulnerable to those
parties' failure to reach year 2000 compliance.
The Company cannot assure you that the Company's customers, suppliers and other
third parties that the Company deals with are or will be year 2000 compliant in
a timely manner. Interruptions in services provided to the Company or in the
purchases made by these third parties could also disrupt the Company's
operations. Parties affected by a disruption in the Company's operations and
services could make claims or bring lawsuits against the Company. Depending upon
the extent and duration of any disruptions caused by the year 2000 problem and
the specific services affected, these disruptions could have an adverse affect
on the Company's business.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to interest rate risk in connection with variable rate
debt instruments issued by the Company. The Company does not enter into market
risk sensitive instruments for trading purposes. The information below
summarizes the Company's interest rate risk associated with its principal
variable rate debt instruments outstanding at September 30, 1999.
Loans under the Company's bank credit facility bear interest at variable rates
equal to the Chase Prime Rate or LIBOR plus the applicable margin. Because the
Chase Prime Rate or LIBOR may increase or decrease at any time, the Company is
exposed to market risk as a result of the impact that changes in these base
rates may have on the interest rate applicable to borrowings under the bank
credit facility. Increases in the interest rates applicable to borrowings under
the bank credit facility would result in increased interest expense and a
reduction in the Company's net income and after tax cash flow.
At September 30, 1999, there was approximately $757 million of aggregate
indebtedness outstanding under the bank credit facility, or approximately 47.5%
of the Company's outstanding long-term debt on that date, bearing interest at
variable rates. The aggregate interest expense for the nine months ended
September 30, 1999 with respect to borrowings under the bank credit facility was
$14.5 million, and the
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weighted average interest rate applicable to borrowings under these credit
facilities during the nine months ended September 30, 1999 was 6.9%. Assuming
that the weighted average interest rate was 200-basis points higher (that is
8.9% rather than 6.9%), then the Company's 1999 interest expense would have been
approximately $4.2 million higher resulting in a $2.5 million decrease in the
Company's nine months ended September 30, 1999 net income and after tax cash
flow.
The Company attempts to mitigate the interest rate risk resulting from its
variable interest rate long-term debt instruments by also issuing fixed rate
long-term debt instruments and maintaining a balance over time between the
amount of the Company's variable rate and fixed rate indebtedness. In addition,
the Company has the capability under the bank credit facility to fix the
interest rates applicable to its borrowings at an amount equal to LIBOR plus the
applicable margin for periods of up to twelve months, which would allow the
Company to mitigate the impact of short-term fluctuations in market interest
rates. In the event of an increase in interest rates, the Company may take
further actions to mitigate its exposure. The Company cannot guarantee, however,
that the actions that it may take to mitigate this risk will be feasible or
that, if these actions are taken, that they will be effective.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
See Item 1, Financial Statements Note 1, which is incorporated
herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 2.1 Agreement and Plan of Merger dated as of July 20,
1999 among the Company, Lamar New Holding Co., and
Lamar Holdings Merge Co. Previously filed as exhibit
2.1 to the Company's Current Report on Form 8-K filed
on July 22, 1999 (File No. 0-30242) and incorporated
herein by reference.
Exhibit 3.1 Amended and Restated Bylaws. Filed herewith.
Exhibit 4.1 Supplemental Indenture to the Indenture dated
November 15, 1996 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated July 20, 1999. Previously filed as
Exhibit 4.1 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-30242) and incorporated herein
by reference.
Exhibit 4.2 Supplemental Indenture to the Indenture dated
September 25, 1997 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated September 15, 1999. Previously
filed as Exhibit 4.2 to Lamar Advertising Company's
Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-30242) and
incorporated herein by reference.
Exhibit 4.3 Supplemental Indenture to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank, as
Trustee, dated September 15, 1999. Previously filed
as Exhibit 4.3 to Lamar
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Advertising Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999 (File No.
0-30242) and incorporated herein by reference.
Exhibit 4.4 Supplemental Indenture to the Indenture dated
September 25, 1997 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated July 20, 1999. Previously filed as
Exhibit 4.4 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-30242) and incorporated herein
by reference.
Exhibit 4.5 Supplemental Indenture to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank, as
Trustee, dated July 20, 1999. Previously filed as
Exhibit 4.5 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-30242) and incorporated herein
by reference.
Exhibit 4.6 Supplemental Indenture to the Indenture dated
November 15, 1996 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated September 15, 1999. Previously
filed as Exhibit 4.6 to Lamar Advertising Company's
Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-30242) and
incorporated herein by reference.
Exhibit 4.7 Supplemental Indentures to the Indenture dated
September 25, 1997 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee. Previously filed as Exhibit 4.7 to Lamar
Advertising Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999 (File No.
0-30242) and incorporated herein by reference.
Exhibit 4.8 Supplemental Indentures to the Indenture dated
November 15, 1996 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee. Previously filed as Exhibit 4.8 to Lamar
Advertising Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999 (File No.
0-30242) and incorporated herein by reference.
Exhibit 4.9 Supplemental Indentures to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank, as
Trustee. Previously filed as Exhibit 4.9 to Lamar
Advertising Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999 (File No.
0-30242) and incorporated herein by reference.
Exhibit 10.1 Bank Credit Agreement dated August 13, 1999, between
the Company, certain of its subsidiaries, the lenders
party thereto and The Chase Manhattan Bank, as
administrative agent. Previously filed as Exhibit
10.1 to Lamar Advertising Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1999
(File No. 0-30242) and incorporated herein by
reference.
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Exhibit 10.2 Stockholders Agreement dated as of September 15, 1999
by and among Lamar Advertising Company, Chancellor
Media Corporation of Los Angeles, Chancellor
Mezzanine Holdings Corporation and the Reilly Family
Limited Partnership. Previously filed as Exhibit 10.2
to Lamar Advertising Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1999
(File No. 0-030242) and incorporated herein by
reference.
Exhibit 10.3 Registration Rights Agreement dated as of September
15, 1999 among Lamar Advertising Company, Chancellor
Media Corporation of Los Angeles and Chancellor
Mezzanine Holdings Corporation. Previously filed as
Exhibit 10.3 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-030242) and incorporated herein
by reference.
Exhibit 10.4 Assumption Agreement dated as of July 20, 1999 is by
and among Lamar Advertising Company, Lamar Media
Corp., and the direct and indirect subsidiaries of
such corporations. Previously filed as Exhibit 10.4
to Lamar Advertising Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1999
(File No. 0-030242) and incorporated herein by
reference.
Exhibit 27.1 Financial Data Schedule. Filed herewith.
Exhibit 99.1 Factors Affecting Future Operating Results. Filed
herewith.
(b) Reports on Form 8-K
Reports on Form 8-K were filed with the Commission during the
third quarter of 1999 to report the following items as of the
dates indicated:
On July 7, 1999, the Company filed a report on Form 8-K to
furnish Financial Statements and Pro Forma Financial Statements
for Chancellor Media Outdoor Corporation ("Chancellor Outdoor")
and its predecessor companies, the outdoor advertising division
of Whiteco Industries, Inc. ("Whiteco"), Martin Media L.P.
("Martin Media") and Martin & MacFarlane, Inc. ("Martin &
MacFarlane"), which the Company acquired as of September 15,
1999. The Company filed as exhibits (1) the consolidated balance
sheets of Chancellor Outdoor as of December 31, 1998 and March
31, 1999 and consolidated statements of operations, equity and
cash flows for the period from July 22, 1998 to December 31,
1998 and the three months ended March 31, 1999 (2) the
statements of income, divisional equity and cash flows of
Whiteco for the eleven months ended November 30, 1998; balance
sheets of Whiteco as of December 31, 1996 and 1997; and
statements of income and cash flows for the years ended December
31, 1995, 1996, and 1997 (3) the statements of operations,
partners' capital and cash flows of Martin Media for the seven
months ended July 31, 1998; balance sheets of Martin Media as of
December 31, 1996 and 1997; and statements of operations,
partners' capital (deficit) and cash flows of Martin Media for
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each of the years ended December 31, 1995, 1996 and 1997 (4) the
statements of operations, retained earnings and cash flows of
Martin & MacFarlane for the seven months ended July 31, 1998;
balance sheets of Martin & MacFarlane as of December 31, 1996
and 1997; statements of income, retained earnings and cash flows
for the six-month period ended December 31, 1995 and each of the
years ended December 31,1996 and 1997; balance sheet of Martin &
MacFarlane as of June 30, 1995; and statements of income,
retained earnings and cash flows of Martin & MacFarlane for the
year ended June 30, 1995. The Company also filed as exhibits
unaudited pro forma condensed consolidated statements of
operations of the Company for the year ended December 31, 1998
and the three months ended March 31, 1999; and unaudited pro
forma condensed consolidated balance sheet of the Company as of
March 31, 1999.
On July 22, 1999, the Company filed a report on Form 8-K in
order to furnish certain exhibits related to the Company's
reorganization. The Company filed an Agreement and Plan of
Merger dated as of July 20, 1999 among the Company, Lamar New
Holding Co., and Lamar Holdings Merge Co. as exhibit 2.1, and a
press release issued by the registrant on July 21, 1999 as
exhibit 99.1.
On July 26, 1999, the Company filed a report on Form 8-K/A to
correct a typographical error in "Item 5. Other Events" in the
8K originally filed on July 22, 1999.
On July 28, 1999, the Company filed a report on Form 8-K
announcing that Lamar Advertising Company had commenced a public
offering of $250,000,000 of convertible notes and filed the
related press release as exhibit 99.1
On August 25, 1999, the Company filed a report on Form 8-K
announcing that in connection with the reorganization of Lamar
Advertising Company into a new holding company structure, Lamar
Media Corp. (formerly known as Lamar Advertising Company) made a
change of control tender offer to the holders of its 9 1/4%
Senior Subordinated Notes due 2007 in aggregate principal amount
of approximately $103,900,000 issued pursuant to an Indenture
dated August 15, 1997, by and among Outdoor Communications,
Inc., a company acquired by Lamar whose obligations under the
Notes were assumed, certain guarantors under the Indenture and
the First Union National Bank as Trustee. Pursuant to the change
of control tender offer and in accordance with the Indenture,
Lamar Media Corp. offered to repurchase the Notes for 101% of
the principal amount plus accrued interest up to but excluding
the payment date of August 19, 1999.
SIGNATURES
Pursuant to the requirements 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 MEDIA CORP.
DATED: November 12, 1999 BY: /s/ Keith Istre
------------------------------------
Keith A. Istre
Chief Financial and Accounting
Officer and Director
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INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
Exhibit 2.1 Agreement and Plan of Merger dated as of July 20,
1999 among the Company, Lamar New Holding Co., and
Lamar Holdings Merge Co. Previously filed as exhibit
2.1 to the Company's Current Report on Form 8-K filed
on July 22, 1999 (File No. 0-30242) and incorporated
herein by reference.
Exhibit 3.1 Amended and Restated Bylaws. Filed herewith.
Exhibit 4.1 Supplemental Indenture to the Indenture dated
November 15, 1996 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated July 20, 1999. Previously filed as
Exhibit 4.1 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-30242) and incorporated herein
by reference.
Exhibit 4.2 Supplemental Indenture to the Indenture dated
September 25, 1997 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated September 15, 1999. Previously
filed as Exhibit 4.2 to Lamar Advertising Company's
Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-30242) and
incorporated herein by reference.
Exhibit 4.3 Supplemental Indenture to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank, as
Trustee, dated September 15, 1999. Previously filed
as Exhibit 4.3 to Lamar Advertising Company's
Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-30242) and
incorporated herein by reference.
Exhibit 4.4 Supplemental Indenture to the Indenture dated
September 25, 1997 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated July 20, 1999. Previously filed as
Exhibit 4.4 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-30242) and incorporated herein
by reference.
Exhibit 4.5 Supplemental Indenture to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank, as
Trustee, dated July 20, 1999. Previously filed as
Exhibit 4.5 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-30242) and incorporated herein
by reference.
Exhibit 4.6 Supplemental Indenture to the Indenture dated
November 15, 1996 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee, dated September 15, 1999. Previously
filed as Exhibit 4.6 to Lamar Advertising Company's
Quarterly Report on Form 10-Q for the period ended
September 30, 1999 (File No. 0-30242) and
incorporated herein by reference.
Exhibit 4.7 Supplemental Indentures to the Indenture dated
September 25, 1997 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee. Previously filed as Exhibit 4.7 to Lamar
Advertising Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999 (File No.
0-30242) and incorporated herein by reference.
Exhibit 4.8 Supplemental Indentures to the Indenture dated
November 15, 1996 among the Company, certain of its
subsidiaries and State Street Bank and Trust Company,
as Trustee. Previously filed as Exhibit 4.8 to Lamar
Advertising Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999 (File No.
0-30242) and incorporated herein by reference.
Exhibit 4.9 Supplemental Indentures to the Indenture dated August
15, 1997 among Outdoor Communications, Inc., certain
of its subsidiaries and First Union National Bank, as
Trustee. Previously filed as Exhibit 4.9 to Lamar
Advertising Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999 (File No.
0-30242) and incorporated herein by reference.
Exhibit 10.1 Bank Credit Agreement dated August 13, 1999, between
the Company, certain of its subsidiaries, the lenders
party thereto and The Chase Manhattan Bank, as
administrative agent. Previously filed as Exhibit
10.1 to Lamar Advertising Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1999
(File No. 0-30242) and incorporated herein by
reference.
Exhibit 10.2 Stockholders Agreement dated as of September 15, 1999
by and among Lamar Advertising Company, Chancellor
Media Corporation of Los Angeles, Chancellor
Mezzanine Holdings Corporation and the Reilly Family
Limited Partnership. Previously filed as Exhibit 10.2
to Lamar Advertising Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1999
(File No. 0-030242) and incorporated herein by
reference.
Exhibit 10.3 Registration Rights Agreement dated as of September
15, 1999 among Lamar Advertising Company, Chancellor
Media Corporation of Los Angeles and Chancellor
Mezzanine Holdings Corporation. Previously filed as
Exhibit 10.3 to Lamar Advertising Company's Quarterly
Report on Form 10-Q for the period ended September
30, 1999 (File No. 0-030242) and incorporated herein
by reference.
Exhibit 10.4 Assumption Agreement dated as of July 20, 1999 is by
and among Lamar Advertising Company, Lamar Media
Corp., and the direct and indirect subsidiaries of
such corporations. Previously filed as Exhibit 10.4
to Lamar Advertising Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1999
(File No. 0-030242) and incorporated herein by
reference.
Exhibit 27.1 Financial Data Schedule. Filed herewith.
Exhibit 99.1 Factors Affecting Future Operating Results. Filed
herewith.