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EXHIBIT 99.1
NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
AS OF AUGUST 14, 1997
AND RELATED STATEMENT OF REVENUES AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Lamar Advertising Company
We have audited the accompanying statement of assets acquired and liabilities
assumed of National Advertising Company - Lamar Acquisition as of August 14,
1997, and the related statement of revenues and expenses for the years ended
December 31, 1996 and 1995. These financial statements have been prepared on
the basis described in Note 1 and are the responsibility of Outdoor Systems,
Inc.'s ("OSI") and Lamar Advertising Company's ("Lamar") managements. 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 aforementioned 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.
As discussed in Note 1, the accompanying financial statements have been prepared
pursuant to the Asset Purchase Agreement described in Note 1, and are not
intended to be a complete presentation of the assets and liabilities and
revenues and expenses applicable to the portion of National Advertising
Company's business acquired by Lamar from OSI.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the assets acquired and liabilities assumed of National
Advertising Company - Lamar Acquisition as of August 14, 1997, and the revenues
and expenses for the years ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
October 17, 1997
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
as of August 14, 1997
(in 000's)
ASSETS ACQUIRED
Current assets:
Trade receivables, less allowance of $156 $ 2,550
Inventories 72
Prepaid land rents, current portion 1,863
Other current assets 93
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Total current assets 4,578
Property, plant and equipment, net 13,444
Prepaid land rents, non-current portion 456
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Total assets acquired 18,478
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LIABILITIES ASSUMED
Current liabilities:
Trade accounts payable $ 227
Accrued payroll and related expenses 93
Deferred revenue 142
Accrued worker's compensation 214
Accrued property taxes 161
Other current liabilities 95
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Total liabilities assumed 932
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Net assets acquired $17,546
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The accompanying notes are an integral part of the financial statements.
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
STATEMENT OF REVENUES AND EXPENSES
for the years ended December 31, 1996 and 1995
(in 000's)
June 30, December 31, December 31,
1997 1996 1995
-------------- ------------ ------------
(unaudited)
Revenues $12,053 $26,914 $25,155
Agency commissions (1,493) (3,611) (3,386)
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Net revenues 10,560 23,303 21,769
Operating expenses:
Direct advertising 6,142 13,382 12,472
Selling and marketing 1,222 2,656 2,520
General and administrative 533 1,389 1,273
Depreciation 738 1,333 1,950
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Revenues in excess of operating expenses 1,925 $ 4,543 $ 3,554
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The accompanying notes are an integral part of the financial statements.
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
NOTES TO FINANCIAL STATEMENTS
(in thousands)
1. BASIS OF PRESENTATION
The statement of assets acquired and liabilities assumed by Lamar Advertising
Company ("Lamar") of the National Advertising Company ("NADCO"), previously a
wholly-owned subsidiary of Minnesota Mining and Manufacturing Company ("3M"),
from Outdoor Systems, Inc. ("OSI") include only those accounts related to the
assets sold to Lamar, pursuant to the Asset Purchase Agreement ("the
Agreement"), dated as of August 15, 1997, between Lamar and OSI. These
acquired assets and liabilities assumed and related revenues and expenses are
hereafter referred to as "Lamar Acquisition."
Lamar Acquisition owns and operates advertising display faces in certain
outdoor media markets in the United States and sells the advertising space to
national, regional and local advertisers throughout the United States.
The accompanying financial statements present the assets acquired and
liabilities assumed and the revenues and expenses of Lamar Acquisition, as
described above, and are presented on the accrual basis of accounting. The
financial statements exclude amounts related to federal and state income
taxes and interest income. Net revenues were specifically identifiable to
the Lamar Acquisition advertising display faces acquired. Certain costs and
expenses, including ground rent and depreciation, are specifically
identifiable to the Lamar Acquisition assets acquired. NADCO's historical
financial statements include allocations of certain costs and expenses from
3M based on services provided by 3M to NADCO. Lamar Acquisition has been
allocated a share of these 3M costs and expenses and other costs and expenses
from NADCO, generally as follows:
-- sales related costs and expenses have been allocated by market area
based on the percentage of Lamar Acquisition's advertising display
faces, by market area, in relation to NADCO's total advertising
display faces, by market area for each respective year; and
-- marketing and general and administrative costs and expenses have been
allocated based on the percentage of Lamar Acquisition's revenues in
relation to NADCO's total revenues, for each respective year.
The accompanying financial statements may not necessarily be indicative of
the assets acquired and liabilities assumed and revenues and expenses of
Lamar Acquisition in the future or what the assets acquired and liabilities
assumed and revenues and expenses would have been had Lamar Acquisition been
operated as a separate, independent entity during the periods presented.
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
NOTES TO FINANCIAL STATEMENTS
(in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Lamar Acquisition's revenues are generated from contracts with advertisers
generally covering periods ranging from one to thirty-six months. Lamar
Acquisition recognizes revenues ratably over the contract term and defers
customer prepayment of rental fees.
PREPAID LAND RENT
Most of Lamar Acquisition's advertising structures are located on leased
land. Land rents are generally paid in advance for periods ranging from one
to twelve months. Prepaid rents are expensed ratably over the related rent
term.
INVENTORIES
Inventories consist principally of parts and materials for the construction
and replacement of outdoor signage. Inventories are stated at the lower of
cost or market, cost being determined using the first-in, first-out (FIFO)
method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is recorded
using the straight-line method over estimated useful lives of the assets.
Repairs and maintenance are charged to expense when incurred. Expenditures
for significant improvements are capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
Lamar Acquisition assesses the impairment of its long-lived assets, including
property and equipment, whenever economic events or changes in circumstances
indicate that the carrying amounts of the assets may not be recoverable.
Long-lived assets are considered to be impaired when the sum of the expected
future operating cash flows, undiscounted and without interest charges, is
less than the carrying amounts of the related assets.
PENSION AND POSTRETIREMENT PLANS
NADCO employees participated in 3M pension and postretirement plans. NADCO
has accounted for its participation in the 3M plans as a participation in
multi-employer plans. Accordingly, the statement of revenues and expenses
includes an allocation from 3M for these costs that is comparable to Lamar
Acquisition's required contribution to the plans for the periods presented.
Additionally, no assets and liabilities have been reflected in the statement
of assets acquired and liabilities assumed related to the overall 3M pension
and postretirement plans since it is not practicable to segregate the amounts
applicable to Lamar Acquisition.
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 acquired and liabilities assumed
and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at August 14, 1997 consists of the following:
Signs, principally outdoor advertising structures $35,992
Land 287
Buildings and leasehold improvements 1,075
Machinery and equipment 396
Furniture and fixtures 776
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38,526
Accumulated depreciation and amortization (25,082)
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Property, plant and equipment, net $13,444
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(in thousands)
4. OPERATING LEASES
Rental expense for operating leases totaled $5,637 and $5,054, including
contingent rental payments of $364 and $303 for the years ended December 31,
1996 and 1995, respectively. Contingent payments are primarily based on
related signage revenues. Land leases are generally entered into for terms of
10 years or less.
Minimum future lease commitments at December 31, 1996 for the next five years
are as follows:
Land
Leases
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1997 $ 5,086
1998 5,086
1999 5,086
2000 5,086
2001 5,086
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Total minimum lease payments $25,430
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The total minimum lease payments for land leases assumes that Lamar
Acquisition will continue to renew, at current lease rates, its existing
leases which may expire during the five years presented.
The amounts of minimum lease commitments were not available as of August 14,
1997; however, such amounts would be similar to the amounts as of
December 31, 1996 adjusted for normal lease activity including acquisitions,
renewals and terminations.
5. EMPLOYEE BENEFITS
PENSION PLANS
Substantially all of NADCO employees participated in defined benefit pension
plans sponsored by 3M. 3M's pension benefits are based principally on an
employee's years of service and compensation near retirement. The pension
expense allocated to Lamar Acquisition was approximately $210 and $185 in
1996 and 1995, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Under various 3M plans, NADCO provided health care and life insurance
benefits to substantially all employees who reached retirement age while
employed by 3M, their covered dependents and beneficiaries. Postretirement
benefit expense has been allocated to Lamar Acquisition for approximately
$106 and $83 in 1996 and 1995, respectively.
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(in thousands)
5. EMPLOYEE BENEFITS, CONTINUED
DEFINED CONTRIBUTION PLANS
Employees of NADCO also participated in a 3M sponsored Employee Savings
Plan under section 401(k) of the Internal Revenue Code. Under this plan, 3M
matched employee contributions of up to 6 percent of compensation at rates
ranging from 10 to 85 percent depending upon 3M financial performance. 3M's
matching contributions to the employee savings plan were funded through an
employee stock ownership plan. Lamar Acquisition's allocation of expense
related to the Employee Savings Plan was approximately $54 and $46 in 1996
and 1995, respectively.
6. TRANSACTIONS WITH RELATED PARTIES
3M provided NADCO with various services, including certain corporate
accounting, finance and administration, facility management, human resource
and legal. The cost allocations to Lamar Acquisition for such services were
approximately $1,028 and $978 for 1996 and 1995, respectively. The amounts
allocated are based on historical or actual usage of services relative to the
usage of the other participating affiliated businesses.
Additionally, 3M allocated charges to NADCO for its share of the annual
self-insurance expense, consisting of workers' compensation, auto and general
liability claims. This expense allocation is based upon the ratio of the
NADCO claims and loss development to the total amount of 3M claims and loss
development. The self-insurance expense allocated to Lamar Acquisition was
approximately $720 and $674 for 1996 and 1995, respectively.
NADCO also rented its corporate headquarters and was charged for the use of
other 3M facilities. The expense allocated to Lamar Acquisition was
approximately $585 and $462 for 1996 and 1995, respectively.
Personnel of NADCO used certain automobiles owned by 3M. Lamar Acquisition
recognized approximately $111 and $100 in allocated rental expense during
1996 and 1995, respectively, related to the use of these assets.
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NATIONAL ADVERTISING COMPANY -- LAMAR ACQUISITION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(in thousands)
7. LITIGATION AND CLAIMS
Various legal actions and claims are pending or may be instituted or asserted
against Lamar Acquisition in the future, including those arising out of
condemnation matters, permit appeals, property owner disputes, lease disputes
and property tax issues. Liabilities have been recorded for these matters to
the extent that it is probable that Lamar Acquisition will be found liable
and the minimum amount of liability is determinable.
Management believes that the ultimate outcome of all pending litigation,
after considering recorded liabilities, would not have a material adverse
effect on Lamar Acquisition's assets and liabilities or revenues and
expenses.
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