1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-K
------------------------
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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 1-13275
OUTDOOR SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
DELAWARE 86-0736400
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(602) 246-9569
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $.01 par value New York Stock Exchange
9 3/8% Senior Subordinated Notes due 2006 New York Stock Exchange
Guarantees of 9 3/8% Senior Subordinated Notes due
2006 New York Stock Exchange
8 7/8% Senior Subordinated Notes due 2007 New York Stock Exchange
Guarantees of 8 7/8% Senior Subordinated Notes due
2007 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 filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on March 15, 1999
as reported by the New York Stock Exchange, was approximately $4,204.7 million.
The number of shares of the Registrant's Common Stock outstanding at March
15, 1999 was 184,467,222.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for the Registrant's
Annual Meeting of Stockholders to be held on May 27, 1999 are incorporated by
reference herein.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
CONTENTS
PAGE
----
PART I
ITEM 1. BUSINESS
GENERAL..................................................... 1
INDUSTRY OVERVIEW........................................... 1
BUSINESS STRATEGY........................................... 2
MARKETS..................................................... 3
INVENTORY................................................... 5
EMPLOYEES................................................... 6
SALES AND SERVICE........................................... 6
CUSTOMERS................................................... 6
PRODUCTION.................................................. 7
COMPETITION................................................. 8
GOVERNMENT REGULATION....................................... 8
ITEM 2. PROPERTIES.................................................. 10
ITEM 3. LEGAL PROCEEDINGS........................................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 10
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY........................... 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................... 11
ITEM 6. SELECTED FINANCIAL DATA..................................... 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................ 14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS.................................................... 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE................................. 50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 50
ITEM 11. EXECUTIVE COMPENSATION...................................... 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................... 50
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K...................................................... 50
3
PART I.
ITEM 1. BUSINESS
GENERAL
Outdoor Systems, Inc. (the "Company") is the largest out-of-home
advertising company in North America, operating, as of December 31, 1998,
approximately 112,500 bulletin, poster, mall and transit advertising display
faces in 90 metropolitan markets in the United States, 13 metropolitan markets
in Canada, and 44 metropolitan markets in Mexico, as well as approximately
125,000 subway advertising display faces in New York City. The Company has
operations in 50 of the 50 largest United States markets, 13 of the 15 largest
Canadian markets and 44 of the 45 largest Mexican markets.
Since going public in April of 1996, the Company has effected five
three-for-two stock splits of the Common Stock. All applicable information in
this report, including the Consolidated Financial Statements and the Notes
thereto, was adjusted to reflect these stock splits on a retroactive basis for
all periods presented.
INDUSTRY OVERVIEW
The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $2.3 billion in 1998, or approximately 1.2% of the
total advertising expenditures in the United States, while the out-of-home
advertising industry, consisting of transit and in-store advertising displays in
addition to outdoor advertising, generated revenues in excess of $4.4 billion in
1998, according to estimates by the Outdoor Advertising Association of America
("OAAA"). Outdoor advertising's 1998 revenues represent growth of approximately
9.0% over estimated total revenues for 1997, which compares favorably to the
growth of total U.S. advertising expenditures of approximately 7.1% during the
same period.
Advertisers purchase outdoor advertising for a number of reasons. Outdoor
advertising offers repetitive impact and a relatively low cost
per-thousand-impressions, a commonly used media measurement, as compared to
television, radio, newspaper, magazine and direct mail marketing. Accordingly,
because of its efficiency, outdoor advertising is a good vehicle to build "mass
market" support. In addition, outdoor advertising can be used to target a
defined audience in a specific location and, therefore, can be relied upon by
local businesses concentrating on a particular geographic area where customers
have specific demographic characteristics. For instance, restaurants, motels,
service stations and similar roadside businesses may use outdoor advertising to
reach potential customers close to the point of sale and provide directional
information. Other local businesses such as television and radio stations and
consumer products companies may wish to appeal more broadly to customers and
consumers in the local market. National brand name advertisers may use the
medium to attract customers generally and build brand awareness. In all cases,
outdoor advertising can be combined with other media such as radio and
television to reinforce messages being provided to consumers.
The outdoor advertising industry has experienced significant changes due to
a number of factors. First, the entire "out-of-home" advertising category has
expanded to include, in addition to traditional billboards and roadside
displays, displays in shopping centers and malls, airports, stadiums, movie
theaters and supermarkets, as well as on taxis, trains, buses and subways.
Second, the outdoor advertising industry has increased its visibility with and
attractiveness to local advertisers as well as national retail, entertainment
and consumer product-oriented companies. Third, the industry has benefited
significantly from improvements in production technology, including the use of
computer printing, vinyl advertising copy and improved lighting techniques,
which have facilitated a more dynamic, colorful and creative use of the medium.
These technological advances have permitted the outdoor advertising industry to
respond more promptly and efficiently to the changing needs of its advertising
customers and to increase its participation in multi-media campaigns. Lastly,
the outdoor advertising industry has benefited from the growth in automobile
travel time for business and leisure due to increased highway congestion and
continued demographic shifts of residences and businesses from the cities to
outlying suburbs. According to a 1995 survey from the U.S. Department of
Transportation, Federal Highway Administration, since 1969, the rate of increase
in drivers is more than three times the population growth. Since 1970, daily
vehicle trips increased 102% and daily automobile travel miles increased 110%.
The Company believes that the foregoing trends have resulted in increased
consumer
1
4
exposure to existing billboard structures at a time when other media have been
fragmenting their audiences as the number of broadcast and cable networks,
magazines and other narrowly targeted formats has increased.
An expanding opportunity within the out-of-home advertising industry is
transit advertising. Local governments are providing transit amenities to
enhance their service and image to local transit users. To finance these transit
amenities, municipalities issue contracts for advertising displays on bus
shelters, subways and buses to private enterprises. Under these contracts, the
private party constructs and maintains the amenities, which it can use for
advertising displays. The primary benefits of privatizing transit advertising
are the avoidance of capital expenditures by the municipality, the prospect of
additional revenue for the municipality from a portion of the advertising
revenue, the consistent quality that a coordinated transit program can provide
and the benefits of regular cleaning and maintenance undertaken by private
enterprises.
The outdoor advertising industry is comprised of several large outdoor
advertising and multi-media companies with operations in multiple markets, as
well as many smaller and local companies operating a limited number of
structures in a single or a few local markets. While the industry has
experienced significant consolidation within the past few years, the OAAA
estimates that, as of December 31, 1998, there were approximately 400 companies
in the outdoor advertising industry operating approximately 396,000 display
faces. The Company expects the trend of consolidation in the outdoor advertising
industry to continue.
BUSINESS STRATEGY
The Company's primary objective is to be the leading provider of
out-of-home advertising services in each of its major markets. The Company's
successful operating strategy, focusing on superior sales and service, optimal
management of its inventory, centralized administration, low overhead and
strategic acquisitions, has enabled it to improve the historical operating
results in each of its existing markets. Management intends to apply this
strategy to each of its newly-acquired markets.
- - Superior Sales and Service. The Company seeks to gain market share in each of
its markets through an intensive focus on customer sales and service, quality
displays and competitive pricing. The Company has recruited and trained a
skilled sales force that is motivated by a program of commission-based
compensation and supported by a network of experienced local managers who
operate under a centrally coordinated marketing plan. Each of the Company's
markets has a general manager who is actively engaged in sales. In addition,
the Company seeks to attract and retain advertisers through creative
advertising layouts, timely installation and rotation of displays and rapid
response to customer needs.
- - National Sales Force. The Company's markets generally possess demographic
characteristics that are attractive to national advertisers, allowing the
Company to combine several of its markets into single contracts so that
advertisers with national and regional campaigns can simplify their purchasing
process while presenting their messages in multiple markets. The Company seeks
to gain national market share by providing advertisers easy access to all of
the Company's markets through one of its four national sales offices in the
U.S.
- - Optimal Inventory Management. The Company seeks to balance advertising rate
growth with optimal occupancy of its displays in order to maximize revenues.
The Company's variety of outdoor advertising displays in its geographically
diverse markets permits flexibility in pricing and packaging its display
inventory.
- - Centralized Administration. The Company has consolidated substantially all of
its administration, accounting, sales management and leasing management
functions into its Phoenix headquarters and five regional offices. This
centralization allows the Company to focus local efforts on customer service
and sales and to exercise greater control over administrative costs and
expenses.
- - Strategic Acquisitions. The Company pursues strategic acquisitions in
existing and new markets to achieve increased operating efficiencies, greater
geographic diversification and increased market penetration. The Company is
primarily interested in further expansion in the 50 largest United States, ten
largest Canadian and ten largest Mexican markets, because these markets
typically generate greater outdoor advertising revenues, readily attract
national advertisers, provide a better basis for regional advertising, attract
quality management and offer opportunities to gain a larger market share from
competitive media.
2
5
MARKETS
The Company's markets generally possess demographic characteristics that
are attractive to national advertisers, allowing the Company to combine several
of its markets into single contracts so that advertisers with national and
regional campaigns can simplify their purchasing process while presenting their
messages in multiple markets. Each market also has unique local industries,
businesses, sports franchises and special events that are frequent users of
outdoor advertising. The following table sets forth certain information with
respect to the Company's outdoor markets as of December 31, 1998:
MALL AND
MARKET 30-SHEET 8-SHEET AIRPORT
CITY RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT TOTAL
---- ------ --------- -------- ------- -------- ------- -------
UNITED STATES:
New York-New Jersey(1).............................. 1 864 2,979 262 264 2,710 7,079
Los Angeles......................................... 2 1,613 2,961 473 2,912 7,959
Chicago............................................. 3 756 640 162 1,558
Philadelphia........................................ 4 183 116 498 797
San Francisco-Oakland-San Jose...................... 5 236 1,005 563 196 1,528 3,528
Boston.............................................. 6 130 130
Washington D.C...................................... 7 195 195
Dallas-Ft. Worth.................................... 8 849 127 976
Detroit............................................. 9 656 1,342 91 138 1,000 3,227
Houston............................................. 10 1,047 114 1,161
Atlanta............................................. 11 933 1,679 101 650 3,363
Seattle............................................. 12 89 89
Minneapolis......................................... 13 54 155 209
Cleveland........................................... 14 70 107 177
Miami-Ft. Lauderdale................................ 15 404 168 572
Phoenix............................................. 16.. 673 1,516 659 79 1,490 4,417
Tampa-St. Petersburg-Sarasota....................... 17 913 116 1,029
Sacramento-Stockton-Modesto......................... 18 446 1,271 91 1,808
Denver.............................................. 19 227 784 156 5,266 6,433
St. Louis........................................... 20 466 833 1 10 1,310
Pittsburgh.......................................... 21 78 78
San Diego........................................... 22 109 541 106 680 1,436
Orlando-Daytona Beach............................... 23 996 93 1,089
Baltimore........................................... 24 61 61
Portland, OR........................................ 25 17 33 50
Indianapolis........................................ 26 137 59 196
Hartford-New Haven.................................. 27 151 831 25 1,007
Salt Lake........................................... 28 61 35 96
Charlotte........................................... 29 145 27 172
Raleigh-Durham...................................... 30 33 20 53
Milwaukee........................................... 31 32 32
Cincinnati.......................................... 32 104 60 164
Nashville........................................... 33 248 38 286
Kansas City......................................... 34 242 840 72 1,154
Columbus, OH........................................ 35 104 12 116
San Antonio......................................... 36 85 36 121
Greenville-Spartanburg.............................. 37 20 20
Grand Rapids........................................ 38 56 568 16 180 820
Norfolk............................................. 39 57 57
New Orleans......................................... 40 345 1,042 428 38 214 2,067
Birmingham.......................................... 41 154 28 182
Memphis............................................. 42 77 27 104
Buffalo............................................. 43 116 54 170
Fresno.............................................. 44 125 892 64 1,081
Albuquerque......................................... 45 99 27 126
Harrisburg.......................................... 46 29 29
Oklahoma City....................................... 47 58 58
Providence.......................................... 48 33 33
Louisville.......................................... 49 296 1,052 243 38 224 1,853
Winston-Salem....................................... 50 35 16 51
West Palm Beach..................................... 51 219 54 273
Scranton............................................ 52 10 10
Jacksonville........................................ 53 178 20 198
Albany.............................................. 54 107 107
Dayton.............................................. 55 123 24 147
Little Rock......................................... 56 26 26
Charleston, SC...................................... 57 181 16 197
Mobile.............................................. 58 22 22
Las Vegas........................................... 59 156 31 187
3
6
MALL AND
MARKET 30-SHEET 8-SHEET AIRPORT
CITY RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT TOTAL
---- ------ --------- -------- ------- -------- ------- -------
UNITED STATES (CONTINUED)
Tulsa............................................... 60 6 6
Richmond, VA........................................ 61 5 5
Austin.............................................. 62 6 6
Flint............................................... 63 86 423 32 21 562
Honolulu............................................ 64 551 551
Knoxville........................................... 65 78 12 90
Wichita............................................. 66 10 10
Toledo.............................................. 67 12 12
Syracuse............................................ 69 62 62
Roanoke............................................. 70 49 20 69
Green Bay........................................... 71 14 14
Shreveport.......................................... 72 41 16 57
Omaha............................................... 74 52 15 67
Rochester........................................... 75 78 3,715 3,793
Des Moines.......................................... 76 28 28
Tucson.............................................. 77 170 6 338 10 524
Rio Grande.......................................... 80 316 316
El Paso............................................. 83 81 81
Columbia, SC........................................ 84 158 24 182
Jackson, MS......................................... 86 76 20 96
Chattanooga......................................... 90 63 36 99
Ft. Myers........................................... 91 108 39 147
Colorado Springs.................................... 98 62 62
Ft. Wayne........................................... 106 69 69
Tyler, TX........................................... 110 87 87
Reno................................................ 117 104 104
Bakersfield, CA..................................... 124 50 50
Eugene.............................................. 125 77 382 459
Columbus, GA........................................ 129 190 412 100 240 942
Beaumont............................................ 134 110 110
Midland-Odessa, TX.................................. 148 47 47
Non-Metro Markets................................... N/A 12,439 175 1,136 13,750
--- ------ ------ ------ ----- ------ -------
UNITED STATES TOTAL(1)............................ 29,495 21,534 3,357 6,700 21,317 82,403
------ ------ ------ ----- ------ -------
CANADA:
Toronto............................................. 1 165 1,512 4,089 5,766
Montreal............................................ 2 117 845 2,030 2,992
Vancouver........................................... 3 19 308 327
Ottawa.............................................. 4 11 173 184
Edmonton............................................ 5 300 558 858
Calgary............................................. 6 563 156 698 1,417
Quebec City......................................... 7 209 348 341 898
Winnepeg............................................ 8 102 299 392 793
Hamilton............................................ 9 12 301 698 1,011
London.............................................. 10 87 87
Kitchener........................................... 11 72 72
St. Catharines...................................... 12 6 97 103
Halifax............................................. 13 12 236 216 464
Other............................................... N/A 167 1,786 982 2,935
--- ------ ------ ------ ----- ------ -------
CANADA TOTAL...................................... 1,364 6,231 -- -- 10,312 17,907
------ ------ ------ ----- ------ -------
MEXICO:
Mexico City......................................... 1 2,061 2,061
Guadalajara......................................... 2 1,128 1,128
Monterrey........................................... 3 3,073 3,073
Puebla.............................................. 4 295 295
Ciudad Juarez....................................... 5 236 236
Tijuana............................................. 6 153 153
Leon................................................ 7 305 305
San Luis Potosi..................................... 8 162 162
Torreon............................................. 9 202 202
Toluca.............................................. 10 111 111
Chihuahua........................................... 11 160 160
Merida.............................................. 12 110 110
Acapulco............................................ 13 147 147
Aguascalientes...................................... 14 99 99
Saltillo............................................ 15 169 169
Cuernavaca.......................................... 16 73 73
Morelia............................................. 17 96 96
Queretaro........................................... 18 107 107
Culiacan............................................ 19 220 220
4
7
MALL AND
MARKET 30-SHEET 8-SHEET AIRPORT
CITY RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT TOTAL
---- ------ --------- -------- ------- -------- ------- -------
MEXICO (CONTINUED)
Hermosillo.......................................... 20 210 210
Veracruz............................................ 21 209 209
Mexicali............................................ 22 86 86
Tampico............................................. 23 153 153
Durango............................................. 24 52 52
Tuxtla Gutierrez.................................... 25 44 44
Cancun.............................................. 26 118 118
Villa Hermosa/Tabasco............................... 27 125 125
Matamoros........................................... 28 91 91
Irapuato............................................ 29 46 46
Nuevo Laredo........................................ 30 47 47
Tepic............................................... 31 31 31
Celaya.............................................. 32 72 72
Oaxaca.............................................. 33 59 59
Coatzacoalcos....................................... 34 62 62
Orizaba............................................. 35 13 13
Pachuca............................................. 36 27 27
Monclova............................................ 37 37 37
Zacatecas........................................... 38 39 39
Campeche............................................ 39 31 31
Colima.............................................. 40 42 42
La Paz.............................................. 41 29 29
Ciudad del Carmen................................... 42 18 18
Tlaxcala............................................ 43 14 14
Manzanillo.......................................... 44 48 48
Other............................................... N/A 1,553 1,553
--- ------ ------ ------ ----- ------ -------
MEXICO TOTAL...................................... 12,163 -- -- -- -- 12,163
------ ------ ------ ----- ------ -------
GRAND TOTAL(1).................................... 43,022(2) 27,765 3,357 6,700 31,629 112,473
====== ====== ====== ===== ====== =======
- ---------------
(1) Display faces do not include 125,000 subway advertising display faces in New
York City.
(2) Includes 141 wall murals and 51 "Spectacular" signs.
INVENTORY
The Company operates five standard types of outdoor advertising billboards
and displays:
- - Bulletins generally are 14 feet high and 48 feet wide (672 square feet) in the
United States with varying sizes in Canada and Mexico. The advertising copy is
either hand painted onto panels at the facilities of the outdoor advertising
company in accordance with design specifications supplied by the advertiser,
and then attached to the outdoor advertising structure, or is printed with
computer-generated graphics on a single sheet of vinyl that is "wrapped"
around the structure. On occasion, to attract more attention, some of the
panels may extend beyond the linear edges of the display face and may include
three-dimensional embellishments. Because of their greater impact and higher
cost, bulletins are usually located on major highways.
- - 30-sheet posters generally are 12 feet high by 25 feet wide (300 square feet)
and are the most common type of billboard. Advertising copy for 30-sheet
posters consists of lithographed or silk-screened paper sheets supplied by the
advertiser that are pasted and applied like wallpaper to the face of the
display, or single sheets of vinyl with computer-generated advertising copy
that are wrapped around the structure. 30-sheet posters are concentrated on
major traffic arteries.
- - Junior (8-sheet) posters usually are 6 feet high by 12 feet wide (72 square
feet). Displays are prepared and mounted in the same manner as 30-sheet
posters, except that vinyl sheets are not typically used on junior posters.
Most junior posters, because of their smaller size, are concentrated on city
streets and target specific neighborhoods.
- - Mall and airport posters are displayed in backlighted cases. The displays are
generally constructed, owned and maintained by the outdoor advertising company
under a contract with a governmental entity or a shopping mall owner who
receives a share of the advertising revenues.
5
8
- - Transit displays include displays on bus shelters, subways and bus benches.
Bus shelters and benches are usually constructed, owned and maintained by the
out-of-home advertising company under a contract with the municipality or
transit authority which receives a share of the shelters' advertising
revenues. Bus shelter displays are enclosed within glassed, backlighted cases
on sides of a pedestrian shelter at an urban bus stop on city rights of way.
Subway displays are located within subway stations and walkways as well as in
subway trains. Advertisements appear on lithographed or silk-screened posters
supplied in a single sheet by the advertiser. Transit displays are an
attractive medium to advertisers using "vertical" advertising copy, such as
magazines and movie posters, because the advertising copy is easily adapted
for use in transit shelters, and because of the proximity of the display to
consumers.
Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Billboard structures, bus
shelters and benches are durable, have long useful lives and do not require
substantial maintenance. When disassembled, they typically can be moved and
relocated at new sites.
EMPLOYEES
The Company had approximately 2,500 employees at December 31, 1998.
SALES AND SERVICE
The Company devotes considerable time and resources to recruiting, training
and coordinating the activities of its sales force. Sales personnel are
compensated primarily on a commission basis to maximize the incentive to
perform. Arturo R. Moreno, President, Chief Executive Officer and a member of
the Board of Directors, and Wally C. Kelly, Senior Vice President, are the
Company's two principal officers responsible for day-to-day operations, and have
an aggregate of approximately 46 years of experience in the outdoor advertising
industry, virtually all of which has been spent in sales and management
positions.
CUSTOMERS
Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising as well as the choice of media and the planning and
implementation of the overall campaign. The Company pays commissions to the
agencies for advertising contracts that are procured by or through those
agencies. Advertising rates are based on a particular display's visual exposure
(or number of "impressions" delivered) in relation to the demographics of the
particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent companies.
The size and geographic diversity of the Company's markets allows it to
attract national advertisers by providing the opportunity to package displays in
several of its markets in a single contract allowing a national advertiser to
simplify the purchasing process and simultaneously present its message in
several markets. National advertisers generally seek wide exposure in major
markets and therefore tend to make larger purchases. The Company competes for
national advertisers primarily on the basis of location, price, availability and
service.
The Company also focuses its efforts on local sales. Local advertisers tend
to have smaller advertising budgets and require greater assistance from the
Company's production and creative personnel in designing and producing
advertising copy. In local sales, the Company often expends more sales efforts
on educating customers regarding the benefits of outdoor media and helping
potential customers develop an advertising strategy using outdoor advertising.
While price and availability are important competitive factors, service and
customer relationships are also critical components of local sales.
6
9
Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. In the 1990s, due to a declining population of
smokers, societal pressures, consolidation in the tobacco industry and price
competition from generic brands, the leading tobacco companies substantially
reduced their expenditures for outdoor advertising. Because tobacco advertisers
often utilized some of the industry's prime inventory, the decline in
tobacco-related advertising expenditures made this space available for other
advertisers, including those that had not traditionally utilized outdoor
advertising. As a result of this decline in tobacco-related advertising revenues
and the increased use of outdoor advertising by other advertisers, the range of
the Company's advertisers has become quite diverse, with no single category of
advertisers accounting for more than 14.7% of net revenues in 1998. The
following table illustrates the diversity of the Company's advertising base:
NET REVENUES BY CATEGORY
PERCENTAGE
OF
NET REVENUES
------------
Retail/Consumer Products.................................... 14.7%
Travel and Entertainment.................................... 10.0
Automotive.................................................. 9.2
Food and Beverages.......................................... 7.6
Media....................................................... 6.4
Technology and Services..................................... 6.0
Hotels...................................................... 5.6
Restaurants................................................. 5.6
Tobacco..................................................... 4.7
Health...................................................... 3.6
Banking..................................................... 3.6
Miscellaneous............................................... 23.0
-----
Total............................................. 100.0%
=====
PRODUCTION
In many of its markets, the Company possesses internal production
facilities and staff to perform the full range of activities required to
develop, create and install outdoor advertising. In smaller operations, the
Company hires subcontractors to perform varying degrees of its production.
Production work includes creating the advertising copy design and layout,
painting the design or coordinating its printing and installing the designs on
its displays. The Company usually provides its full range of production services
to local advertisers and to advertisers that are not represented by advertising
agencies, since national advertisers and advertisers represented by advertising
agencies often use preprinted designs that require only installation. However,
the Company's creative and production personnel frequently are involved in
production activities even when advertisers are represented by agencies by
developing new designs or adapting copy from other media for use on billboards.
The Company's artists also assist in the development of marketing presentations,
demonstrations and strategies to attract new advertisers.
With the increased use of vinyl and pre-printed advertising copy, outdoor
advertising companies are becoming less responsible for labor-intensive
production work since vinyl and pre-printed copy is typically produced by the
advertiser or its agency and can be installed quickly. The Company believes that
this trend over time will reduce operating expenses associated with production
activities.
7
10
COMPETITION
The Company competes in each of its markets with other outdoor advertising
operations as well as other media, including broadcast and cable television,
radio, print and direct mail marketers. In addition, the Company also competes
with a wide variety of "out-of-home" media, including advertising in shopping
centers and malls, airports, stadiums, movie theaters and supermarkets, as well
as on taxis, trains, buses and subways. Advertisers compare the effectiveness of
relative costs of available media and cost-per-thousand impressions,
particularly when delivering a message to customers with distinct demographic
characteristics. In competing with other media, outdoor advertising relies on
its low cost per-thousand impressions and its ability to reach a broad segment
of the population in a specific market or to target a particular geographic area
or population with a particular set of demographic characteristics within that
market.
The outdoor advertising industry is highly fragmented, consisting of
several large outdoor advertising and media companies with operations in
multiple markets as well as smaller and local companies operating a limited
number of structures in a single or a few local markets. Although significant
consolidation has occurred over the past few years, according to the OAAA, as of
December 31, 1998, there were approximately 400 companies in the outdoor
advertising industry operating approximately 396,000 bulletin and poster display
faces. In several of its markets, the Company encounters direct competition from
other major outdoor media companies. The Company believes that its strong
emphasis on sales and customer service and its position as a major provider of
advertising services in each of its markets enable it to compete effectively
with the other outdoor advertising companies, as well as other media, within
those markets.
GOVERNMENT REGULATION
U.S. Regulations. The outdoor advertising industry is subject to
governmental regulation at the federal, state and local level. Federal law,
principally the Highway Beautification Act of 1965, encourages states, by the
threat of withholding 10% of the federal appropriations for the construction and
improvement of highways within such states, to implement state legislation to
prohibit billboards located within 660 feet of, or visible from, interstate and
primary highways except in commercial or industrial areas where off-site signage
is permitted provided it meets spacing and size restrictions. All of the states
have implemented regulations at least as restrictive as the Highway
Beautification Act. The Highway Beautification Act, and the various state
statutes implementing it, require payment of just compensation whenever
governmental authorities require legally erected and maintained billboards to be
removed from areas adjacent to federally aided highways.
The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of outdoor advertising structures adjacent to federally-aided
highways and other thoroughfares. Such regulations, often in the form of
municipal building, sign or zoning ordinances, specify minimum standards for the
height, size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel or from nonilluminated to
illuminated structures, and/or restrict the reconstruction of billboards which
are substantially destroyed as a result of storms or other causes. From time to
time governmental authorities order the removal of billboards by the exercise of
eminent domain. Thus far, the Company believes it has been able to obtain
satisfactory compensation for any of its structures removed at the direction of
governmental authorities, although there is no assurance that it will be able to
continue to do so in the future.
Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. In theory, amortization permits the billboard owner to
operate its billboard as a non-conforming use for a specified period of time
during which it is to recover its investment, after which it must remove or
otherwise conform its billboard to the applicable regulations at its own cost
without any compensation. Several municipalities in the Company's markets,
including municipalities or townships in Denver, Houston, Jacksonville, Kansas
City, St. Louis and Tampa, currently have amortization ordinances or
regulations. Ordinances requiring the removal of a billboard without
compensation, whether through amortization or otherwise, are being challenged in
various state and federal courts with conflicting results. In some cities,
amortization ordinances or regulations are not being enforced or have been held
unconstitutional. However, no assurance can be given as to the effect
8
11
on the Company of the enforcement of existing laws or regulations, or of new
laws and regulations that may be adopted in the future.
In recent years, there have been efforts to restrict billboard advertising
of certain products, including tobacco and alcohol. Congress has passed no
legislation at the federal level except legislation requiring health hazard
warnings similar to those on cigarette packages and print advertisements.
Certain states in which the Company operates have historically prohibited the
outdoor advertising of distilled spirits. In California and Phoenix, Arizona,
transit shelter advertising posters on public rights of way are prohibited from
displaying tobacco and/or alcohol advertising. San Francisco has adopted an
ordinance banning all tobacco and alcohol advertising on public property, but
has "grandfathered" existing sales contracts through 2002. Oakland has adopted a
spacing ordinance which, if upheld in court, would de facto prohibit outdoor
advertising of alcohol.
In November 1998, the major U.S. tobacco companies (the "Tobacco
Companies") reached an out of court settlement (the "Agreement") with 46 states,
the District of Columbia, the Commonwealth of Puerto Rico and four other U.S.
territories (the "Settling States"). The remaining four states had already
reached similar settlements with the Tobacco Companies. The Agreement calls for
the removal of tobacco advertising from out-of-home media, including billboards,
along with signs and placards in arenas, stadiums, shopping malls and video game
arcades by April 23, 1999. Additionally, the Agreement provides that, at the
Settling States' option, the Tobacco Companies must, at their expense,
substitute for tobacco advertising alternative advertising which discourages
youth smoking. That alternative advertising must remain in place for the
duration of the Tobacco Companies' out-of-home media advertising contracts which
existed as of the date of the Agreement.
The elimination of tobacco advertising as called for by the Agreement will
cause a reduction in direct revenues from Tobacco Companies and may
simultaneously increase the available space on the existing inventory of
billboards in the outdoor advertising industry. Although the extent of the
future impact on operations is not known, the Company has been successful thus
far in replacing tobacco advertising in areas where settlements were reached
prior to the Agreement (i.e., Florida, Texas and San Francisco). Also, tobacco
revenues in the U.S. accounted for only 4.2% of the Company's total net revenues
in 1998. While both of these factors are positive, the Company can give no
assurance that the further cutbacks in tobacco advertising during 1999 will not
have an adverse effect on operations for 1999 or beyond.
Canadian Regulations. Outdoor advertising in Canada is subject to
regulation at the federal, provincial and municipal levels. These regulations
may prohibit advertising of certain products on outdoor signs in certain
locations. For example, in Ontario, billboards and posters advertising liquor
may not be placed within 200 meters of a primary or secondary school.
Additionally, Canadian federal legislation was enacted in April, 1997 which
effectively prohibits substantially all outdoor tobacco advertising. While this
legislation is being challenged, there can be no assurance that such challenge
will be successful. In addition, the placement of outdoor billboards is
primarily regulated at the provincial and local level. For example, Quebec
regulates the placement of advertising adjacent to highways, as well as the
language used on outdoor signs.
Mexican Regulations. In Mexico there are no current regulations which
limit the advertising of any product on outdoor signs. While the Company is not
aware of any such legislation being proposed, there can be no assurance that
legislation restricting the advertising of any specific product on outdoor signs
will not be enacted in the future. In addition, the placement of outdoor
billboards is primarily regulated at the local level. For example, Mexico City
regulates the placement of billboards near historical monuments.
General. To date, regulations in the Company's markets have not materially
adversely affected its operations. However, the outdoor advertising industry is
heavily regulated and at various times and in various markets can be expected to
be subject to varying degrees of regulatory pressure affecting the operation of
advertising displays. Accordingly, although the Company's experience to date is
that the regulatory environment is not prohibitive, no assurance can be given
that existing or future laws or regulations will not materially adversely affect
the Company.
9
12
ITEM 2. PROPERTIES
Outdoor Advertising Sites. The majority of the Company's advertising
display sites are leased. However, the Company owns parcels of real property
that serve as sites for a few of its outdoor displays. In addition, the Company
possesses perpetual easements on parcels of real property owned by third parties
on which it has placed a few of its outdoor displays.
The Company's leases are for varying terms ranging from monthly or annual
periods to terms of ten years or longer, and many provide for renewal options.
There is no significant concentration of displays under any one lease or subject
to negotiation with any one landlord.
Office and Production Facilities. The Company's principal executive and
administrative offices are located in Phoenix, Arizona, in a facility owned by
the Company. A portion of this facility also is used for painting, poster
prepasting and related production activities. Additionally, the Company owns the
majority of the office and production facilities from which it operates in its
United States, Canadian and Mexican metropolitan markets.
See also "Item 1 -- Business -- Markets."
ITEM 3. LEGAL PROCEEDINGS
The Company is party either as plaintiff or defendant to various actions,
proceedings and pending claims, in the ordinary course of business. Litigation
is subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims referred to above could be decided against the
Company. Although the ultimate amount for which the Company or its subsidiaries
may be held liable with respect to matters where the Company is defendant is not
ascertainable, the Company believes that any resulting liability will not
materially affect the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
YEARS WITH
NAME AGE POSITION COMPANY
---- --- -------- ----------
William S. Levine.......... 67 Chairman of the Board and Director 19
Arturo R. Moreno........... 52 President, Chief Executive Officer and Director 15
Wally C. Kelly............. 42 Senior Vice President 15
Robert M. Reade............ 58 Vice President 7
Bill M. Beverage........... 48 Treasurer, Secretary and Chief Financial Officer 8
Mr. Levine, a founder and principal stockholder of the Company, has been
Chairman of the Board and a director of the Company since its formation. Mr.
Levine has 19 years of experience in the outdoor advertising industry. He is an
owner and officer of numerous privately-owned firms and commercial real estate
operations. Since 1990, Mr. Levine has dedicated a substantial portion of his
time to the Company's affairs.
Mr. Moreno has served as the Company's President and Chief Executive
Officer and has been a director of the Company since April 1984. Mr. Moreno has
26 years of experience in the outdoor advertising industry. From 1981 to 1984,
Mr. Moreno served as President and General Manager of Gannett Outdoor of New
Jersey. From 1979 to 1981, he was President and General Manager of Gannett
Outdoor of Kansas City (Missouri). From 1973 to 1981, Mr. Moreno worked in
Phoenix as a Vice President of Sales for Gannett Outdoor and its predecessor
company.
10
13
Mr. Kelly has been the Company's Senior Vice President since 1984. Mr.
Kelly has 20 years of experience in the outdoor advertising business. From 1979
to 1984, Mr. Kelly worked for Whiteco Metrocom, Inc. in Tucson (1979 to 1981) as
Sales Manager and in Chicago as Vice President of National Sales (1982 to 1984).
Mr. Reade has been Vice President of the Company since May 1997. He served
as the Company's Director of Real Estate from April 1993 to May 1997 and was a
consultant to the Company from 1992 to April 1993. Mr. Reade has 29 years of
experience in the outdoor advertising industry. From 1987 to 1990, Mr. Reade
served as President and Chief Operating Officer of a major convenience store
chain and from 1985 to 1987 was Real Estate Manager of such chain. In 1985, Mr.
Reade served as Vice President, Sales and Marketing for Gannett Outdoor Group in
New York and from 1970 to 1985 he was General Manager for Gannett Outdoor and
its predecessor company in Phoenix.
Mr. Beverage has served as the Company's Controller since 1992, its
Treasurer and Secretary since May 1993, and its Chief Financial Officer since
October 1995. Mr. Beverage has 19 years of experience in the accounting
departments of various outdoor advertising companies. From 1990 to 1992, he
served as the Company's Atlanta real estate manager. From 1988 until 1990, he
worked for Outdoor Today, Inc. in Atlanta (which was acquired by the Company in
1990) as a consultant and as its accounting manager. Prior to 1988, he worked
for five years for Turner Outdoor Advertising in Atlanta and for four years for
Creative Displays in Atlanta. From 1976 to 1979, he was an auditor for Arthur
Young & Co. (now known as Ernst & Young).
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve at the discretion of the Board of Directors.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company effected the initial public offering of its Common Stock on
April 24, 1996 at a price of $1.97 per share, as adjusted for all subsequent
stock splits. The Company's Common Stock is currently traded on the New York
Stock Exchange under the symbol "OSI". From April 24, 1996 to September 1, 1997,
the Common Stock was quoted on the Nasdaq Stock Market under the symbol "OSIA".
The following table sets forth, for the periods indicated, the high and low
sales prices per share of the Common Stock as reported by the New York Stock
Exchange or the Nasdaq Stock Market, as applicable.
1997 HIGH LOW
---- ------ ------
1st Quarter.............................................. $10.04 $ 6.45
2nd Quarter.............................................. 11.33 7.63
3rd Quarter.............................................. 12.05 10.28
4th Quarter.............................................. 17.53 11.50
1998 HIGH LOW
---- ------ ------
1st Quarter.............................................. $23.38 $13.88
2nd Quarter.............................................. 28.00 19.44
3rd Quarter.............................................. 27.94 18.06
4th Quarter.............................................. 30.00 14.50
On March 15, 1999, the last reported sales price of the Common Stock on the
New York Stock Exchange was $30.0625 per share. As of March 15, 1999, there were
100 shareholders of record of the Common Stock.
The Company's Senior Credit Facility prohibits the payment of cash
dividends and other distributions until certain financial ratios are achieved.
11
14
On May 19, 1998, the Company issued 2,494,790 shares of Common Stock, with
an aggregate value of approximately $49.8 million, as merger consideration to
the former stockholders of an acquired company. Pursuant to the merger
agreement, the value of these shares was determined by the average of the per
share closing prices of the Common Stock as reported by the New York Stock
Exchange for each of the five days preceding the closing date. These shares were
issued in reliance upon the exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), provided by Section
4(2) thereof. These shares were subsequently registered for resale under the
Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below were derived from
the audited consolidated financial statements of the Company for the five years
ended December 31, 1998. The financial statements of the Company as of December
31, 1997 and 1998 and for the three years in the period ended December 31, 1998
together with the report of Deloitte & Touche LLP, independent auditors, are
included elsewhere herein. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements, including
the Notes thereto, appearing elsewhere herein.
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS
DATA(1)(2):
Net revenues(3).............. $ 52,077 $ 64,813 $ 173,116 $ 471,004 $ 705,911
Operating Expenses:
Direct advertising
expenses................. 24,433 30,462 87,593 237,175 330,955
General and administrative
expenses................. 3,357 4,096 13,458 28,563 37,341
Depreciation and
amortization............. 9,165 9,970 22,555 75,327 123,093
Gain on the Atlanta and
Denver Dispositions........ 4,325 -- 7,344 -- --
Operating income............. 19,447 20,285 56,854 129,939 214,522
Foreign currency transaction
(gain) loss................ -- -- (171) 2,093 4,278
Interest expense-net......... 16,393 17,199 32,489 87,150 138,065
Income (loss) before
extraordinary item(4)...... 1,333 2,768 14,336 22,211 41,142
Net income (loss)............ 1,333 2,768 (3,444) 15,438 41,142
Net income (loss)
attributable to common
stockholders............... (263) 307 (6,905) 15,438 41,142
Basic net income (loss) per
share...................... -- -- (.07) .09 .22
Diluted net income (loss) per
share...................... -- -- (.06)(5) .08 .20
Shares used in basic per
share computations......... 56,594,295 71,200,280 101,509,052 163,644,016 183,354,266
Shares used in diluted per
share computations......... 71,200,280 85,806,264 119,013,759 183,913,342 203,953,778
12
15
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OTHER DATA:
EBITDA(6).................... $ 24,287 $ 30,255 $ 72,065 $ 205,266 $ 337,615
EBITDA margin(7)............. 46.6% 46.7% 41.6% 43.6% 47.8%
Net cash provided by
operating activities....... $ 11,505 $ 18,552 $ 49,588 $ 90,687 $ 156,622
Net cash used in investing
activities................. (27,556) (6,301) (754,058) (1,293,751) (507,707)
Net cash provided by (used
in) financing activities... 17,726 (14,170) 714,618 1,197,269 362,902
Capital expenditures......... 4,924 7,070 9,046 30,189 38,215
Number of advertising
displays................... 11,900 12,700 61,600(8) 98,300(8) 112,500(8)
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.............. $ 15,022 $ 8,221 $ 36,142 $ 61,229 $ 37,798
Total assets................. 151,260 138,213 933,455 2,229,157 2,756,826
Total debt................... 155,204 142,269 606,409 1,444,150 1,807,232
Redeemable preferred stock... 3,422 3,504 -- -- --
Common stockholders' equity
(deficiency)............... (29,074) (28,767) 288,179 695,471 770,926
- ---------------
(1) On July 1, 1998, the Company completed the acquisition of (i) substantially
all of the assets of Vendor, S.A. de C.V., the outdoor advertising
subsidiary of Televisa, S.A. de C.V., for approximately $216.0 million and
(ii) substantially all of the outdoor advertising business conducted by MM
Billboard, S.A. de C.V., an affiliated outdoor advertising company in
northern Mexico, for approximately $21.9 million. The operations of these
acquisitions (collectively, the "Vendor Acquisitions") include approximately
6,600 bulletin display faces in 44 metropolitan markets in Mexico. In
addition, during 1998 the Company completed other acquisitions. Accordingly,
operating results are not necessarily comparable on a year-to-year basis.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Note 2 of the Consolidated Financial Statements.
(2) During 1996 and 1997, the Company completed certain acquisitions, including
the Gannett Outdoor Acquisition (as defined herein) and the Denver
Disposition (as defined herein) in 1996, and the 3M Media Acquisition (as
defined herein) in 1997. In December 1994, the Company consummated the
disposition of substantially all the operating assets of its business then
operating in Atlanta (the "Atlanta Disposition"). Accordingly, operating
results are not necessarily comparable on a year-to-year basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 2 of the Consolidated Financial Statements.
(3) Net revenues are gross revenues minus agency commissions, plus lease,
printing and other revenues.
(4) Deferred financing costs of $17.8 and $6.8 million associated with
borrowings which were retired or redeemed were charged as an extraordinary
loss during 1996 and 1997, respectively.
(5) Stock options are included because the Company had net income before the
extraordinary loss.
(6) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense and, in 1994 and 1996, before the gain on the Atlanta
Disposition and Denver Disposition, respectively. While EBITDA should not be
considered in isolation or as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with generally accepted accounting principles, or as a measure
of profitability or liquidity, management understands that it is customarily
used by certain investors as one measure to evaluate the financial
performance of companies in the outdoor advertising industry.
(7) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(8) Does not include approximately 125,000 subway advertising display faces in
New York City.
13
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following discussion of the consolidated results of operations of the
Company for the three years ended December 31, 1998 and financial condition at
December 31, 1998 should be read in conjunction with the Consolidated Financial
Statements of the Company and the related Notes included elsewhere herein.
SOURCES OF REVENUE
The Company derives substantially all of its revenues from sales of
advertising on its out-of-home advertising displays. Revenues are a function of
both the occupancy of the Company's out-of-home advertising display inventory
(the amount of time that its display faces contain advertisements) and the rates
that the Company charges for use of its display faces. Accordingly, the Company
focuses its sales efforts on attaining an optimal "mix" of occupancy and rates
in order to maximize revenues, and believes that there are opportunities for
additional improvements to its occupancy and rate mix with respect to its entire
inventory.
Net revenues are gross revenues less commissions paid to advertising
agencies that contract for the use of advertising display faces on behalf of
advertisers plus other income arising from the Company's operations. Advertisers
typically contract for advertising space through agencies, although in some
cases the Company sells advertising space directly to local advertisers. Agency
commissions are typically 15% of gross revenues on local sales and 16 2/3% of
gross revenues on national sales. The Company measures its operating performance
based upon percentages of net revenues rather than gross revenues.
COMPONENTS OF EXPENSES
Operating expenses are comprised of direct advertising expenses, general
and administrative expenses and depreciation and amortization expense. Direct
advertising expenses consist of rental payments to property owners for use of
land on which advertising display faces are located, production expenses and
selling expenses. Production expenses consist of salaries for operations
personnel and real estate representatives, materials and supplies used in the
preparation and display of advertising copy, annual permits, property taxes and
other similar expenses. Selling expenses consist of salaries and commissions for
salespeople, travel and entertainment relating to sales, sales administration
and other similar expenses. The Company's general and administrative expenses
consist of expenses related to accounting, administrative functions, insurance,
bad debts and other similar expenses.
USE OF EBITDA
The performance of an outdoor advertising business, such as the Company, is
measured by its ability to generate EBITDA. EBITDA is defined as operating
income (loss) before interest, taxes, depreciation and amortization expense and,
with respect to 1996, before the gain on the Denver Disposition. Although EBITDA
is not a measure of performance calculated in accordance with generally accepted
accounting principles, the Company believes that EBITDA is accepted by the
outdoor advertising industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of outdoor
advertising companies. Nevertheless, this measure should not be considered in
isolation or as a substitute for operating income, net income, net cash provided
by operating activities or any other measure for determining the Company's
operating performance or liquidity which is calculated in accordance with
generally accepted accounting principles.
NET OPERATING LOSS CARRYFORWARDS
The Company has U.S., Mexican and Canadian net operating loss carryforwards
of approximately $39.0 million, $214.0 million and $3.0 million, respectively,
as of December 31, 1998, which expire subsequent to the year 2005. Although
realization is not assured, management believes, based on operating results in
1998 and its expectations for the future, that the taxable income of the Company
will more likely than not be
14
17
sufficient to utilize all of the net operating loss carryforwards prior to their
ultimate expiration. However, there can be no assurances that the Company will
generate taxable income in the future.
ACQUISITIONS
Mexico Acquisitions. On July 1, 1998, the Company completed the
acquisition of (i) substantially all of the assets of Vendor, S.A. de C.V., the
outdoor advertising subsidiary of Televisa, S.A. de C.V., for approximately
$216.0 million and (ii) substantially all of the outdoor advertising business
conducted by MM Billboard, S.A. de C.V., an affiliated outdoor advertising
company in northern Mexico, for approximately $21.9 million. The operations of
the Vendor Acquisitions include approximately 6,600 bulletin display faces in 44
metropolitan markets in Mexico. The Company financed the purchase price of the
Vendor Acquisitions, plus approximately $4.1 million of other costs associated
with the Vendor Acquisitions, with borrowings under the Company's Senior Credit
Facility.
The Company also completed other acquisitions of outdoor advertising
companies in northern Mexico in October 1998.
3M Media Acquisition. On August 15, 1997, the Company acquired the outdoor
advertising operations of Minnesota Mining and Manufacturing Company ("3M")
through the purchase of the capital stock of National Advertising Company, a
subsidiary of 3M ("3M Media"), for approximately $1.0 billion in cash (the "3M
Media Acquisition"). The 3M Media operations included approximately 29,900
advertising display faces consisting of approximately 20,800 bulletins, 2,400
posters and 6,700 mall advertising display faces in 56 metropolitan markets and
non-metropolitan locations in the United States (net of assets disposed of as
described below).
The Company financed the purchase price of the 3M Media Acquisition and the
fees and expenses associated with the acquisition and the acquisition financing
through (i) proceeds from the offering of 45,562,500 shares of common stock (the
"1997 Common Stock Offering") to the public, completed on May 28, 1997, (ii)
proceeds of an offering of $500 million aggregate principal amount of 8 7/8%
Senior Subordinated Notes due 2007 completed on June 23, 1997 (the "1997 Notes
Offering"), and (iii) borrowings under the Company's Senior Credit Facility
which was amended to provide for a revolving credit facility and term loans of
up to approximately $900 million.
In connection and simultaneously with the 3M Media Acquisition, the Company
sold to Lamar Advertising Company and another outdoor advertising company
certain outdoor advertising assets the Company acquired from 3M. The assets sold
consisted of approximately 1,800 advertising displays in Atlanta, Denver,
Detroit, Grand Rapids, Houston, New Orleans, Kansas City, Louisville, Phoenix
and Sacramento. The selling price for such assets was approximately $116 million
in cash. There was no gain or loss recognized on this sale.
Gannett Outdoor Acquisition. On August 22, 1996, the Company purchased
substantially all of the assets of Gannett Outdoor (the "Gannett Outdoor
Acquisition"), including the stock of certain indirect subsidiaries of Gannett
Co., Inc. ("Gannett")related to the outdoor division, for approximately $712.5
million in cash. The Company acquired from Gannett a total of approximately
40,000 advertising display faces consisting of 4,100 bulletins, 20,400 posters
and 15,500 transit advertising displays (the Company also acquired approximately
125,000 subway advertising display faces in New York City) in 15 metropolitan
markets in the United States and seven metropolitan markets in Canada.
The Company financed the Gannett Outdoor Acquisition through (i) borrowings
under its Senior Credit Facility, (ii) a Subordinated Credit Facility ("Bridge
Loan") and (iii) the proceeds from the offering of 43,486,875 shares of Common
Stock to the public, completed on August 22, 1996, for which it received
proceeds of approximately $283.1 million net of underwriting discounts and
commissions and offering expenses of approximately $13.1 million. In October
1996, the Company sold $250.0 million of 9 3/8% Senior Subordinated Notes due
2006. The proceeds from this offering were used to repay all borrowings under
the Bridge Loan and to partially repay amounts outstanding under the Senior
Credit Facility (as defined herein) (see Note 5 to the Consolidated Financial
Statements).
15
18
RESULTS OF OPERATIONS
Operating results for the twelve months ended December 31, 1997 include,
from their respective acquisition dates, the operations of the 3M Media
Acquisition completed August 15, 1997 and the several other acquisitions
completed during 1997 (see Note 2 to the Consolidated Financial Statements)
(collectively, the "1997 Acquisitions"). Operating results for the twelve months
ended December 31, 1998 include the operations, from their respective
acquisition dates, of the Vendor Acquisitions completed July 1, 1998, and the
several other acquisitions completed during 1998 (collectively, the "1998
Acquisitions") (see Note 2 to the Consolidated Financial Statements).
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998
Gross revenues increased by 49.2% from $527.5 million in 1997 to $786.9
million in 1998. Gross revenues increased approximately 11.0% during 1998
compared to 1997 for markets where the Company operated both in 1997 and 1998.
The balance of the increased revenues were a result of the inclusion of the 1997
Acquisitions for a full twelve months in 1998 and the 1998 Acquisitions since
their respective dates of completion.
Agency commissions were 13.6% of gross revenues in 1997 compared to 12.6%
in 1998. Agency commissions were lower in 1998 primarily as a result of slightly
lower proportion of revenues generated through advertising agencies.
Net revenues increased by 49.9% from $471.0 million in 1997 to $705.9
million in 1998, primarily as a result of the increase in gross revenues
combined with an increase of lease, printing and other income from $15.3 million
in 1997 to $18.4 million in 1998. Other income increased primarily due to the
inclusion in 1998 of a full twelve months of license fee revenue from perpetual
easements acquired in 1997.
Direct advertising expenses increased from $237.2 million in 1997 to $331.0
million in 1998. This was primarily a result of including in 1998 a full twelve
months expense for the 1997 Acquisitions and the 1998 Acquisitions. As a
percentage of net revenues, direct advertising expenses decreased from 50.4% in
1997 to 46.9% in 1998 because of efficiencies realized from economies of scale.
General and administrative expenses increased from $28.6 million in 1997 to
$37.3 million in 1998. This was primarily a result of including in 1998 a full
twelve months expense for the 1997 Acquisitions and expense for the 1998
Acquisitions since their respective dates of completion. As a percentage of net
revenues, general and administrative expenses decreased from 6.1% in 1997 to
5.3% in 1998 because of efficiencies realized from economies of scale.
As a result of the above factors, EBITDA increased by 64.5% from $205.3
million in 1997 to $337.6 million in 1998.
Depreciation and amortization expenses increased from $75.3 million in 1997
to $123.1 million in 1998, primarily due to the net increase in depreciation and
amortization from the 1997 Acquisitions and the 1998 Acquisitions which was
offset in part by certain assets becoming fully depreciated during 1998. As a
percentage of net revenues, depreciation and amortization expense increased from
16.0% in 1997 to 17.4% in 1998.
Net interest expense increased from $87.2 million in 1997 to $138.1 million
in 1998, as a result of interest expense related to obligations incurred in
connection with the 1997 Acquisitions and the 1998 Acquisitions. As a percentage
of net revenues, net interest expense increased from 18.5% in 1997 to 19.6% in
1998, primarily due to the increase in net revenues.
Income before taxes and extraordinary item was approximately $40.7 million
in 1997 and $72.2 million in 1998.
The Company recorded an income tax provision of $18.5 million in 1997 and
$31.0 million in 1998. The decrease in the reported effective income tax rate
for 1998 is due primarily to the lower statutory tax rate and the tax effect of
currency losses in Mexico.
16
19
The Company reported an extraordinary loss of $6.8 million, net of $4.5
million tax benefit, in 1997. This extraordinary loss resulted primarily from
the write-off of one time bridge loan commitment costs in connection with
certain of the 1997 Acquisitions.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997
Gross revenues increased by 171.7% from $194.2 million in 1996 to $527.5
million in 1997. Gross revenues increased approximately 9.8% during 1997
compared to 1996 for markets where the Company operated both in 1997 and 1996.
The balance of the increased revenues were a result of the 1997 Acquisitions
(see Note 2 to the Consolidated Financial Statements).
Agency commissions were 13.6% of gross revenues in 1997 compared to 14.0%
in 1996. Agency commissions were lower in 1997 primarily as a result of slightly
lower proportion of revenues generated through advertising agencies.
Net revenues increased by 172.1% from $173.1 million in 1996 to $471.0
million in 1997, primarily as a result of the increase in gross revenues
combined with an increase of lease, printing and other income from $6.1 million
in 1996 to $15.3 million in 1997. Lease, printing and other income increased
primarily due to the inclusion of license fee revenue from perpetual easements
acquired in 1997 and the inclusion in 1997 of a full twelve months of revenues
from a printing operation acquired in connection with the Gannett Outdoor
Acquisition.
Direct advertising expenses increased from $87.6 million in 1996 to $237.2
million in 1997. This was primarily a result of the 1997 Acquisitions. As a
percentage of net revenues, direct advertising expenses decreased to 50.4% in
1997 from 50.6% in 1996 as a result of efficiencies realized from economies of
scale from the 1997 Acquisitions.
General and administrative expenses increased from $13.5 million in 1996 to
$28.6 million in 1997. This was primarily a result of the 1997 Acquisitions. As
a percentage of net revenues, general and administrative expenses decreased from
7.8% in 1996 to 6.1% in 1997 because of efficiencies realized from economies of
scale.
As a result of the above factors, EBITDA increased by 184.8% from $72.1
million in 1996 to $205.3 million in 1997.
Depreciation and amortization expenses increased from $22.6 million in 1996
to $75.3 million in 1997, primarily due to the net increase in depreciation and
amortization from the 1997 Acquisitions which was offset in part by certain
assets becoming fully depreciated during 1997. As a percentage of net revenues,
depreciation and amortization expense increased from 13.0% in 1996 to 16.0% in
1997.
Net Interest expense increased from $32.5 million in 1996 to $87.2 million
in 1997, as a result of interest expense related to obligations incurred in
connection with the 1997 Acquisitions. As a percentage of net revenues, net
interest expense decreased from 18.8% in 1996 to 18.5% in 1997, primarily due to
the increase in net revenues.
Income before taxes and extraordinary item was approximately $24.5 million
in 1996 and $40.7 million in 1997. Included in 1996 income before taxes and
extraordinary item was a $7.3 million gain on the Denver Disposition.
Disregarding the effect of this gain, income before taxes and extraordinary item
increased from $17.2 million in 1996 to $40.7 million in 1997.
The Company recorded an income tax provision of $10.2 million in 1996 and
$18.5 million in 1997. The increase in the reported effective income tax rate
for 1997 is due primarily to the inclusion of a full year of operations of the
Company's Canadian subsidiary.
The Company reported an extraordinary loss of $17.8 million, net of $9.8
million tax benefit, in 1996 and $6.8 million, net of $4.5 million tax benefit
in 1997. Both of these extraordinary losses resulted primarily from one time
bridge loan commitment costs in connection with certain of the 1997 Acquisitions
and from a premium associated with the early redemption of its 10 3/4% Senior
Notes due 2003.
17
20
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $61.2 million at December 31, 1997 and
$37.8 million at December 31, 1998. The decrease in working capital resulted
primarily from the increased current portion of long term debt offset by working
capital acquired in the 1998 Acquisitions.
Net cash provided by operating activities increased by $65.9 million from
$90.7 million during 1997 to $156.6 million during 1998, primarily due to
increased net income resulting from the 1997 and 1998 Acquisitions and the
effect of a larger depreciation and amortization expense as a component of net
income, which were partially offset by changes in working capital accounts. Net
cash used in investing activities decreased from $1,293.8 million in 1997 to
$507.7 million in 1998, primarily due to the larger investment in the 1997
Acquisitions as compared to the 1998 Acquisitions. Net cash provided by
financing activities decreased from $1,197.3 million in 1997 to $362.9 million
in 1998, primarily because of proceeds received from the 1997 Common Stock
Offering, the 1997 Notes Offering and borrowings under the Senior Credit
Facility, all used to finance the 1997 Acquisitions.
The Company made approximately $38.2 million of capital expenditures, other
than through acquisitions during 1998, an increase from approximately $30.2
million during 1997. Currently, the Company has no material commitments for
capital expenditures, although it anticipates ongoing capital expenditures in
the ordinary course of business, other than for acquisitions, will be
approximately $38.0 million to $40.0 million in each of the next two years.
The Company financed the purchase price of the 1998 Acquisitions and the
fees and expenses associated with the 1998 Acquisitions through (i) borrowings
under the Company's Senior Credit Facility and (ii) the issuance of 2,494,790
shares of stock in one of the 1998 Acquisitions.
The Company believes that internally generated funds and available
borrowings under the Senior Credit Facility will be sufficient to satisfy its
operating cash requirements for at least the next twelve to twenty-four months.
The Company may, however, require additional capital to consummate significant
acquisitions in the future and there can be no assurance that such capital will
be available.
YEAR 2000 COMPLIANCE
The Company recognizes the need to ensure that its operations will not be
adversely impacted by Year 2000 software failures. The Company has identified
all significant internal information technology systems ("IT Systems") that will
require modification to ensure Year 2000 compliance ("Year 2000 Compliance").
Internal and external resources are being used to make the required
modifications and test Year 2000 Compliance for these IT Systems as well as
non-IT Systems (i.e., telephone, security, etc.) (collectively "Business
Systems"). Although the Company can provide no assurances, the incremental cost
to make the Business Systems year 2000 compliant is estimated to be no more than
approximately $600,000 of which approximately $200,000 has been spent to date.
The Company plans on completing all upgrades by the end of the second quarter of
1999. These costs and the date on which the Company plans to complete the Year
2000 modification and testing processes are based on management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ from those
plans.
In addition, the Company has communicated with others with whom it does
significant business, primarily banks and suppliers of electricity, to determine
their Year 2000 Compliance readiness and the extent to which the Company is
vulnerable to any third party Year 2000 issues. There can be no guarantee that
the systems of other companies on which the Company relies will be timely
converted, or that a failure to convert by another company would not have a
material adverse effect on the Company.
Based on the results of its review of the Year 2000 issues to date, the
Company does not believe that a contingency plan to handle Year 2000 problems is
necessary at this time and has not developed such a plan. The Company will,
however, continue to monitor the Year 2000 compliance program and evaluate the
need
18
21
for a contingency plan to handle the most reasonably likely worst case Year 2000
scenario; which might be disruptions in service from suppliers in a few isolated
places in North America.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and
Hedging Activities ("SFAS No. 133") during 1998. SFAS No. 133 is effective for
all fiscal quarters beginning after June 15, 1999, and requires all derivative
contracts to be carried on the balance sheet at their fair values. The Company
is currently evaluating what impact SFAS No. 133 will have on its financial
statements.
The American Institute of Certified Public Accountants issued Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities during 1998 ("SOP
98-5"). SOP 98-5 provides guidance on the financial reporting of start-up costs
and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998. The Company is currently evaluating the
impact SOP 98-5 will have on its financial statements.
INFLATION
Because a significant portion of the Company's costs are fixed, the Company
does not believe that inflation in the U.S. and Canada has had or will have a
material adverse effect on its operations. However, there can be no assurance
that a high rate of inflation in the future will not have an adverse effect on
the Company's operations in the U.S. and Canada.
The rate of inflation in Mexico is higher than in the U.S. and Canada.
While the Mexican economy is experiencing a lower rate of inflation than it has
experienced historically, there can be no assurance that a higher rate of
inflation in the future will not have an adverse effect on the Company's
operations in Mexico.
FORWARD-LOOKING STATEMENTS
This report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
When used in this report, the words "estimate", "expect", "anticipate",
"believe" and similar expressions are intended to identify forward-looking
statements. The Company cautions that reliance on any forward-looking statement
involves risk and uncertainties, and that although the Company believes that the
assumptions on which the forward-looking statements contained herein are based
are reasonable, any of those assumptions could prove to be inaccurate, and, as a
result, the forward-looking statements based on those assumptions also could be
incorrect. The uncertainties in this regard include, but are not limited to,
those identified in the risk factors discussed under "Risk Factors" in the
Company's Prospectus dated July 24, 1997 included in the Company's Registration
Statement on Form S-4 (Reg. No. 333-30957).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk:
The Company carries some floating rate debt and thus is exposed to the
impact of interest rate changes. The Company mitigates this exposure through the
use of an interest rate protection agreement which allows it to manage its mix
of variable rate and fixed rate debt. The Company does not enter into derivative
arrangements for trading purposes.
The information below summarizes the Company's market risk associated with
debt obligations and other significant financial instruments as of December 31,
1998. The information presented below should be read in conjunction with Note 5
of the Notes to Consolidated Financial Statements.
At December 31, 1998, the Company's indebtedness under its Senior Credit
Facility, representing approximately 58.4% of the Company's long-term debt,
bears interest at variable rates. Accordingly, the Company's net income and
after tax cash flow are affected by changes in interest rates. The Company is
19
22
required under its Senior Credit Facility to maintain an interest rate
protection agreement to mitigate the exposure to the impact of interest rate
changes. As of December 31, 1998, the Company had interest rate collar
agreements which provide for a maximum base interest rate of 8.5% and a minimum
base interest rate of 4.95% on a portion of its debt ("Notional Debt"). If the
actual base interest rate exceeds the maximum, the Company receives a payment
equal to the amount of actual interest in excess of the maximum times the
Notional Debt and, conversely, makes a payment if the actual base interest rate
falls below the minimum.
Assuming the 1998 average level of borrowings under its Senior Credit
Facility at the 1998 average variable interest rate of 7.2% and assuming a two
percentage point decrease in the 1998 average variable interest rate under these
borrowings, it is estimated that the Company's 1998 interest expense would have
decreased by approximately $16.0 million resulting in an increase in the
Company's 1998 net income and after tax cash flow of approximately $9.6 million.
However, a two percentage point increase in the 7.2% average variable interest
rate to 9.2%, would have resulted in an increase in the Company's 1998 interest
expense of approximately $17.5 million resulting in a decrease in the Company's
1998 net income and after tax cash flow of approximately $10.5 million.
In the event of an adverse change in interest rates, management would
likely take actions to further mitigate its exposure. However, due to the
uncertainty of the actions that would be taken and their possible effects, this
analysis assumes no such actions. Further this analysis does not consider the
effects of the change in the level of overall economic activity that could exist
in such an environment.
Fluctuations in interest rates may also adversely affect the fair market
value of the Company's fixed rate borrowings. The fair market value of debt with
a fixed interest rate will increase as interest rates fall and the fair market
value will decrease as interest rates rise. The Company's fixed rate borrowings
consist of $750 million aggregate amount of senior notes, of which $500 million
bear interest at 8 7/8% per annum and $250 million bear interest at 9 3/8% per
annum.
Foreign Currency Risk:
The Company's earnings are affected by fluctuations in the value of the
U.S. dollar as compared to foreign currencies as a result of its operations in
Canada and Mexico. It is estimated that the result of a 10% fluctuation in the
value of the U.S. dollar relative to these foreign currencies at December 31,
1998 would change the Company's 1998 net income and after tax cash flow by
approximately $5.6 million. The Company's analysis does not consider the
implications that such fluctuations could have on the overall economic activity
that could exist in such an environment in either the U.S. or the foreign
countries or on the results of operation of these foreign entities.
Although the Company continues to evaluate derivative financial
instruments, including forwards, swaps and purchased options, to manage foreign
currency exchange rate changes, the Company does not currently hold derivatives
for managing these risks or for trading purposes.
20
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report................................ 22
Consolidated Balance Sheets as of December 31, 1997 and
1998...................................................... 23
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1997 and 1998.......................... 24
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1997 and 1998.............. 25
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998.......................... 26
Notes to Consolidated Financial Statements.................. 27
21
24
INDEPENDENT AUDITORS' REPORT
Board of Directors
Outdoor Systems, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of Outdoor
Systems, Inc. and subsidiaries (the "Company") as of December 31, 1997 and 1998,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Outdoor Systems, Inc. and
subsidiaries at December 31, 1997 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 2, 1999
22
25
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
------------------------
1997 1998
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 5,897 $ 16,554
Accounts receivable -- less allowance for doubtful
accounts of $13,850 and $20,311........................ 119,745 136,817
Prepaid land leases....................................... 28,659 23,467
Other current assets, including amounts due from related
parties of $298 and $625............................... 16,686 14,544
Value added taxes receivable.............................. -- 33,876
Deferred income taxes..................................... 5,914 12,546
---------- ----------
Total current assets.............................. 176,901 237,804
PROPERTY AND EQUIPMENT -- Net............................... 1,598,011 1,876,065
OTHER ASSETS................................................ 13,565 15,881
DEFERRED FINANCING COSTS -- Net............................. 40,520 35,070
GOODWILL AND OTHER INTANGIBLES -- Net....................... 400,160 592,006
---------- ----------
TOTAL....................................................... $2,229,157 $2,756,826
========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 11,454 $ 12,855
Accrued interest.......................................... 8,940 8,696
Accrued expenses and other liabilities.................... 44,678 48,208
Current maturities of long-term debt...................... 50,600 130,247
---------- ----------
Total current liabilities......................... 115,672 200,006
LONG-TERM DEBT.............................................. 1,393,550 1,676,985
OTHER LONG-TERM OBLIGATIONS................................. 4,327 9,688
DEFERRED INCOME TAXES....................................... 20,137 99,221
---------- ----------
Total liabilities................................. 1,533,686 1,985,900
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 5, 10 and 12)
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value -- authorized 12,000,000
shares; no shares issued and outstanding
Common stock, $.01 par value -- authorized, 600,000,000
shares; issued and outstanding, 181,685,051 and
184,369,963 shares..................................... 1,817 1,844
Additional paid-in capital................................ 709,124 762,775
(Accumulated deficit) retained earnings................... (9,837) 31,305
Treasury stock at cost -- 38,729,996 and 36,235,206
shares................................................. (4,053) (3,794)
Accumulated other comprehensive loss...................... (1,580) (21,204)
---------- ----------
Total common stockholders' equity................. 695,471 770,926
---------- ----------
TOTAL....................................................... $2,229,157 $2,756,826
========== ==========
See notes to consolidated financial statements.
23
26
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
----------- ----------- -----------
REVENUES:
Outdoor advertising................................... $ 194,183 $ 527,547 $ 786,926
Less agency commissions............................... 27,136 71,798 99,397
----------- ----------- -----------
Total......................................... 167,047 455,749 687,529
Lease, printing and other revenues.................... 6,069 15,255 18,382
----------- ----------- -----------
Net revenues.................................. 173,116 471,004 705,911
----------- ----------- -----------
OPERATING EXPENSES:
Direct advertising -- including $139, $139 and $131 to
related parties.................................... 87,593 237,175 330,955
General and administrative -- including $450, $450 and
$450 to related parties............................ 13,458 28,563 37,341
Depreciation and amortization......................... 22,555 75,327 123,093
----------- ----------- -----------
Total operating expenses...................... 123,606 341,065 491,389
----------- ----------- -----------
GAIN ON DENVER DISPOSITION.............................. 7,344 -- --
----------- ----------- -----------
OPERATING INCOME........................................ 56,854 129,939 214,522
OTHER:
Foreign currency transaction (gain) loss.............. (171) 2,093 4,278
Interest expense -- net............................... 32,489 87,150 138,065
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS....... 24,536 40,696 72,179
INCOME TAXES............................................ 10,200 18,485 31,037
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY LOSS........................ 14,336 22,211 41,142
EXTRAORDINARY LOSS...................................... (17,780) (6,773) --
----------- ----------- -----------
NET (LOSS) INCOME....................................... (3,444) 15,438 41,142
LESS STOCK DIVIDENDS, ACCRETIONS AND DISCOUNT ON
REDEMPTIONS........................................... 3,461 -- --
----------- ----------- -----------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS... $ (6,905) $ 15,438 $ 41,142
=========== =========== ===========
BASIC AND DILUTED (LOSS) INCOME PER SHARE (Note 1):
Basic:
Income before extraordinary loss...................... $ .11 $ .13 $ .22
Extraordinary loss.................................... (.18) (.04) --
----------- ----------- -----------
Net (loss) income..................................... $ (.07) $ .09 $ .22
=========== =========== ===========
Weighted average number of shares outstanding......... 101,509,052 163,644,016 183,354,266
=========== =========== ===========
Diluted:
Income before extraordinary loss...................... $ .09 $ .12 $ .20
Extraordinary loss.................................... (.15) (.04) --
----------- ----------- -----------
Net (loss) income..................................... $ (.06) $ .08 $ .20
=========== =========== ===========
Weighted average number of shares outstanding......... 119,013,759 183,913,342 203,953,778
=========== =========== ===========
See notes to consolidated financial statements.
24
27
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
COMMON STOCK OUTSTANDING: Shares:
Balance, beginning of year................................ 71,200,700 135,525,255 181,685,051
Stock options exercised................................... 506,250 597,296 190,122
Initial public offering................................... 20,331,430 -- --
Secondary offering........................................ 43,486,875 45,562,500 --
Issuance of shares in acquisition......................... -- -- 2,494,790
----------- ----------- -----------
Balance, end of year...................................... 135,525,255 181,685,051 184,369,963
----------- ----------- -----------
PREFERRED STOCK: Amount:
Balance, beginning of year................................ $ 13,649 $ -- $ --
Accretion................................................. 2,720 -- --
Redeemed.................................................. (16,369) -- --
----------- ----------- -----------
Balance, end of year...................................... $ -- $ -- $ --
=========== =========== ===========
COMMON STOCK OUTSTANDING: Amount:
Balance, beginning of year................................ $ 712 $ 1,355 $ 1,817
Stock options exercised................................... 5 6 2
Initial public offering................................... 203 -- --
Secondary offering........................................ 435 456 --
Issuance of shares in acquisition......................... -- -- 25
----------- ----------- -----------
Balance, end of year...................................... $ 1,355 $ 1,817 $ 1,844
----------- ----------- -----------
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year................................ $ (974) $ 316,035 $ 709,124
Stock options exercised................................... 119 152 398
Tax benefit from stock options exercised.................. -- 1,979 --
Initial public offering................................... 36,474 -- --
Secondary offering........................................ 282,896 390,958 --
Issuance of shares in acquisition......................... 53,253
Common/preferred stock accretion.......................... (2,480) -- --
----------- ----------- -----------
Balance, end of year...................................... $ 316,035 $ 709,124 $ 762,775
----------- ----------- -----------
(ACCUMULATED DEFICIT) RETAINED EARNINGS:
Balance, beginning of year................................ $ (24,718) $ (25,275) $ (9,837)
Common/preferred stock accretion.......................... (688) -- --
Cash dividends............................................ (293) -- --
Cancellation of put option on common stock................ 3,868 -- --
Net (loss) income......................................... (3,444) 15,438 41,142
----------- ----------- -----------
Balance, end of year...................................... $ (25,275) $ (9,837) $ 31,305
----------- ----------- -----------
COMMON STOCK IN TREASURY: Amount:
Balance, beginning of year................................ $ (4,053) $ (4,053) $ (4,053)
Issuance of shares in acquisition......................... -- -- 259
----------- ----------- -----------
Balance, end of year...................................... $ (4,053) $ (4,053) $ (3,794)
----------- ----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year................................ $ -- $ 117 $ (1,580)
Unrealized foreign currency translation gain (loss)....... 117 (1,697) (19,624)
----------- ----------- -----------
Balance, end of year...................................... $ 117 $ (1,580) $ (21,204)
----------- ----------- -----------
TOTAL COMMON STOCKHOLDERS' EQUITY........................... $ 288,179 $ 695,471 $ 770,926
=========== =========== ===========
COMPREHENSIVE (LOSS) INCOME:
Net (loss) income......................................... $ (3,444) $ 15,438 $ 41,142
Unrealized foreign currency translation gain (loss) (Note
1)...................................................... 117 (1,697) (19,624)
----------- ----------- -----------
Comprehensive (loss) income............................... $ (3,327) $ 13,741 $ 21,518
=========== =========== ===========
See notes to consolidated financial statements.
25
28
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE DATA)
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
--------- ----------- -----------
OPERATING ACTIVITIES:
Net (loss) income......................................... $ (3,444) $ 15,438 $ 41,142
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Extraordinary loss...................................... 17,780 6,773 --
Gain on disposals....................................... (7,344) -- --
(Gain) loss on foreign currency transaction
adjustment............................................. (171) 2,093 4,278
Deferred taxes.......................................... 9,910 13,534 21,238
Deferred financing fees................................. 1,389 5,469 7,050
Depreciation and amortization........................... 22,555 75,327 123,093
Provision for allowance for doubtful accounts........... 2,492 4,129 6,530
Other................................................... 3,664 727 931
Changes in net assets and liabilities -- net of effects
from acquisitions and disposals:
Accounts receivable..................................... (767) (47,042) (23,573)
Prepaid expenses and other current assets............... 74 694 7,372
Accrued interest........................................ 2,216 1,899 (221)
Accounts payable and other liabilities.................. 1,234 11,646 (31,218)
--------- ----------- -----------
Net cash provided by operating activities........... 49,588 90,687 156,622
--------- ----------- -----------
INVESTING ACTIVITIES:
Vendor Acquisitions....................................... -- -- (244,948)
Acquisition of 3M Media................................... -- (894,299) --
Acquisition of Gannett Outdoor, net of cash overdraft
acquired................................................ (712,545) -- --
Capital expenditures...................................... (9,046) (30,189) (38,215)
Other acquisitions........................................ (13,991) (337,715) (222,771)
Net proceeds from disposals............................... 3,049 -- --
Acquisition of perpetual land easements................... (21,525) (31,548) (1,773)
--------- ----------- -----------
Net cash used in investing activities............... (754,058) (1,293,751) (507,707)
--------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................. 846,853 1,538,135 490,718
Tender for 10 3/4% Senior Notes........................... (128,205) -- --
Principal payments on debt................................ (269,893) (699,311) (126,329)
Increase in deferred financing fees....................... (37,483) (33,127) (1,600)
Cash dividends paid on preferred stock.................... (293) -- --
Redemption of preferred and exchangeable preferred
stock................................................... (16,369) -- --
Issuance of common stock.................................. 320,132 391,572 400
Other..................................................... (124) (287)
--------- ----------- -----------
Net cash provided by (used in) financing
activities.......................................... 714,618 1,197,269 362,902
--------- ----------- -----------
Effect of exchange rate changes on cash................... -- (195) (1,160)
--------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 10,148 (5,990) 10,657
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 1,739 11,887 5,897
--------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 11,887 $ 5,897 $ 16,554
========= =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest................................................ $ 27,519 $ 82,974 $ 131,347
========= =========== ===========
Income taxes............................................ $ 275 $ 6,853 $ 4,893
========= =========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
In conjunction with the large acquisitions (Gannett
Outdoor (1996), 3M Media and Van Wagner (1997), Vendor
Acquisitions (1998)), liabilities were assumed as
follows:
Fair value of assets acquired........................... $ 728,848 $ 1,105,981 $ 270,905
Cash paid............................................... 707,980 1,081,520 241,995
--------- ----------- -----------
Liabilities assumed and incurred and issuance of notes
payable................................................. $ 20,868 $ 24,461 $ 28,910
========= =========== ===========
Issuance of 2,494,790 shares of stock for fair value of
assets acquired......................................... $ -- $ -- $ 53,500
========= =========== ===========
Additional obligation on CSX transaction.................. $ 2,198 $ 523 $ 523
========= =========== ===========
Write-off of deferred financing costs..................... $ 3,130 $ -- $ --
========= =========== ===========
Note receivable on Denver Disposition..................... $ 6,440 $ -- $ --
========= =========== ===========
See notes to consolidated financial statements.
26
29
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- Outdoor Systems, Inc. was incorporated on February 22,
1980, and is engaged principally in the rental of advertising space on outdoor
advertising structures in 90 metropolitan markets in the United States, 13
metropolitan markets in Canada and 44 metropolitan markets in Mexico.
Principles of consolidation -- The consolidated financial statements
include the accounts of Outdoor Systems, Inc. and its subsidiaries
(collectively, the "Company"), including its Canadian subsidiary Mediacom, Inc.
("Mediacom") and its Mexican subsidiary, Outdoor Systems Mexico, Inc. ("OSM").
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Significant accounting policies are as follows:
a. Cash and cash equivalents -- The Company considers all highly liquid
investments with an initial maturity of three months or less at the date of
purchase to be cash equivalents.
b. Property and equipment are recorded at cost. Normal maintenance and
repair costs are expensed. Improvements which extend the life or usefulness of
an asset are capitalized. Depreciation is computed principally on a
straight-line method based upon the following useful lives:
Buildings................................................... 25-32 years
Advertising structures...................................... 5-20 years
Vehicles.................................................... 3-5 years
Furniture and fixtures...................................... 5 years
Perpetual land easements.................................... 40 years
c. Deferred financing costs are amortized using the effective interest
method over the terms of the related loans.
d. Goodwill represents the excess purchase price over net assets acquired
and is amortized over 30 years. Amortization expense was $713,000, $6,128,269
and $16,318,906 in 1996, 1997 and 1998, respectively.
e. Revenue recognition -- The Company recognizes revenue from advertising
contracts when billed, which is on a straight-line pro rata monthly basis in
accordance with contract terms. Costs associated with providing service for
specific contracts are expensed as incurred, although such contracts generally
extend beyond one month. Other revenue represents license fees from perpetual
land easements and revenues from a printing operation.
f. Income (loss) per share -- Basic income (loss) per common share is
computed based on the weighted average number of common shares outstanding
during each period. Diluted income (loss) per share is computed based on the
weighted average number of common and common equivalent shares outstanding
during each year and includes shares issuable upon exercise of stock options
except in those circumstances where such options would be anti-dilutive.
g. Impairment of long-lived assets -- The Company reviews the carrying
values of its long-lived assets, identifiable intangibles and goodwill for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of assets to be held and used may not be recoverable.
h. Use of estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from these
estimates.
27
30
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
i. Stock-based compensation -- As permitted by Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"), the Company uses the intrinsic value based method prescribed
by the Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations in accounting for its plans.
Accordingly, no compensation expense has been recognized for its stock-based
compensation plans because the exercise price has been equal to market price at
date of grant. A summary of the pro forma effects on reported income from
continuing operations and earnings per share for 1996, 1997 and 1998, as if the
fair value based method of accounting defined in SFAS No. 123 had been applied
is included in Note 9 to these consolidated financial statements.
j. New accounting pronouncements -- The Financial Accounting Standards
Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133") which is effective for all fiscal quarters beginning
after June 15, 1999, and requires all derivative contracts to be carried on the
balance sheet at their fair values. The Company is currently evaluating what
impact SFAS No. 133 will have on its financial statements.
The American Institute of Certified Public Accountants issued Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities during 1998 ("SOP
98-5"). SOP 98-5 provides guidance on the financial reporting of start-up costs
and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998. The Company is currently evaluating the
impact SOP 98-5 will have on its financial statements.
k. Stock splits -- Since going public in April of 1996, the Company has
effected five three-for-two stock splits of the Common Stock. The consolidated
financial statements and the notes thereto have been adjusted to reflect these
stock splits on a retroactive basis for all periods presented.
l. Foreign currency translation -- In accordance with the principles of
Statement of Financial Accounting Standards No. 52, Foreign Currency Translation
("SFAS No. 52"), the Company is using the local currency as the functional
currency of its Canadian operating subsidiaries. The Company acquired most of
its Mexican operations effective July 1, 1998, and determined that, as of such
date, and as of January 1, 1999, the Mexican economy was not "highly
inflationary." Therefore, in accordance with SFAS No. 52, the Company is using
the Mexican peso as the functional currency of its Mexican operating subsidiary.
Accordingly, assets and liabilities held outside the United States are
translated into U.S. dollars at the rate of exchange in effect at the balance
sheet date. Income and expense items are translated from the functional currency
into U.S. dollars at the weighted average exchange rate prevailing during the
period. Translation gains and losses are included in other comprehensive income
in the stockholders' equity. Gains and losses resulting from foreign currency
transactions are reflected currently in the consolidated statements of
operations.
m. Reclassifications -- Certain reclassifications were made to the 1996 and
1997 financial statements to conform with the 1998 presentation.
2. OFFERINGS AND ACQUISITIONS
COMPLETION OF INITIAL PUBLIC OFFERING
On April 24, 1996, the Company completed its Initial Public Offering
("IPO") by selling 20,331,430 shares of its common stock. The Company received
proceeds of approximately $36,677,000 net of underwriting discounts and
commissions and offering expenses of approximately $3,517,000.
GANNETT OUTDOOR ACQUISITION
On August 22, 1996, the Company purchased substantially all of the
billboard and transit advertising operations of the Outdoor Advertising Division
of Gannett Co., Inc. (the "Gannett Outdoor Acquisition"), for
28
31
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $712,545,000 ($707,980,000 before cash overdraft acquired of
$4,565,000). The Company also acquired an option to acquire the Gannett Outdoor
operations in Houston, which option was exercised on November 14, 1996 for
$12,174,000.
The Company financed the Gannett Outdoor Acquisition through borrowings
under its Senior Credit Facility, a Subordinated Credit Facility ("Bridge Loan")
and the offering of 43,486,875 shares of common stock, for which it received
proceeds of approximately $283,135,000 net of underwriting discounts and
commissions and offering expenses of approximately $13,133,000. In October 1996,
the Company sold (the "1996 Notes Offering") $250,000,000 of 9 3/8% Senior
Subordinated Notes due 2006 (the "1996 Notes"). The proceeds from the 1996 Notes
Offering were used to repay all borrowings under the Bridge Loan and to
partially repay amounts outstanding under the Senior Credit Facility (see Note
5).
The Gannett Outdoor Acquisition was accounted for using the purchase method
of accounting and the results of operations have been included in the
consolidated financial statements subsequent to the date of acquisition. The
Gannett Outdoor Acquisition resulted in goodwill of $60 million which represents
the excess of the purchase price over the fair value of the assets which is
amortized on a straight-line basis over 30 years.
DENVER DISPOSITION
In connection with the Gannett Outdoor Acquisition, on August 8, 1996, the
Company sold substantially all of its existing billboard assets in Denver
("Denver Disposition") to an unrelated party for $2,760,000 in cash and a
$6,440,000 9% promissory note due November 8, 2006, which is included in other
assets. The Denver Disposition resulted in a gain of $7,344,000.
OTHER 1996 ACQUISITIONS
On May 22, 1996, the Company completed the acquisition of perpetual land
easements located on real property and leased to independent outdoor advertising
companies from CSX Realty Development Corporation ("CSX") for $21,525,000 in
cash and certain future payments in an aggregate amount not to exceed
$10,000,000 payable over a period of ten years beginning no later than the year
2006. The exact amount and timing of such payments is to be determined based
upon the results of the Company's operation of the easements. The cost of the
perpetual land easements is included in property and equipment and is amortized
on a straight-line basis over 40 years.
In April 1996, the Company acquired all of the stock of Decade
Communications Group, Inc. (the "Bench Ad Acquisition"), which owned
approximately 5,300 bus benches in the Denver metropolitan area for a purchase
price of approximately $1,817,000. The acquisition was accounted for as a
purchase and the results of operations of the Bench Ad Acquisition are included
in these financial statements from the date of acquisition.
UNAUDITED PRO FORMA INFORMATION
The following table summarizes unaudited pro forma operating results for
the Company for the year ended December 31, 1996, assuming that the Gannett
Outdoor Acquisition and other 1996 acquisitions and the Denver Disposition had
occurred at the beginning of the applicable year and after giving effect to
financing costs and purchase accounting adjustments.
29
32
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996
--------------
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
Consolidated net revenues................................... $335,826
========
Income before extraordinary loss............................ $ 14,173
========
Net income.................................................. $ 13,329
========
Income attributable to common stockholders.................. $ 9,868
========
Basic net income per share.................................. $ .10
========
Diluted net income per share................................ $ .08
========
The unaudited consolidated pro forma financial information does not purport
to represent the results of operations of the Company that actually would have
resulted had the acquisitions occurred as of the applicable year, nor should it
be taken as indicative of the future results of the operations of the Company.
1997 ACQUISITIONS
During 1997, the Company acquired outdoor advertising assets through
approximately 25 acquisitions throughout the United States and Canada for a
total purchase price of approximately $1.3 billion (the "1997 Acquisitions").
The 1997 Acquisitions were accounted for using the purchase method of
accounting and the results of operations have been included in the consolidated
financial statements subsequent to the date of acquisition. The acquisitions
resulted in goodwill of $346.5 million which represents the excess of the
purchase price over the fair value of the assets which is amortized on a
straight-line basis over 30 years.
Included in the 1997 Acquisitions is the August 15, 1997 acquisition of the
outdoor advertising operations of Minnesota Mining and Manufacturing Company
("3M") through the purchase of the capital stock of National Advertising
Company, a subsidiary of 3M ("3M Media"), for approximately $1.0 billion in cash
(the "3M Media Acquisition").
The Company financed the purchase price of the 3M Media Acquisition and the
fees and expenses associated with the acquisition and the acquisition financing
through (i) proceeds from the offering of 45,562,500 shares of common stock to
the public, completed on May 28, 1997, (ii) proceeds of an offering of $500
million aggregate principal amount of 8 7/8% Senior Subordinated Notes due 2007
(the "1997 Notes") completed on June 23, 1997 (the "1997 Notes Offering"), and
(iii) borrowings under the Company's Senior Credit Facility which was amended to
provide for a revolving credit facility and term loans of up to approximately
$900 million.
In connection and simultaneously with the 3M Media Acquisition, the Company
sold to Lamar Advertising Company and another outdoor advertising company
certain outdoor advertising assets the Company acquired from 3M. The assets sold
consisted of approximately 1,800 advertising displays in Atlanta, Denver,
Detroit, Grand Rapids, Houston, New Orleans, Kansas City, Louisville, Phoenix
and Sacramento. The selling price for such assets was approximately $116 million
in cash, there was no gain or loss recognized on the sale.
The other 1997 acquisitions were financed, primarily, utilizing cash flows
from operations and borrowings under the company's Senior Credit Facility.
30
33
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED PRO FORMA INFORMATION
The following table summarizes unaudited pro forma operating results for
the Company for the two years ended December 31, 1997, assuming that the 1997
Acquisitions had occurred at the beginning of the applicable year and after
giving effect to financing costs and purchase accounting adjustments.
1996 1997
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Consolidated net revenues................................... $591,583 $605,894
======== ========
Income before extraordinary loss............................ $ 12,308 $ 23,805
======== ========
Net (loss) income........................................... $ (5,472) $ 23,805
======== ========
(Loss) income attributable to common stockholders........... $ (8,933) $ 23,805
======== ========
Basic net (loss) income per share........................... $ (.09) $ .15
======== ========
Diluted net (loss) income per share......................... $ (.08) $ .13
======== ========
The pro forma amounts above include adjustments for the 1997 Acquisitions
only and do not include pro forma adjustments for the Gannett Outdoor
Acquisition which was completed on August 22, 1996 and the other 1996
acquisitions. The unaudited consolidated pro forma financial information does
not purport to represent the results of operations of the Company that actually
would have resulted had the acquisitions occurred as of the applicable year, nor
should it be taken as indicative of the future results of the operations of the
Company.
1998 ACQUISITIONS
During 1998, the Company acquired outdoor advertising assets through
approximately 14 acquisitions throughout the United States, Canada and Mexico
for a total purchase price of approximately $468 million (the "1998
Acquisitions").
The 1998 Acquisitions were accounted for using the purchase method of
accounting and the results of operations have been included in the consolidated
financial statements subsequent to the date of acquisition. The 1998
Acquisitions resulted in goodwill of approximately $137 million which represents
the excess of the purchase price over the fair value of the assets which is
amortized on a straight-line basis over 30 years. The Company is continuing its
evaluation of the fair value of the 1998 Acquisitions and further adjustments to
the purchase price may be made.
Included in the 1998 Acquisitions is the July 1, 1998 acquisition of (i)
substantially all of the assets of Vendor, S.A. de C.V., the outdoor advertising
subsidiary of Televisa, S.A. de C.V., for approximately $216.0 million and (ii)
substantially all of the outdoor advertising business conducted by MM Billboard,
S.A. de C.V., an affiliated outdoor advertising company in northern Mexico, for
approximately $21.9 million. The Company financed the purchase price of these
acquisitions (collectively, the "Vendor Acquisitions") with borrowings under the
Company's Senior Credit Facility. Value added tax paid to the Mexican government
for the Vendor Acquisitions is recorded as a current receivable at December 31,
1998.
UNAUDITED PRO FORMA INFORMATION
The following table summarizes unaudited pro forma operating results for
the Company for the two years ended December 31, 1998, assuming that the 1998
Acquisitions had occurred at the beginning of the applicable year and after
giving effect to financing costs and purchase accounting adjustments.
31
34
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997 1998
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Consolidated net revenues................................... $540,962 $746,033
======== ========
Income before extraordinary loss............................ $ 487 $ 29,540
======== ========
Net (loss) income........................................... $ (6,286) $ 29,540
======== ========
Basic net income per share.................................. $ (.04) $ .16
======== ========
Diluted net income per share................................ $ (.03) $ .14
======== ========
The pro forma amounts above include adjustments for the 1998 Acquisitions
only and do not include pro forma adjustments for the 1997 Acquisitions. The
unaudited consolidated pro forma financial information does not purport to
represent the results of operations of the Company that actually would have
resulted had the acquisitions occurred as of the applicable year, nor should it
be taken as indicative of the future results of the operations of the Company.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1997 1998
---------- ----------
(IN THOUSANDS)
Advertising structures...................................... $1,647,518 $1,998,129
Perpetual land easements.................................... 54,607 57,749
Vehicles.................................................... 13,902 23,552
Furniture and fixtures...................................... 11,639 13,624
Buildings................................................... 19,084 23,491
Land........................................................ 22,093 33,492
Other....................................................... 8,575 8,941
---------- ----------
Total....................................................... 1,777,418 2,158,978
Less accumulated depreciation............................... 179,407 282,913
---------- ----------
Property and equipment -- net............................... $1,598,011 $1,876,065
========== ==========
Included in advertising structures are costs allocated to display leases
totaling $528,819 and $792,067, at December 31, 1997 and 1998, respectively.
The Company has granted a security interest in substantially all of its
assets to lenders in connection with the Senior Credit Facility.
32
35
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are comprised of the following at
December 31:
1997 1998
------- -------
(IN THOUSANDS)
Accrued payroll, payroll taxes and severance................ $ 7,466 $ 8,443
Percentage lease payments................................... 1,990 1,224
Other liabilities assumed in 1997 Acquisitions.............. 8,174 2,813
Customer deposits........................................... 7,388 5,003
Unearned revenue............................................ 3,233 3,069
Taxes....................................................... 5,696 14,209
Other....................................................... 10,731 13,447
------- -------
$44,678 $48,208
======= =======
5. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
1997 1998
---------- ----------
(IN THOUSANDS)
Senior Credit Facility...................................... $ 693,034 $1,055,368
1997 Notes.................................................. 496,124 496,532
1996 Notes.................................................. 250,000 250,000
Other....................................................... 4,992 5,332
---------- ----------
Total....................................................... 1,444,150 1,807,232
Less current maturities..................................... 50,600 130,247
---------- ----------
Long-term debt -- net....................................... $1,393,550 $1,676,985
========== ==========
SENIOR CREDIT FACILITY
The Company's senior credit facility (the "Senior Credit Facility"), dated
August 15, 1997, consists of (i) a U.S. Dollar senior revolving line of credit
facility of up to $600,000,000 including a $35,000,000 letter of credit
subfacility ("United States Revolver"), and a Canadian Dollar ("C$") senior
revolving line of credit facility ("Canadian Revolver") of up to C$69,625,000
including a C$7,000,000 letter of credit sub-facility; (ii) a $450,000,000
Senior Secured U.S. Dollar Term Loan; and (iii) a $50,000,000 Senior Secured
Canadian Term Loan. Letters of credit with stated amounts totaling $22,097,077
have been issued for the Company's account at December 31, 1998. Availability
under the Senior Credit Facility totaled approximately $60,373,500 at December
31, 1998.
The commitment of the lenders under the United States Revolver will be
reduced annually on December 31st of each year (commencing on December 31, 1999)
through 2003 by $90,000,000 and by $150,000,000 on June 30, 2004. The commitment
under the Canadian Revolver will be reduced annually on December 31st of each
year (commencing on December 31, 1999) through 2003 by C$10,443,750 and by
C$17,406,250 on June 30, 2004. The United States Term Loan must be repaid in
equal quarterly installments commencing on March 31, 1998, with annual
amortization of $50,000,000 through 1999, $75,000,000 from 2000 through 2003 and
$50,000,000 in 2004 in equal installments on March 31 and June 30. The Canadian
Term Loan must be repaid in equal quarterly installments commencing on March 31,
1998, with annual amortization of $1,000,000 through 2001, $8,000,000 during
2002, $15,000,000 during 2003 and $23,000,000 in 2004 in equal installments on
March 31 and June 30.
33
36
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The United States and Canadian Revolvers and United States and Canadian
Term Loans bear interest at the ABR or C$ Prime Rate (as defined in the Senior
Credit Facility's terms) (7.75% and 6.75%, respectively, at December 31, 1998)
plus 0.0% to 1.125% or Eurodollar Rate or Applicable BA Discount Rate (as
defined in the Senior Credit Facility's terms) (5.63% and 5.11%, respectively,
at December 31, 1998) plus 0.75% to 2.125%, based on the Company's total
leverage ratio.
The Senior Credit Facility is secured by a first perfected lien on
substantially all of the present and future assets of the Company and a pledge
of the Company's equity interest in its subsidiaries provided that the Senior
Credit Facility is only secured by 65% of the stock of Mediacom. The U.S.
facilities are guaranteed by each of the Company's U.S. subsidiaries, and the
Canadian facilities are guaranteed by the Company and each of the Company's U.S.
subsidiaries.
The Senior Credit Facility, among other things, places limitations on the
Company's acquisitions, dispositions, asset swaps and stock repurchases, and
requires the Company to comply with financial covenants concerning leverage,
interest coverage, fixed charges and minimum cash flows. Additionally, the
Senior Credit Facility requires the Company to maintain interest rate protection
on a portion of its debt. At December 31, 1998, the Company had interest rate
collar agreements which provide for a maximum base interest rate of 8.5% and a
minimum base interest rate of 4.95%.
1996 AND 1997 NOTES
In October 1996, the Company completed the sale of the 1996 Notes. The net
proceeds of the 1996 Notes were used to repay the Bridge Loan and to reduce
amounts borrowed under the Senior Credit Facility and to pay related fees and
expenses. In July 1997, the Company completed the sale of the 1997 Notes. The
net proceeds of the 1997 Notes were used to finance a portion of the purchase
price paid in the 3M Media Acquisition.
The 1996 Notes and 1997 Notes represent general unsecured obligations of
the Company and are subordinated to all existing and future senior indebtedness
of the Company and are senior to all subordinated indebtedness of the Company.
Under the 1996 Notes and 1997 Notes, among other things, the Company is
restricted in its ability to incur additional indebtedness, make certain
investments, create liens, enter into transactions with affiliates, issue stock
of a restricted subsidiary, enter into sale and leaseback transactions, merge or
consolidate the Company, and transfer or sell assets. The Company is prohibited
from paying cash dividends and distributions.
OTHER
In November 1997, the Company issued a note for $4,950,000 in connection
with an acquisition in Los Angeles. The note bears interest at 10% per annum,
payable monthly. The principal is due 2003.
The annual maturities of long-term debt at December 31, 1998 are as
follows:
(IN THOUSANDS)
--------------
1999........................................................ $ 130,247
2000........................................................ 172,477
2001........................................................ 172,477
2002........................................................ 177,051
2003........................................................ 186,574
Thereafter.................................................. 968,406
----------
Total............................................. $1,807,232
==========
34
37
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. EXTRAORDINARY LOSS ARISING FROM EARLY EXTINGUISHMENT OF DEBT
The extraordinary loss arising from the early extinguishment of debt
consisted of the following:
1996 1997
------- -------
(IN THOUSANDS)
Redemption of subordinated debt subsequent to IPO........... $ 1,415
Redemption of 10 3/4% Senior Notes:
Tender offer.............................................. 13,542
Deferred debt costs....................................... 3,802
Bridge Redeemable Preferred Stock and Bridge Loan
financing costs........................................... 8,856 11,288
------- -------
Total....................................................... 27,615 11,288
Less related tax benefit.................................... (9,835) (4,515)
------- -------
Total extraordinary loss.......................... $17,780 $ 6,773
======= =======
In connection with the IPO, the Company redeemed $6,583,000 principal
amount of subordinated debt that had a carrying value of $6,099,000 for
$7,514,000 in cash, resulting in an extraordinary loss of $1,415,000.
In order to facilitate the financing of the Gannett Outdoor Acquisition,
the Company purchased, pursuant to a tender offer (the "Debt Tender Offer"), all
but $15,000 aggregate principal amount of its outstanding 10 3/4% Senior Notes
due 2003 (the "10 3/4% Senior Notes"). The aggregate consideration paid by the
Company in the Debt Tender Offer of $1,116.25 per $1,000 principal amount of
10 3/4% Senior Notes, plus expenses associated therewith, resulted in an
extraordinary loss from debt extinguishment of $13,542,000.
In connection with the Gannett Outdoor Acquisition, the Company entered
into long-term bridge financing commitments for the Bridge Loan and redeemable
preferred stock. Such commitment fees and bridge loan issuance costs aggregated
$8,949,000. The commitment on the redeemable preferred stock was canceled at the
date of the Gannett Outdoor Acquisition and the Bridge Loan was repaid with the
net proceeds of the offering of the 1996 Notes resulting in an extraordinary
loss of $8,856,000.
In connection with the 3M Media Acquisition, the Company entered into a
bridge loan financing commitment. Commitment fees aggregated $11,288,000. The
bridge loan financing commitment was cancelled in June 1997 after the Company
completed the 1997 Notes Offering. No amounts were borrowed under the Bridge
Loan.
7. FINANCIAL INSTRUMENTS
The fair values of the 1996 Notes and 1997 Notes were approximately
$268,750,000 and $527,500,000, respectively at December 31, 1998. The fair
values of the 1996 Notes and the 1997 Notes were determined based upon
quotations from an investment banker. The carrying amount of variable rate
long-term debt instruments is estimated to approximate fair values as the rates
are tied to short-term indices.
8. OTHER EQUITY MATTERS
At December 31, 1995, the Company's redeemable preferred stock totaled
$13,649,000. During 1996, in connection with the IPO, the Company redeemed all
of its outstanding preferred stock for approximately $16,369,000.
In 1990, the Company issued common stock in connection with the financing
of an acquisition under which the Company was required to redeem the common
stock at a redemption price based upon the appraised value of the common stock
as of the redemption date. Because this common stock was subject to redemption
at the option of the holder, the Company accreted the stock to its estimated
appraised value over
35
38
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the redemption period based upon annual estimates of value determined as a
multiple of cash flow. Accretion was calculated on a straight-line basis and was
charged directly to stockholders' deficit. At the date of the IPO, the common
stock was sold by the holders and the related put options were terminated.
Accordingly, amounts aggregating $3,868,000 were credited to accumulated
deficit.
9. STOCK OPTIONS
The following is a summary of changes in outstanding options:
NUMBER OF EXERCISE
SHARES PRICE
---------- ----------------
Outstanding at December 31, 1995....................... 15,107,189 $0.00 to $0.25
Granted................................................ 6,970,363 $1.97
Cancelled or expired................................... -- --
Exercised.............................................. (506,250) $0.25
Outstanding at December 31, 1996....................... 21,571,302 $0.00 to $1.97
Granted................................................ 174,938 $8.89 to $11.12
Cancelled or expired................................... (14,240) $1.97 to $8.89
Exercised.............................................. (597,296) $0.25 to $1.97
----------
Outstanding at December 1997........................... 21,134,704 $0.00 to $11.12
Granted................................................ 1,129,439 $15.58 to $21.00
Cancelled or expired................................... (14,548) $1.97 to $15.58
Exercised.............................................. (190,122) $0.25 to $11.12
----------
Outstanding at December 31, 1998....................... 22,059,473 $0.00 to $21.00
==========
Exercisable at December 31, 1998....................... 16,931,769 $0.01 to $21.00
==========
The following table summarizes information concerning currently outstanding
and exercisable options:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
-- 838,342(1) N/A -- -- --
$ .01 11,693,384(2) N/A $ .01 11,693,384 $ .01
$ .25 2,316,933(2) N/A $ .25 2,316,933 $ .25
$ 1.97 5,925,089 8 years $ 1.97 2,856,196 $ 1.97
$ 8.89 142,597 9 years $ 8.89 33,753 $ 8.89
$ 9.81 15,189 9 years $ 9.81 15,189 $ 9.81
$11.12 4,500 9 years $11.12 1,125 $11.12
$15.58 1,103,250 10 years $15.58 -- $15.58
$19.94 15,189 10 years $19.94 15,189 $19.94
$21.00 5,000 10 years $21.00 -- $21.00
---------- ----------
22,059,473 16,931,769
========== ==========
Notes:
(1) These options have no exercise price, have no expiration date and are
exercisable only upon termination.
(2) These options are fully exercisable and have no expiration date.
36
39
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had compensation cost for the Company's stock option plan been determined
based upon the fair value at the grant date for awards under this plan
consistent with the methodology prescribed in SFAS No. 123, the Company's net
(loss) income and basic and diluted (loss) income per share for the years ended
December 31, 1996, 1997 and 1998 would have been as follows:
1996 1997 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net (loss) income attributable to common
stockholders -- as reported....................... $(6,905) $15,438 $41,142
Net (loss) income attributable to common
stockholders -- pro forma......................... $(8,271) $15,302 $38,891
Basic (loss) income per share -- as reported........ $ (.07) $ .09 $ .22
Basic (loss) income per share -- pro forma.......... $ (.08) $ .09 $ .21
Diluted (loss) income per share -- as reported...... $ (.06) $ .08 $ .20
Diluted (loss) income per share -- pro forma........ $ (.07) $ .08 $ .19
ASSUMPTIONS:
Expected dividend yield............................. 0% 0% 0%
Expected stock price volatility..................... 62.0% 51.7% 61.6%
Risk-free interest rate............................. 6.0% 5.7% 4.7%
Forfeiture rate..................................... 0% 0% 0%
Average expected life............................... 3 years 3 years 3 years
10. BENEFIT PLANS
The Company established an Incentive Plan (the "Incentive Plan") covering
certain managers and key employees. Incentive Awards ("Awards") were made under
the Incentive Plan in the form of shares of phantom stock based on the
individual's performance. Awards were valued each year based upon the estimated
value of the Company. Awards are vested at the date of grant and any increases
in value vested over a four year period. For the years ended December 31, 1996,
1997 and 1998, the Company charged earnings for compensation expense of
$196,000, $234,300 and $234,300, respectively. In connection with the IPO,
effective January 1, 1996, the Company ceased allocating amounts to the accounts
maintained under the Incentive Plan. The Company offered to each then current
employee who was a participant in the Incentive Plan the alternative of having
their account settled in cash, in shares of the common stock of the Company, or
both, with actual distributions of cash or common stock subject to both vesting
requirements and terms and conditions similar to those under which distributions
would have been made under the Incentive Plan. To the extent participants
elected to settle their accounts in common stock, the Company issued (subject to
the vesting requirements and distribution terms and conditions) to such
participants options to purchase common stock at the initial public offering
price.
The Company has a 401(k) savings plan under which it has the discretion of
making contributions as a percentage of employee contributions. For the years
ended December 31, 1996, 1997 and 1998 the Company's contributions to the 401(k)
plan were $63,000, $75,700 and $251,000, respectively.
37
40
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES
The provision for income taxes is comprised of the following for the years
ended December 31,
1996 1997 1998
------- ------- -------
(IN THOUSANDS)
Current:
Federal............................................. $ 108 $ 483 $ 4,974
State............................................... 182 384 1,236
Foreign............................................. -- 4,084 3,589
------- ------- -------
Total current......................................... 290 4,951 9,799
Deferred.............................................. 9,910 13,534 21,238
------- ------- -------
Total income tax provision............................ $10,200 $18,485 $31,037
======= ======= =======
The Company has U.S., Mexican and Canadian net operating loss carryforwards
(before applicable tax rates) of approximately $39,000,000, $214,000,000, and
$3,000,000, respectively, as of December 31, 1998 which expire subsequent to the
year 2005.
Although realization is not assured, the Company believes, based on
operating results in 1998, and its expectations for the future, that taxable
income of the Company will more likely than not be sufficient to utilize all of
the net operating loss carryforwards prior to their ultimate expiration.
Significant components of the Company's net deferred tax asset (liability)
as of December 31 are as follows:
1997 1998
------------------- --------------------
NON- NON-
CURRENT CURRENT CURRENT CURRENT
------- -------- ------- ---------
(IN THOUSANDS)
Deferred tax assets:
Reserves and allowances................. $5,914 $ 140 $12,546 $ 254
Net operating loss/credit
carryforwards........................ -- 10,716 -- 97,304
Foreign capital loss carryforward....... -- -- -- 1,594
Deferred tax liabilities:
Property and intangibles................ -- (30,993) -- (198,373)
------ -------- ------- ---------
Total net asset (liability)..... $5,914 $(20,137) $12,546 $ (99,221)
====== ======== ======= =========
The Company has not provided for U.S. deferred income taxes or foreign
withholding taxes on undistributed earnings of its non-U.S. subsidiaries as of
December 31, 1998, since these earnings are intended to be reinvested
indefinitely.
The following is a reconciliation of the reported effective income tax
rates to the statutory rates:
1996 1997 1998
---- ---- ----
Statutory rate.............................................. 35% 35% 35%
State income taxes, net of federal income tax benefit....... 4 4 4
Foreign income taxes........................................ -- -- (3)
Goodwill amortization....................................... 1 3 3
Other....................................................... 2 3 4
-- -- --
Reported rate............................................... 42% 45% 43%
== == ==
38
41
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. COMMITMENTS AND OTHER
LEASES
The Company leases land and equipment under operating leases with various
terms expiring at various dates. Certain of the land leases provide for periodic
rental increases. At December 31, 1998, minimum annual rentals under all
operating leases for the next five years are as follows:
(IN THOUSANDS)
--------------
1999........................................................ $72,085
2000........................................................ 54,533
2001........................................................ 43,950
2002........................................................ 35,421
2003........................................................ 30,392
TRANSIT AGREEMENTS
The Company has signed agreements which provide an exclusive right to sell
advertising space in various airports, transit shelters and transit systems.
Under the various agreements, the Company must make minimum guarantee payments
for the next five years as follows:
(IN THOUSANDS)
--------------
1999........................................................ $11,191
2000........................................................ 3,230
2001........................................................ 2,840
2002........................................................ 3,135
2003........................................................ 2,857
Operating lease expense was $29,790,000, $90,196,391 and $153,178,570 for
1996, 1997 and 1998, respectively.
LITIGATION
The Company is party either as plaintiff or defendant to various actions,
proceedings and pending claims, in the ordinary course of business. Litigation
is subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims referred to above could be decided against the
Company. Although the ultimate amount for which the Company or its subsidiaries
may be held liable with respect to matters where the Company is defendant is not
ascertainable, the Company believes that any resulting liability should not
materially affect the Company's financial position or results of operations.
39
42
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SEGMENTS
The Company has operations in 147 metropolitan markets throughout North
America which have similar operations, but are managed independently. No single
customer accounts for 10% or more of any segment's revenue. None of these
markets, individually, account for a significant portion of the Company's
assets, revenues or net income and, therefore, they have been aggregated by
geographical region as follows:
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------
UNITED
STATES CANADA MEXICO ELIMINATIONS TOTAL
---------- -------- -------- ------------ ----------
(IN THOUSANDS)
Net revenues from external customers.... $ 150,970 $ 22,146 $ 173,116
Intersegment revenues................... -- 850 $ (850) --
Interest expense -- net................. 31,242 1,247 32,489
Depreciation and amortization expense... 20,032 2,523 22,555
Foreign currency transaction gain....... -- (171) (171)
Income taxes............................ 8,364 1,836 10,200
Segment net (loss) income............... (8,697) 1,792 (6,905)
Capital expenditures.................... 9,347 (301) 9,046
Total assets............................ 836,456 133,271 (36,272) 933,455
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------
UNITED
STATES CANADA MEXICO ELIMINATIONS TOTAL
---------- -------- -------- ------------ ----------
(IN THOUSANDS)
Net revenues from external customers.... $ 410,008 $ 60,996 $ 471,004
Intersegment revenues................... -- 4,304 $ (4,304) --
Interest expense -- net................. 80,580 6,570 87,150
Depreciation and amortization expense... 67,204 8,123 75,327
Foreign currency transaction loss....... -- 2,093 2,093
Income taxes............................ 14,776 3,709 18,485
Segment net income...................... 14,941 497 15,438
Capital expenditures.................... 25,666 4,523 30,189
Total assets............................ 2,133,020 145,527 (49,390) 2,229,157
YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------
UNITED
STATES CANADA MEXICO ELIMINATIONS TOTAL
---------- -------- -------- ------------ ----------
(IN THOUSANDS)
Net revenues from external customers.... $ 617,922 $ 61,402 $ 26,587 $ 705,911
Intersegment revenues................... -- 7,022 -- $ (7,022) --
Interest expense -- net................. 131,024 7,133 (92) 138,065
Depreciation and amortization expense... 104,660 9,601 8,832 123,093
Foreign currency transaction loss....... -- 3,346 932 4,278
Income taxes (benefit).................. 27,409 4,383 (755) 31,037
Segment net income...................... 36,503 520 4,119 41,142
Capital expenditures.................... 27,540 8,506 2,169 38,215
Total assets............................ 2,613,007 174,174 372,497 (402,852) 2,756,826
The Canadian operating segment sells products to the U.S. segment. Revenue
is recognized upon shipment of products.
40
43
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. BASIC AND DILUTED INCOME (LOSS) PER SHARE
The weighted average number of shares outstanding for 1996, 1997 and 1998
is as follows:
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1997 1998
------------ ------------ ------------
Basic weighted average number of shares
outstanding at end of period........... 101,509,052 163,644,016 183,354,266
Dilutive effect of stock options(1)...... 17,504,707 20,269,326 20,599,512
------------ ------------ ------------
Diluted weighted average number of shares
outstanding............................ 119,013,759 183,913,342 203,953,778
============ ============ ============
- ---------------
(1) Stock options were included in 1996 because the Company had net income
before the extraordinary loss.
15. QUARTERLY DATA (UNAUDITED)
QUARTER
-----------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1997:
Net revenues....................... $ 80,080 $ 99,564 $131,991 $159,369
Operating income................... 17,113 26,967 37,528 48,331
Net (loss) income.................. 691 (413) 7,743 7,417
Basic net income per share......... -- -- .04 .05
Diluted net income per share....... -- -- .04 .04
1998:
Net revenues....................... $146,722 $173,829 $193,852 $191,508
Operating income................... 36,258 56,243 62,932 59,089
Net income......................... 2,728 12,054 13,449 12,911
Basic net income per share......... .01 .07 .07 .07
Diluted net income per share....... .01 .06 .07 .06
The second quarter of 1997 includes an extraordinary loss from the early
extinguishment of debt of approximately $6.8 million, net of tax. The third and
fourth quarters of 1997 include the operating results from the 3M Media
Acquisition.
The third and fourth quarters of 1998 include the operating results from
the Vendor Acquisitions.
16. CONSOLIDATING FINANCIAL STATEMENTS
The following represents consolidating condensed financial statements of
Outdoor Systems, Inc. and its subsidiaries (the "Subsidiaries") which are
presented because certain of the Subsidiaries have guaranteed the 1996 Notes and
the 1997 Notes. The 1996 Notes and 1997 Notes are guaranteed by all of the
Company's domestic subsidiaries (the "Guarantors"). The guarantees of the
Guarantors of the 1996 Notes and 1997 Notes are full, unconditional, and joint
and several. The subsidiaries which have not guaranteed the 1996 Notes and 1997
Notes (the "Non-Guarantors") are Mediacom, located in Canada, and OSM, located
in Mexico. Separate financial statements of the Guarantors are not presented
because management has determined that they would not be material to investors.
There are no significant restrictions on the Company's ability to obtain funds
from the Guarantors.
41
44
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
THE NON- ELIMINATION
COMPANY GUARANTORS ENTRIES CONSOLIDATED
-------- ---------- ----------- ------------
REVENUES:
Outdoor advertising............................... $173,541 $21,492 $ (850) $194,183
Less agency commissions........................... 24,349 2,787 -- 27,136
-------- ------- ------- --------
Total..................................... 149,192 18,705 (850) 167,047
Lease, printing and other revenues................ 1,778 4,291 -- 6,069
-------- ------- ------- --------
Net revenues.............................. 150,970 22,996 (850) 173,116
-------- ------- ------- --------
OPERATING EXPENSES:
Direct advertising................................ 74,293 14,150 (850) 87,593
General and administrative........................ 11,839 1,619 -- 13,458
Depreciation and amortization..................... 20,032 2,523 -- 22,555
-------- ------- ------- --------
Total operating expenses.................. 106,164 18,292 (850) 123,606
-------- ------- ------- --------
GAIN ON ATLANTA AND DENVER DISPOSITIONS............. 7,344 -- -- 7,344
-------- ------- ------- --------
OPERATING INCOME.................................... 52,150 4,704 -- 56,854
OTHER:
Foreign currency transaction gain................. -- (171) -- (171)
Interest expense -- net........................... 31,242 1,247 -- 32,489
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS... 20,908 3,628 -- 24,536
INCOME TAXES........................................ 8,364 1,836 -- 10,200
-------- ------- ------- --------
INCOME BEFORE EXTRAORDINARY LOSS.................... 12,544 1,792 -- 14,336
EXTRAORDINARY LOSS.................................. (17,780) -- -- (17,780)
-------- ------- ------- --------
(LOSS) INCOME BEFORE INCOME FROM SUBSIDIARY......... (5,236) 1,792 -- (3,444)
INCOME FROM SUBSIDIARY.............................. 1,929 -- (1,929) --
-------- ------- ------- --------
NET INCOME (LOSS)................................... (3,307) 1,792 (1,929) (3,444)
LESS STOCK DIVIDENDS, ACCRETIONS AND DISCOUNT ON
REDEMPTIONS....................................... 3,461 -- -- 3,461
-------- ------- ------- --------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS...................................... $ (6,768) $ 1,792 $(1,929) $ (6,905)
======== ======= ======= ========
42
45
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
THE NON- ELIMINATION
COMPANY GUARANTORS ENTRIES CONSOLIDATED
--------- ---------- ----------- ------------
OPERATING ACTIVITIES:
Net (loss) income................................. $ (5,235) $ 1,791 $ $ (3,444)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary loss.............................. 17,780 -- 17,780
Gain on disposals............................... (7,344) -- (7,344)
Gain on foreign currency transaction
adjustment.................................... -- (171) (171)
Deferred taxes.................................. 9,910 -- 9,910
Deferred financing fees......................... 1,389 -- 1,389
Depreciation and amortization................... 20,032 2,523 22,555
Provision for allowance for doubtful accounts... 2,466 26 2,492
Other........................................... 3,547 117 3,664
Changes in net assets and liabilities -- net of
effects from acquisitions and disposals:
Accounts receivable............................. (1,188) 421 (767)
Prepaid expenses and other current assets....... (1,719) 1,793 74
Accrued interest................................ 1,964 252 2,216
Accounts payable and other liabilities.......... 1,234 -- 1,234
--------- -------- -------- ---------
Net cash provided by operating activities....... 42,836 6,752 49,588
--------- -------- -------- ---------
INVESTING ACTIVITIES:
Acquisition of Gannett Outdoor, net of cash
overdraft acquired.............................. (707,958) (4,587) (712,545)
Capital expenditures.............................. (9,347) 301 (9,046)
Other acquisitions................................ (13,991) -- (13,991)
Net proceeds from disposals....................... 3,049 -- 3,049
Acquisition of perpetual land easements........... (21,525) -- (21,525)
--------- -------- -------- ---------
Net cash used in investing activities........... (749,772) (4,286) (754,058)
--------- -------- -------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.......... 764,852 82,001 846,853
Tender for 10 3/4% Senior Notes................... (128,205) -- (128,205)
Principal payments on debt........................ (269,893) -- (269,893)
Increase in deferred financing fees............... (37,483) -- (37,483)
Cash dividends paid on preferred stock............ (293) -- (293)
Redemption of preferred and exchangeable preferred
stock........................................... (16,369) -- (16,369)
Issuance of common stock.......................... 320,132 -- 320,132
Other............................................. 82,046 (82,170) (124)
--------- -------- -------- ---------
Net cash provided by (used in) financing
activities.................................... 714,787 (169) 714,618
--------- -------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... 7,851 2,297 10,148
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 1,739 -- 1,739
--------- -------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD............ $ 9,590 $ 2,297 $ $ 11,887
========= ======== ======== =========
43
46
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
THE ELIMINATION
COMPANY NON-GUARANTORS ENTRIES CONSOLIDATED
---------- -------------- ----------- ------------
CURRENT ASSETS
Cash and cash equivalents................ $ 3,790 $ 2,107 $ 5,897
Accounts receivable -- net............... 109,688 10,057 119,745
Prepaid land leases...................... 25,518 3,141 28,659
Other current assets..................... 9,624 7,062 16,686
Deferred income taxes.................... 5,914 5,914
---------- -------- -------- ----------
Total current assets............. 154,534 22,367 176,901
PROPERTY AND EQUIPMENT -- Net.............. 1,474,851 123,160 1,598,011
OTHER ASSETS............................... 13,565 13,565
DEFERRED FINANCING COSTS................... 40,520 40,520
GOODWILL AND OTHER INTANGIBLES -- Net...... 400,160 400,160
INVESTMENT IN SUBSIDIARY................... 49,390 $(49,390)
---------- -------- -------- ----------
TOTAL............................ $2,133,020 $145,527 $(49,390) $2,229,157
========== ======== ======== ==========
CURRENT LIABILITIES
Accounts payable......................... $ 8,649 $ 2,805 $ 11,454
Accrued interest......................... 8,551 389 8,940
Accrued expenses and other liabilities... 45,815 (1,137) 44,678
Current maturities of long-term debt..... 49,600 1,000 50,600
---------- -------- -------- ----------
Total current liabilities........ 112,615 3,057 $ -- 115,672
LONG-TERM DEBT: ........................... 1,297,516 96,034 1,393,550
OTHER LONG-TERM OBLIGATIONS................ 4,327 4,327
DEFERRED INCOME TAXES...................... 13,761 6,376 20,137
---------- -------- -------- ----------
Total liabilities................ 1,428,219 105,467 -- 1,533,686
---------- -------- -------- ----------
COMMON STOCKHOLDERS' EQUITY: .............. 704,801 40,060 (49,390) 695,471
---------- -------- -------- ----------
TOTAL............................ $2,133,020 $145,527 $(49,390) $2,229,157
========== ======== ======== ==========
44
47
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
THE NON- ELIMINATION
COMPANY GUARANTORS ENTRIES CONSOLIDATED
-------- ---------- ----------- ------------
REVENUES:
Outdoor advertising............................. $469,791 $62,060 $(4,304) $527,547
Less agency commissions......................... 63,687 8,111 71,798
-------- ------- ------- --------
Total........................................ 406,104 53,949 (4,304) 455,749
Lease, printing and other revenues.............. 3,904 11,351 15,255
-------- ------- ------- --------
Net revenues............................... 410,008 65,300 (4,304) 471,004
-------- ------- ------- --------
OPERATING EXPENSES:
Direct advertising.............................. 201,671 39,808 (4,304) 237,175
General and administrative...................... 24,063 4,500 28,563
Depreciation and amortization................... 67,204 8,123 75,327
-------- ------- ------- --------
Total operating expenses................ 292,938 52,431 (4,304) 341,065
-------- ------- ------- --------
OPERATING INCOME.................................. 117,070 12,869 -- 129,939
OTHER:
Foreign currency transaction loss............... 2,093 2,093
Interest expense -- net......................... 80,580 6,570 87,150
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
LOSS............................................ 36,490 4,206 -- 40,696
INCOME TAXES...................................... 14,776 3,709 18,485
-------- ------- ------- --------
INCOME BEFORE EXTRAORDINARY LOSS.................. 21,714 497 -- 22,211
EXTRAORDINARY LOSS................................ (6,773) (6,773)
-------- ------- ------- --------
NET INCOME BEFORE INCOME FROM SUBSIDIARY.......... 14,941 497 -- 15,438
INCOME FROM SUBSIDIARY............................ 512 (512) --
-------- ------- ------- --------
NET INCOME........................................ $ 15,453 $ 497 $ (512) $ 15,438
======== ======= ======= ========
45
48
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
THE NON- ELIMINATION
COMPANY GUARANTORS ENTRIES CONSOLIDATED
----------- ---------- ----------- ------------
OPERATING ACTIVITIES:
Net income.............................. $ 14,941 $ 497 $ $ 15,438
Adjustments to reconcile net income to
net cash provided by operating
activities:
Extraordinary loss................... 6,773 -- 6,773
Loss on foreign currency transaction
adjustment......................... -- 2,093 2,093
Deferred taxes....................... 13,706 (172) 13,534
Deferred financing fees.............. 5,469 -- 5,469
Depreciation and amortization........ 67,204 8,123 75,327
Provision for allowance for doubtful
accounts........................... 3,991 138 4,129
Other................................ 727 -- 727
Changes in net assets and
liabilities -- net of effects from
acquisitions and disposals:
Accounts receivable.................. (47,689) 647 (47,042)
Prepaid expenses and other current
assets............................. (5,880) (506) 7,080 694
Accrued interest..................... 1,744 155 1,899
Accounts payable and other
liabilities........................ 15,847 (4,201) 11,646
----------- -------- ------- -----------
Net cash provided by operating
activities......................... 76,833 6,774 7,080 90,687
----------- -------- ------- -----------
INVESTING ACTIVITIES:
Acquisition of 3M Media................. (894,299) -- (894,299)
Capital expenditures.................... (25,666) (4,523) (30,189)
Other acquisitions...................... (316,224) (21,491) (337,715)
Acquisition of perpetual land
easements............................ (31,548) -- (31,548)
----------- -------- ------- -----------
Net cash used in investing
activities......................... (1,267,737) (26,014) (1,293,751)
----------- -------- ------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt................................. 1,434,565 110,650 (7,080) 1,538,135
Principal payments on debt.............. (607,906) (91,405) (699,311)
Increase in deferred financing fees..... (33,127) -- (33,127)
Issuance of common stock................ 391,572 -- 391,572
----------- -------- ------- -----------
Net cash provided by financing
activities......................... 1,185,104 19,245 (7,080) 1,197,269
----------- -------- ------- -----------
Effect of exchange rate changes on
cash................................. -- (195) (195)
----------- -------- ------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................. (5,800) (190) (5,990)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD.................................. 9,590 2,297 11,887
----------- -------- ------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD.................................. $ 3,790 $ 2,107 $ $ 5,897
=========== ======== ======= ===========
46
49
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
THE NON- ELIMINATION
COMPANY GUARANTORS ENTRIES CONSOLIDATED
---------- ---------- ----------- ------------
CURRENT ASSETS
Cash and cash equivalents..................... $ 9,071 $ 7,483 $ 16,554
Accounts receivable -- net.................... 123,063 13,754 136,817
Prepaid land leases........................... 18,739 4,728 23,467
Other current assets.......................... 8,859 5,685 14,544
Value added taxes receivable.................. -- 33,876 33,876
Deferred income taxes......................... 12,422 124 12,546
---------- -------- --------- ----------
Total current assets.................. 172,154 65,650 -- 237,804
PROPERTY AND EQUIPMENT -- Net................... 1,524,293 351,772 1,876,065
OTHER ASSETS.................................... 14,411 1,470 15,881
DEFERRED FINANCING COSTS........................ 35,070 35,070
GOODWILL AND OTHER INTANGIBLES -- Net........... 464,227 127,779 592,006
INVESTMENT IN SUBSIDIARY........................ 402,852 (402,852)
---------- -------- --------- ----------
TOTAL................................. $2,613,007 $546,671 $(402,852) $2,756,826
========== ======== ========= ==========
CURRENT LIABILITIES
Accounts payable.............................. $ 8,763 $ 4,092 $ 12,855
Accrued interest.............................. 8,395 301 8,696
Accrued expenses and other liabilities........ 34,771 13,437 48,208
Current maturities of long-term debt.......... 129,247 1,000 130,247
---------- -------- --------- ----------
Total current liabilities............. 181,176 18,830 -- 200,006
LONG-TERM DEBT.................................. 1,594,617 190,568 (108,200) 1,676,985
OTHER LONG-TERM OBLIGATIONS..................... 9,629 59 9,688
DEFERRED INCOME TAXES........................... 44,204 55,017 99,221
---------- -------- --------- ----------
Total liabilities..................... 1,829,626 264,474 (108,200) 1,985,900
---------- -------- --------- ----------
COMMON STOCKHOLDERS' EQUITY: ................... 783,381 282,197 (294,652) 770,926
---------- -------- --------- ----------
TOTAL................................. $2,613,007 $546,671 $(402,852) $2,756,826
========== ======== ========= ==========
47
50
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
THE NON- ELIMINATION
COMPANY GUARANTORS ENTRIES CONSOLIDATED
-------- ---------- ----------- ------------
REVENUES:
Outdoor advertising............................. $700,336 $93,612 $(7,022) $786,926
Less agency commissions......................... 90,496 8,901 99,397
-------- ------- ------- --------
Total........................................ 609,840 84,711 (7,022) 687,529
Lease, printing and other revenues.............. 8,082 10,300 18,382
-------- ------- ------- --------
Net revenues................................. 617,922 95,011 (7,022) 705,911
-------- ------- ------- --------
OPERATING EXPENSES:
Direct advertising.............................. 287,959 50,018 (7,022) 330,955
General and administrative...................... 30,367 6,974 37,341
Depreciation and amortization................... 104,660 18,433 123,093
-------- ------- ------- --------
Total operating expenses................ 422,986 75,425 (7,022) 491,389
-------- ------- ------- --------
OPERATING INCOME.................................. 194,936 19,586 214,522
OTHER:
Foreign currency transaction loss............... 4,278 4,278
Interest expense -- net......................... 131,024 7,041 138,065
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES AND INCOME FROM
SUBSIDIARY...................................... 63,912 8,267 72,179
INCOME TAXES...................................... 27,409 3,628 31,037
-------- ------- ------- --------
NET INCOME BEFORE INCOME FROM SUBSIDIARY.......... 36,503 4,639 41,142
INCOME FROM SUBSIDIARY............................ 5,109 (5,109) --
-------- ------- ------- --------
NET INCOME........................................ $ 41,612 $ 4,639 $(5,109) $ 41,142
======== ======= ======= ========
48
51
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
THE NON- ELIMINATION
COMPANY GUARANTORS ENTRIES CONSOLIDATED
--------- ---------- ----------- ------------
OPERATING ACTIVITIES:
Net income...................................... $ 36,503 $ 4,639 $ $ 41,142
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on foreign currency transaction
adjustment................................. -- 4,278 4,278
Deferred taxes............................... 24,519 (3,281) 21,238
Deferred financing fees...................... 7,050 -- 7,050
Depreciation and amortization................ 104,660 18,433 123,093
Provision for allowance for doubtful
accounts................................... 6,483 47 6,530
Other........................................ 931 -- 931
Changes in net assets and liabilities -- net of
effects from acquisitions and disposals:
Accounts receivable.......................... (19,836) (3,737) (23,573)
Prepaid expenses and other current assets.... 7,357 15 7,372
Accrued interest............................. (156) (65) (221)
Accounts payable and other liabilities....... (25,173) (6,045) (31,218)
--------- -------- ------- ---------
Net cash provided by operating activities.... 142,338 14,284 156,622
--------- -------- ------- ---------
INVESTING ACTIVITIES:
Vendor Acquisitions............................. (256,507) 11,559 (244,948)
Capital expenditures............................ (27,540) (10,675) (38,215)
Other acquisitions.............................. (217,116) (5,655) (222,771)
Acquisition of perpetual land easements......... (1,773) -- (1,773)
--------- -------- ------- ---------
Net cash used in investing activities........ (502,936) (4,771) (507,707)
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........ 485,936 4,782 490,718
Principal payments on debt...................... (118,569) (7,760) (126,329)
Increase in deferred financing fees............. (1,600) -- (1,600)
Issuance of common stock........................ 400 -- 400
Other........................................... (287) -- (287)
--------- -------- ------- ---------
Net cash provided by (used in) financing
activities................................. 365,880 (2,978) 362,902
--------- -------- ------- ---------
Effect of exchange rate changes on cash......... -- (1,160) (1,160)
--------- -------- ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 5,282 5,375 10,657
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.... 3,790 2,107 5,897
--------- -------- ------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......... $ 9,702 $ 7,482 $ $ 16,554
========= ======== ======= =========
49
52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information regarding the directors of the Company is incorporated
herein by reference to the information set forth in the table captioned
"Director and Director Nominee Information" and under "Election of
Directors" in the definitive proxy statement of the Registrant for the
Registrant's annual meeting of stockholders to be held on May 27, 1999.
(b) Pursuant to Form 10-K General Instruction G(3), the information
regarding executive officers of the Company has been included in Part I
of this Report under the caption "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by
reference to the information set forth under the captions "Executive
Compensation" and "Compensation of Directors" in the definitive proxy statement
of the Registrant for the Registrant's annual meeting of stockholders to be held
on May 27, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated herein by
reference to the information set forth in the table captioned "Beneficial
Ownership of Common Stock" in the definitive proxy statement of the Registrant
for the Registrant's annual meeting of stockholders to be held on May 27, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated herein by
reference to the information set forth in the table captioned "Certain
Transactions" in the definitive proxy statement of the Registrant for the
Registrant's annual meeting of stockholders to be held on May 27, 1999.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are incorporated by reference in or are filed
as a part of this report:
1. Financial statements (included under Item 8).
2. Financial statement schedules.
S-1 Independent Auditors' Report on Schedule
S-2 Schedule II -- Valuation and Qualifying Accounts
3. Exhibits.
The following exhibits are incorporated by reference in or filed as a
part of this report:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 -- Fourth Amended and Restated Certificate of Incorporation, as
amended (filed as Exhibit 3.1 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-53113) and incorporated herein by reference).
50
53
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.2 -- Amended and Restated Bylaws (filed as Exhibit 3.2 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
4.1 -- Specimen Common Stock Certificate of the Registrant (filed
as Exhibit 4.1 to the Registrant's Amendment No. 2 to Form
S-1 Registration Statement (Reg. No. 333-1582) and
incorporated herein by reference).
4.2 -- Indenture (filed as Exhibit 4.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
4.3 -- Indenture dated October 15, 1996, (the "1996 Indenture"), by
and among the Registrant, its United States subsidiaries and
The Bank of New York, as trustee (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated October 9,
1996 and incorporated herein by reference).
4.4 -- Indenture dated as of June 23, 1997 (the "1997 Indenture")
among the Registrant, its United States subsidiaries and The
Bank of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007 (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-4 (Reg. No.
333-30957) and incorporated herein by reference).
4.5 -- First Supplemental Indenture to the 1996 Indenture, dated as
of June 23, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.3 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.6 -- Second Supplemental Indenture to the 1996 Indenture, dated
as of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.4 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.7 -- Third Supplemental Indenture to the 1996 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and The Bank
of New York, as trustee, relating to the 9 3/8% Senior
Subordinated Notes due 2006 (filed as Exhibit 4.7 to the
Registrant's Annual Report on Form 10-K, as filed with the
Commission on March 19, 1998, and incorporated herein by
reference).
4.8 -- Fourth Supplemental Indenture to the 1996 Indenture dated
August 31, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantors named therein and The
Bank of New York, as trustee, relating to the 9 3/8% Senior
Subordinated Notes due 2006.
4.9 -- First Supplemental Indenture to the 1997 Indenture, dated as
of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 8 7/8% Senior Subordinated Notes due 2007 (filed as
Exhibit 2.7 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.10 -- Second Supplemental Indenture to the 1997 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and The Bank
of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007 (filed as Exhibit 4.9 to the
Registrant's Annual Report on Form 10-K, as filed with the
Commission on March 19, 1998, and incorporated herein by
reference).
51
54
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.11 -- Third Supplemental Indenture to the 1997 Indenture dated
August 31, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantors named therein and The
Bank of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007.
9.1 -- Voting Agreement dated May 4, 1990, effective April 2, 1989,
between William S. Levine and Rubin Sabin (filed as Exhibit
9.1 to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
9.2 -- Irrevocable Proxy dated as of April 2, 1989, between William
S. Levine and Rubin Sabin (filed as Exhibit 9.2 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).
9.3 -- Amended and Restated Voting Agreement dated as of August 17,
1993, entered into among the Registrant, William S. Levine
and Gregory Riggle (filed as Exhibit 9.3 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
9.4 -- Stockholders' Agreement dated as of April 15, 1996, between
William S. Levine, Arte Moreno and MK-Link Investments
Limited Partnership (filed as Exhibit 9.4 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.1 -- Fourth Amended and Restated Credit Agreement, dated as of
October 22, 1996, entered into among the Registrant, the
several lenders from time to time parties thereto and CIBC
Inc., as agent (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the period ended September
30, 1996 and incorporated herein by reference).
10.2 -- Amended and Restated Securities Purchase Agreement dated as
of August 17, 1993, entered into among the Registrant, TCW
Special Placements Fund II and TCW Capital, as Investment
Manager pursuant to an Investment Agreement dated as of June
30, 1987 (filed as Exhibit 10.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.3 -- Junior Subordinated Exchange Note dated effective as of
January 1, 1992, issued by the Registrant to Rubin Sabin
(filed as Exhibit 10.3 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.4 -- Intercreditor and Subordination Agreement dated as of May 4,
1990, among the Registrant, OS Advertising Company of Texas,
Inc., Outdoor Today, Inc., National Westminster Bank USA, as
Agent, Rubin Sabin and Elaine Sabin (filed as Exhibit 10.4
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.5 -- Amended and Restated Intercreditor and Subordination
Agreement dated as of August 17, 1993, entered into between
the Registrant, Gregory Riggle, CIBC Inc. and United States
Trust Company of New York, as trustee (filed as Exhibit 10.5
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.6 -- Administrative Services Agreement dated as of June 1, 1993,
between the Registrant and Camelback Services, Inc. (filed
as Exhibit 10.6 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).*
10.7 -- Services Agreement dated as of May 1, 1993, between the
Registrant, Williams Manufacturing, Inc. and J & L
Industries, Inc. as amended by the First Amendment thereto
dated April 15, 1996, to be effective as of July 1, 1995
(filed as Exhibit 10.7 to the Registrant's Amendment No. 2
to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).*
52
55
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.8 -- Amended and Restated Incentive Plan dated effective as of
January 1, 1988, adopted by the Registrant as amended to
date (filed as Exhibit 10.8 to the Registrant's Amendment
No. 2 to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).*
10.9 -- Assets Purchase Agreement dated March 15, 1991, among the
Registrant, Naegele Outdoor Advertising, Inc., OS
Advertising Company of Georgia, Inc., and Morris
Communications Corporation, as amended by the First
Amendment to Assets Purchase Agreement dated as of December
23, 1991, among the Registrant, Naegele Outdoor Advertising,
Inc., OS Advertising Company of Georgia, Inc., Morris
Communications Corporation, and OS Advertising Company of
Kentucky, Inc. (filed as Exhibit 10.17 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.10 -- Agreement and grant of Option dated as of April 3, 1989,
between the Registrant and Arthur Moreno, as amended by the
First Amendment to Agreement and Grant of Option dated as of
January 1, 1991 (filed as Exhibit 10.23 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).*
10.10.1 -- Letter Agreement between Registrant and Arte Moreno
regarding Agreement and Grant of Option dated as of April 3,
1989, and First Amendment to Agreement and Grant of Option
dated as of January 1, 1991 (filed as Exhibit 10.10.1 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).*
10.11 -- Option Agreement dated as of January 1, 1991, between the
Registrant and Wally Kelly (filed as Exhibit 10.24 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).*
10.12 -- Senior Note Intercreditor Agreement dated as of August 17,
1993, entered into among TCW Special Placements Fund II, TCW
Capital, acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and United
States Trust Company of New York as trustee (filed as
Exhibit 10.26 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).
10.13 -- Bank Intercreditor Agreement dated as of August 17, 1993,
entered into among TCW Special Placements Fund II, TCW
Capital acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and CIBC
Inc. as agent (filed as Exhibit 10.26 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.14 -- Option Purchase Agreement among the Registrant and OS
Advertising Company of Georgia, Inc. and Capitol Outdoor
Acquisition Co., Inc. and Capitol Outdoor Leasing Co., Inc.,
dated as of July 27, 1994, as amended by the First Amendment
to Option Purchase Agreement dated as of December 14, 1994
(filed as Exhibit 1 to the Registrant's Current Report on
Form 8-K dated December 19, 1994 and incorporated herein by
reference).
10.15 -- Asset Purchase Agreement between the Registrant and Eller
Outdoor Advertising Company of Atlanta, dated November 21,
1994 (filed as Exhibit 2 to the Registrant's Current Report
on Form 8-K dated December 19, 1994 and incorporated herein
by reference).
10.16 -- The Registrant's 1996 Omnibus Plan (filed as Exhibit 10.16
to the Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).*
10.17 -- Form of Incentive Stock Option Grant to be awarded to each
of Wally C. Kelly and Bill M. Beverage pursuant to the terms
of the Registrant's 1996 Omnibus Plan (filed as Exhibit
10.17 to the Registrant's Amendment No. 2 to Form S-1
Registration Statement No. 333-1582 and incorporated herein
by reference).*
53
56
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.18 -- Form of Stock Option Grant to be awarded to each of Arte
Moreno, Wally C. Kelly and Bill M. Beverage pursuant to the
terms of the Registrant's 1996 Omnibus Plan (filed as
Exhibit 10.18 to the Registrant's Amendment No. 2 to Form
S-1 Registration Statement No. 333-1582 and incorporated
herein by reference).*
10.19 -- Form of Incentive Plan Settlement Participant Election
Agreement to be entered into by each of Wally C. Kelly and
Bill M. Beverage pursuant to the conversion of interests in
the Incentive Plan (filed as Exhibit 10.19 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).*
10.20 -- Asset Purchase Agreement dated July 9, 1996, by and between
the Registrant and Gannett Co., Inc., together with the
Promissory Note and related Guaranty. The Exhibit contains a
list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant
agrees to furnish supplementally a copy of any omitted
Schedule or Exhibit to the Commission upon request (filed as
Exhibit 99.1 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
10.21 -- Amendment No. 1 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 12, 1996 (filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.22 -- Amendment No. 2 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 19, 1996 (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.23 -- Form of Option by Gannett Outdoor Co. of Texas, Inc., in
favor of the Registrant together with the form of Asset
Purchase Agreement by and between the Registrant and Gannett
Outdoor Co. of Texas, Inc. (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
10.24 -- Senior Subordinated Credit Agreement dated July 9, 1996, by
and among the Registrant, the guarantors named therein, the
lenders named therein, and Canadian Imperial Bank of
Commerce together with the forms of Bridge Note and Term
Note. The Exhibit contains a list briefly identifying the
contents of Schedules and Exhibits, some of which have been
omitted. The Registrant agrees to furnish supplementally a
copy of any omitted Schedule or Exhibit to the Commission
upon request (filed as Exhibit 99.4 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.25 -- Form of Indenture by and among the Registrant, the
subsidiary guarantors named therein, and a trustee to be
selected by the Registrant (filed as Exhibit 99.5 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
10.26 -- First Supplemental Indenture dated as of August 22, 1996, by
and between the Registrant and United States Trust Company
of New York (filed as Exhibit 99.5 to the Registrant's
Current Report on Form 8-K dated August 27, 1996 and
incorporated herein by reference).
54
57
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.27 -- Securities Purchase Agreement dated July 9, 1996, by and
between the Registrant and CIBC WG Argosy Merchant Fund 2,
L.L.C. The Exhibit contains a list briefly identifying the
contents of Schedules and Exhibits which have been omitted.
The Registrant agrees to furnish supplementally a copy of
any omitted Schedule or Exhibit to the Commission upon
request (filed as Exhibit 99.6 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.28 -- Form of Certificate of Designations of Senior Increasing
Rate Cumulative Preferred Stock, Series A (filed as Exhibit
99.7 to the Registrant's Current Report on Form 8-K dated
July 10, 1996 and incorporated herein by reference).
10.29 -- Form of Warrant Agreement by and between the Registrant and
a Warrant Agent to be selected by the Registrant (filed as
Exhibit 99.8 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
10.30 -- Form of Registration Rights Agreement by and among the
Registrant, the guarantors names therein, and the holders
name therein (filed as Exhibit 99.9 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.31 -- Form of Common Stock Registration Rights Agreement by and
between the Registrant and CIBC WG Argosy Merchant Form 2,
L.L.C. (filed as Exhibit 99.10 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.32 -- Underwriting Agreement dated August 19, 1996 by and among
the Registrant and Alex. Brown & Sons Incorporated, CIBC
Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette
Securities Corporation (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.33 -- Asset Purchase Agreement between RailCom, Ltd. and the
Registrant dated May 8, 1996 (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
10.34 -- Purchase and Sales Agreement Between CSX Realty Development
Corporation, The Three Rivers Railway Company, The Atlantic
Land and Improvement Company, Winston-Salem Southbound
Railway Company, Gainesville Midland Railroad Company, and
Richmond, Fredericksburg and Potomac Railway Company and
RailCom, Ltd. dated January 23, 1996, as amended March 29,
1996, and May 21, 1996 (filed as Exhibit 2.2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
10.35 -- Amendment to Purchase Agreement, dated March 29, 1996 (filed
as Exhibit 2.2.2 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
10.36 -- Second Amendment to Purchase Agreement dated May 21, 1996
(filed as Exhibit 2.2.3 to the Registrant's Current Report
on Form 8-K dated May 22, 1996 and incorporated herein by
reference).
10.37 -- Grant of Easement and Agreement dated May 21, 1996 (filed as
Exhibit 2.3 to the Registrant's Current Report on Form 8-K
dated May 22, 1996 and incorporated herein by reference).
10.38 -- Assignment of License Agreements, dated May 21, 1996 (filed
as Exhibit 2.4 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
10.39 -- Assignment and Assumption Agreement dated May 22, 1996
(filed as Exhibit 2.5 to the Registrant's Current Report on
Form 8-K dated May 22, 1996 and incorporated herein by
reference).
55
58
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.41 -- Underwriting Agreement dated October 9, 1996 by and among
the Registrant, its United States subsidiaries, CIBC Wood
Gundy Securities Corp. and Alex. Brown & Sons Incorporated
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated October 9, 1996 and incorporated herein by
reference).
10.42 -- Agreement of Purchase and Sale dated April 30, 1997 by and
between the Registrant and Minnesota Mining and
Manufacturing Company. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.1 to the
Registrant's Form S-3 Registration Statement (Reg. No.
333-26407) and incorporated herein by reference).
10.43 -- Stock Purchase Agreement dated April 11, 1997 by and among
the Registrant, Van Wagner Communications, Inc., Richard M.
Schaps and Jason Perline. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule or
Exhibit to the Commission upon request (filed as Exhibit
99.2 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.44 -- Signboard Easements Sale Agreement dated March 21, 1997
between the Registrant and the Burlington Northern and Santa
Fe Railway Company. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.3 to the
Registrant's Form S-3 Registration Statement (Reg. No.
333-26407) and incorporated herein by reference).
10.45 -- Asset Purchase Agreement dated as of February 24, 1997 by
and between the Registrant and GRTP, Ltd. The Exhibit
contains a list briefly identifying the contents of
Schedules and Exhibits, some of which have been omitted. The
Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request
(filed as Exhibit 99.4 to the Registrant's Form S-3
Registration Statement (Reg. No. 333-26407) and incorporated
herein by reference).
10.46 -- Joint Venture Asset Purchase Agreement dated as of February
28, 1997 by and between the Registrant and Reynolds/Tower
Outdoor Sign Joint Venture. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule or
Exhibit to the Commission upon request (filed as Exhibit
99.5 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.47 -- Joint Venture Asset Purchase Agreement dated as of February
28, 1997 by and between the Registrant and Reynolds/McCrary
Joint Venture. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.6 to the
Registrant's Form S-3 Registration Statement (Reg. No.
333-26407) and incorporated herein by reference).
10.48 -- Joint Venture Asset Purchase Agreement dated as of February
28, 1997 by and between the Registrant and RV Outdoor Sign
Joint Venture. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant Agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.7 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
56
59
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.49 -- Asset Purchase Agreement dated as of January 21, 1997 by and
among the Registrant and Scadron Enterprises, Robert B.
Scadron, Jeffrey Scadron and Barry Scadron. The Exhibit
contains a list briefly identifying the contents of
Schedules and Exhibits, some of which have been omitted. The
Registrant Agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request
(filed as Exhibit 99.8 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 333-26407) and incorporated
herein by reference).
10.50 -- Asset Purchase Agreement dated as of December 27, 1996 by
and among the Registrant, Villepigue Outdoor Advertising
Corporation, Villepigue International Advertising, Inc.,
S.B. Properties, Inc., Third & Eighth Realty Corp. and
Mobile Outdoor Media, Inc. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant Agrees to
furnish supplementally a copy of any omitted Schedule or
Exhibit to the Commission upon request (filed as Exhibit
99.9 to the Registrant's Registration Statement on Form S-3
(Reg. No. 333-26407) and incorporated herein by reference).
10.51 -- Amendment dated as of March 12, 1997 to the Fourth amended
and Restated Credit Agreement dated as of October 22, 1996,
among the Registrant, Mediacom Inc., the several banks and
other financial institutions parties thereto and Canadian
Imperial Bank of Commerce as administrative agent (filed as
Exhibit 99.10 to the Registrant's Registration Statement on
Form S-3 (Reg. No. 333-26407) and incorporated herein by
reference).
10.52 -- Second Amendment dated as of May 9, 1997 to the Fourth
Amended and Restated Credit Agreement dated as of October
22, 1996, as amended, among the Registrant, Mediacom Inc.,
the several banks and other financial institutions parties
thereto and Canadian Imperial Bank of Commerce as
administrative agent (filed as Exhibit 99.11 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
10.53 -- Amendment No. 1 dated as of May 22, 1997 to Stock Purchase
Agreement dated April 11, 1997 by and among Richard M.
Schaps, Jason Perline, Van Wagner Communications, Inc. and
the Registrant (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K dated May 28, 1997 and
incorporated herein by reference).
10.54 -- Underwriting Agreement dated May 22, 1997 by and among the
Registrant, the selling stockholders named therein, Alex.
Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, CIBC Wood Gundy Securities Corp.,
Montgomery Securities and Prudential Securities Corporation
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated May 28, 1997 and incorporated herein by
reference).
10.55 -- Amendment No. 1 dated June 2, 1997 to Underwriting Agreement
dated May 22, 1997 by and among the Registrant, the selling
stockholders named therein, Alex. Brown & Sons Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, CIBC
Wood Gundy Securities Corp., Montgomery Securities and
Prudential Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated June 4,
1997 and incorporated herein by reference).
10.56 -- Purchase Agreement dated June 17, 1997 among the Registrant,
its United States subsidiaries, CIBC Wood Gundy Securities
Corp., Alex. Brown & Sons Incorporated and Donaldson, Lufkin
& Jenrette Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Registration Statement on Form S-4 (Reg.
No. 333-30957) and incorporated herein by reference).
57
60
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.57 -- Registration Rights Agreement dated June 17, 1997 among the
Registrant, the Guarantors named therein, CIBC Wood Gundy
Securities Corp., Alex. Brown & Sons Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation (filed
as Exhibit 99.2 to the Registrant's Registration Statement
on Form S-4 (Reg. No. 333-30957) and incorporated herein by
reference).
10.58 -- Asset Purchase Agreement dated August 15, 1997, by and
between the Registrant and The Lamar Corporation (filed as
Exhibit 99.2 to the Registrant's Current Report on Form 8-K
dated August 29, 1997 and incorporated herein by reference).
10.59 -- Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom Inc., the
several lenders parties thereto and Canadian Imperial Bank
of Commerce, as agent (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 29,
1997 and incorporated herein by reference).
10.60 -- 1966 Non-Employee Director Stock Option Plan (filed as
Exhibit 99.3 to the Registrant's Registration Statement on
Form S-8 (Reg. No. 333-38589) and incorporated herein by
reference).*
10.61 -- Stock Purchase Agreement dated November 7, 1997 among the
Registrant, Salm Enterprises, Inc., Joslyn Stuart and
Hillary Salm. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 10.61 to the
Registrant's Annual Report on Form 10-K, as filed with the
Commission on March 19, 1998, and incorporated herein by
reference).
10.62 -- Asset Purchase Agreement dated November 25, 1997 by and
between the Registrant and Outdoor Media Group, Inc. The
Exhibit contains a list briefly identifying the contents of
Schedules and Exhibits, some of which have been omitted. The
Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request
(filed as Exhibit 10.62 to the Registrant's Annual Report on
Form 10-K, as filed with the Commission on March 19, 1998,
and incorporated herein by reference).
10.63 -- Incentive Bonus Plan for the Chief Executive Officer (filed
as Annex A to the Registrant's Proxy Statement dated April
30, 1997, and incorporated herein by reference).*
10.64 -- Amendment dated as of March 17, 1998, to the Fifth Amended
and Restated Credit Agreement dated as of August 15, 1997,
among the Registrant, Mediacom, Inc., the several banks and
other financial institutions parties thereto and Canadian
Imperial Bank of Commerce, as administrative agent (filed as
Exhibit 99.1 to the Registrant's Quarterly Report on Form
10-Q, as filed with the Commission on May 11, 1998, and
incorporated herein by reference).
10.65 -- Asset Purchase Agreement dated as of April 8, 1998, by and
among the Registrant, the Barbara Shop, Inc. d/b/a
Philadelphia Outdoor and Leslie Kaplan. The Exhibit contains
a list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant
agrees to furnish supplementally a copy of any omitted
Schedule or Exhibit to the Commission upon request (filed as
Exhibit 99.2 to the Registrant's Quarterly Report on Form
10-Q, as filed with the Commission on May 11, 1998, and
incorporated herein by reference).
10.66 -- Assumption and Amendment Agreement dated as of April 15,
1998, made by Salm Enterprises, Inc. and Atlantic Prospect,
Inc. in favor of Canadian Imperial Bank of Commerce, as
administrative agent (filed as Exhibit 99.3 to the
Registrant's Quarterly Report on Form 10-Q, as filed with
the Commission on May 11, 1998, and incorporated herein by
reference).
58
61
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.67 -- Agreement and Plan of Merger dated as of May 19, 1998, by
and among the Registrant, Gator Outdoor Advertising, Inc.,
GATOA, Inc., and Peter D. Sleiman, Anthony T. Sleiman,
Joseph E. Sleiman and Eli T. Sleiman, Jr. (filed as Exhibit
99.1 to the Registrant's Registration Statement on Form S-3
(Reg. No. 333-53113) and incorporated herein by reference).
10.68 -- Asset Purchase and Assignment Agreement dated June 4, 1998,
among the Registrant, Vendor S.A. de C.V., Outdoor Systems
Mexico, S.A. de C.V., Promoindustrias Metropolitanas, S.A.
de C.V., Televisa, S.A. de C.V., and Francisco A. Gonzales
Sanchez (filed as Exhibit 99.1 to the Registrant's Current
Report on Form 8-K dated July 16, 1998 and incorporated
herein by reference).
10.69 -- Stock Purchase Agreement dated July 1, 1998, between Vendor
S.A. de C.V. and Outdoor Systems Mexico, S.A. de C.V. (filed
as Exhibit 99.2 to the Registrant's Current Report on Form
8-K dated July 16, 1998 and incorporated herein by
reference).
10.70 -- Asset Purchase and Assignment Agreement dated June 4, 1998,
among the Registrant, Multimedios Estrellas de Oro, S.A. de
C.V., MM Billboard, S.A. de C.V., Outdoor Systems Mexico,
S.A. de C.V. and Francisco A. Gonzales Sanchez (filed as
Exhibit 99.3 to the Registrant's Current Report on Form 8-K
dated July 16, 1998 and incorporated herein by reference).
10.71 -- Amendment and Consent, dated as of June 18, 1998, to the
Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom, Inc., the
several banks and other financial institutions from time to
time parties thereto and Canadian Imperial Bank of Commerce,
as administrative agent.
10.72 -- Third Amendment, dated as of November 4, 1998, to the Fifth
Amended and Restated Credit Agreement, dated as of August
15, 1997, among the Registrant, Mediacom, Inc., the several
banks and other financial institutions from time to time
parties thereto and Canadian Imperial Bank of Commerce, as
administrative agent.
10.73 -- Fourth Amendment, dated as of December 15, 1998, to the
Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom, Inc., the
several banks and other financial institutions from time to
time parties thereto and Canadian Imperial Bank of Commerce,
as administrative agent.
10.74 -- Fifth Amendment, dated as of February 3, 1999, to the Fifth
Amended and Restated Credit Agreement, dated as of August
15, 1997, among the Registrant, Mediacom, Inc., the several
banks and other financial institutions from time to time
parties thereto and Canadian Imperial Bank of Commerce, as
administrative agent.
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Deloitte & Touche LLP
27 -- Financial Data Schedule
- ---------------
* Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
Current Report on Form 8-K/A dated September 10, 1998 (July 1, 1998)
amending Item 7 of the Current Report on Form 8-K dated July 16, 1998,
reporting the completion of the acquisition of substantially all of the
assets of Vendor, S.A. de C.V. and MM Billboard, S.A. de C.V.
59
62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Phoenix, State of Arizona, on the 18th
day of March 1999.
OUTDOOR SYSTEMS, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
OUTDOOR SYSTEMS, INC.
By: /s/ ARTURO R. MORENO Date: March 18, 1999
- --------------------------------------------
Arturo R. Moreno
President and Director
(Principal Executive Officer)
By: /s/ WILLIAM S. LEVINE Date: March 18, 1999
- --------------------------------------------
William S. Levine
Chairman and Director
By: /s/ BILL M. BEVERAGE Date: March 18, 1999
- --------------------------------------------
Bill M. Beverage
Secretary, Treasurer and Chief Financial
Officer
(Principal Financial and Accounting Officer)
By: /s/ BRIAN J. O'CONNOR Date: March 18, 1999
- --------------------------------------------
Brian J. O'Connor
Director
By: /s/ STEPHEN F. BUTTERFIELD Date: March 18, 1999
- --------------------------------------------
Stephen F. Butterfield
Director
63
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Outdoor Systems, Inc.
Phoenix, Arizona
We have audited the consolidated financial statements of Outdoor Systems,
Inc. as of December 31, 1997 and 1998, and for each of the three years in the
period ended December 31, 1998, and have issued our report thereon dated
February 2, 1999; such consolidated financial statements and report are included
elsewhere in this Form 10-K. Our audits also included the financial statement
schedule of Outdoor Systems, Inc., listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 2, 1999
S-1
64
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
ADDITIONS
--------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS OF PERIOD
----------- ---------- ---------- ------ ---------- ---------
1996
Allowance for Doubtful
Accounts.................... $ 1,010 $2,492 $2,726(2) $ (830)(1) $ 5,398
======= ====== ====== ======= =======
1997
Allowance for Doubtful
Accounts.................... $ 5,398 $4,129 $5,677(2) $(1,354)(1) $13,850
======= ====== ====== ======= =======
1998
Allowance for Doubtful
Accounts.................... $13,850 $6,530 $2,738(2) $(2,807)(1) $20,311
======= ====== ====== ======= =======
- ---------------
(1) Represents accounts receivable write-offs.
(2) Amount represents reserve at date of acquisition related to accounts
receivable in the working capital of companies acquired.
S-2
65
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 -- Fourth Amended and Restated Certificate of Incorporation, as
amended (filed as Exhibit 3.1 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-53113) and incorporated herein by reference).
3.2 -- Amended and Restated Bylaws (filed as Exhibit 3.2 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
4.1 -- Specimen Common Stock Certificate of the Registrant (filed
as Exhibit 4.1 to the Registrant's Amendment No. 2 to Form
S-1 Registration Statement (Reg. No. 333-1582) and
incorporated herein by reference).
4.2 -- Indenture (filed as Exhibit 4.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
4.3 -- Indenture dated October 15, 1996, (the "1996 Indenture"), by
and among the Registrant, its United States subsidiaries and
The Bank of New York, as trustee (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated October 9,
1996 and incorporated herein by reference).
4.4 -- Indenture dated as of June 23, 1997 (the "1997 Indenture")
among the Registrant, its United States subsidiaries and The
Bank of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007 (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-4 (Reg. No.
333-30957) and incorporated herein by reference).
4.5 -- First Supplemental Indenture to the 1996 Indenture, dated as
of June 23, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.3 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.6 -- Second Supplemental Indenture to the 1996 Indenture, dated
as of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.4 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.7 -- Third Supplemental Indenture to the 1996 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and the Bank
of New York, as trustee, relating to the 9 3/8% Senior
Subordinated Notes due 2006 (filed as Exhibit 4.7 to the
Registrant's Annual Report on Form 10-K, as filed with the
Commission on March 19, 1998, and incorporated herein by
reference).
4.8 -- Fourth Supplemental Indenture to the 1996 Indenture dated
August 31, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantors named therein and The
Bank of New York, as trustee, relating to the 9 3/8% Senior
Subordinated Notes due 2006.
4.9 -- First Supplemental Indenture to the 1997 Indenture, dated as
of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and the Bank of New York, as trustee, relating to
the 8 7/8% Senior Subordinated Notes due 2007 (filed as
Exhibit 2.7 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.10 -- Second Supplemental Indenture to the 1997 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and the Bank
of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007 (filed as Exhibit 4.9 to the
Registrant's Annual Report on Form 10-K, as filed with the
Commission on March 19, 1998, and incorporated herein by
reference).
4.11 -- Third Supplemental Indenture to the 1997 Indenture dated
August 31, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantors named therein and The
Bank of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007.
66
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
9.1 -- Voting Agreement dated May 4, 1990, effective April 2, 1989,
between William S. Levine and Rubin Sabin (filed as Exhibit
9.1 to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
9.2 -- Irrevocable Proxy dated as of April 2, 1989, between William
S. Levine and Rubin Sabin (filed as Exhibit 9.2 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).
9.3 -- Amended and Restated Voting Agreement dated as of August 17,
1993, entered into among the Registrant, William S. Levine
and Gregory Riggle (filed as Exhibit 9.3 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
9.4 -- Stockholders' Agreement dated as of April 15, 1996, between
William S. Levine, Arte Moreno and MK-Link Investments
Limited Partnership (filed as Exhibit 9.4 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.1 -- Fourth Amended and Restated Credit Agreement, dated as of
October 22, 1996, entered into among the Registrant, the
several lenders from time to time parties thereto and CIBC
Inc., as agent (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the period ended September
30, 1996 and incorporated herein by reference).
10.2 -- Amended and Restated Securities Purchase Agreement dated as
of August 17, 1993, entered into among the Registrant, TCW
Special Placements Fund II and TCW Capital, as Investment
Manager pursuant to an Investment Agreement dated as of June
30, 1987 (filed as Exhibit 10.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.3 -- Junior Subordinated Exchange Note dated effective as of
January 1, 1992, issued by the Registrant to Rubin Sabin
(filed as Exhibit 10.3 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.4 -- Intercreditor and Subordination Agreement dated as of May 4,
1990, among the Registrant, OS Advertising Company of Texas,
Inc., Outdoor Today, Inc., National Westminster Bank USA, as
Agent, Rubin Sabin and Elaine Sabin (filed as Exhibit 10.4
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.5 -- Amended and Restated Intercreditor and Subordination
Agreement dated as of August 17, 1993, entered into between
the Registrant, Gregory Riggle, CIBC Inc. and United States
Trust Company of New York, as trustee (filed as Exhibit 10.5
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.6 -- Administrative Services Agreement dated as of June 1, 1993,
between the Registrant and Camelback Services, Inc. (filed
as Exhibit 10.6 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).*
10.7 -- Services Agreement dated as of May 1, 1993, between the
Registrant, Williams Manufacturing, Inc. and J & L
Industries, Inc. as amended by the First Amendment thereto
dated April 15, 1996, to be effective as of July 1, 1995
(filed as Exhibit 10.7 to the Registrant's Amendment No. 2
to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).*
10.8 -- Amended and Restated Incentive Plan dated effective as of
January 1, 1988, adopted by the Registrant as amended to
date (filed as Exhibit 10.8 to the Registrant's Amendment
No. 2 to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).*
10.9 -- Assets Purchase Agreement dated March 15, 1991, among the
Registrant, Naegele Outdoor Advertising, Inc., OS
Advertising Company of Georgia, Inc., and Morris
Communications Corporation, as amended by the First
Amendment to Assets Purchase Agreement dated as of December
23, 1991, among the Registrant, Naegele Outdoor Advertising,
Inc., OS Advertising Company of Georgia, Inc., Morris
Communications Corporation, and OS Advertising Company of
Kentucky, Inc. (filed as Exhibit 10.17 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
67
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.10 -- Agreement and grant of Option dated as of April 3, 1989,
between the Registrant and Arthur Moreno, as amended by the
First Amendment to Agreement and Grant of Option dated as of
January 1, 1991 (filed as Exhibit 10.23 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).*
10.10.1 -- Letter Agreement between Registrant and Arte Moreno
regarding Agreement and Grant of Option dated as of April 3,
1989, and First Amendment to Agreement and Grant of Option
dated as of January 1, 1991 (filed as Exhibit 10.10.1 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).*
10.11 -- Option Agreement dated as of January 1, 1991, between the
Registrant and Wally Kelly (filed as Exhibit 10.24 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).*
10.12 -- Senior Note Intercreditor Agreement dated as of August 17,
1993, entered into among TCW Special Placements Fund II, TCW
Capital, acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and United
States Trust Company of New York as trustee (filed as
Exhibit 10.26 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).
10.13 -- Bank Intercreditor Agreement dated as of August 17, 1993,
entered into among TCW Special Placements Fund II, TCW
Capital acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and CIBC
Inc. as agent (filed as Exhibit 10.26 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.14 -- Option Purchase Agreement among the Registrant and OS
Advertising Company of Georgia, Inc. and Capitol Outdoor
Acquisition Co., Inc. and Capitol Outdoor Leasing Co., Inc.,
dated as of July 27, 1994, as amended by the First Amendment
to Option Purchase Agreement dated as of December 14, 1994
(filed as Exhibit 1 to the Registrant's Current Report on
Form 8-K dated December 19, 1994 and incorporated herein by
reference).
10.15 -- Asset Purchase Agreement between the Registrant and Eller
Outdoor Advertising Company of Atlanta, dated November 21,
1994 (filed as Exhibit 2 to the Registrant's Current Report
on Form 8-K dated December 19, 1994 and incorporated herein
by reference).
10.16 -- The Registrant's 1996 Omnibus Plan (filed as Exhibit 10.16
to the Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).*
10.17 -- Form of Incentive Stock Option Grant to be awarded to each
of Wally C. Kelly and Bill M. Beverage pursuant to the terms
of the Registrant's 1996 Omnibus Plan (filed as Exhibit
10.17 to the Registrant's Amendment No. 2 to Form S-1
Registration Statement No. 333-1582 and incorporated herein
by reference).*
10.18 -- Form of Stock Option Grant to be awarded to each of Arte
Moreno, Wally C. Kelly and Bill M. Beverage pursuant to the
terms of the Registrant's 1996 Omnibus Plan (filed as
Exhibit 10.18 to the Registrant's Amendment No. 2 to Form
S-1 Registration Statement No. 333-1582 and incorporated
herein by reference).*
10.19 -- Form of Incentive Plan Settlement Participant Election
Agreement to be entered into by each of Wally C. Kelly and
Bill M. Beverage pursuant to the conversion of interests in
the Incentive Plan (filed as Exhibit 10.19 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).*
10.20 -- Asset Purchase Agreement dated July 9, 1996, by and between
the Registrant and Gannett Co., Inc., together with the
Promissory Note and related Guaranty. The Exhibit contains a
list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant
agrees to furnish supplementally a copy of any omitted
Schedule or Exhibit to the Commission upon request (filed as
Exhibit 99.1 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
68
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.21 -- Amendment No. 1 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 12, 1996 (filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.22 -- Amendment No. 2 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 19, 1996 (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.23 -- Form of Option by Gannett Outdoor Co. of Texas, Inc., in
favor of the Registrant together with the form of Asset
Purchase Agreement by and between the Registrant and Gannett
Outdoor Co. of Texas, Inc. (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
10.24 -- Senior Subordinated Credit Agreement dated July 9, 1996, by
and among the Registrant, the guarantors named therein, the
lenders named therein, and Canadian Imperial Bank of
Commerce together with the forms of Bridge Note and Term
Note. The Exhibit contains a list briefly identifying the
contents of Schedules and Exhibits, some of which have been
omitted. The Registrant agrees to furnish supplementally a
copy of any omitted Schedule or Exhibit to the Commission
upon request (filed as Exhibit 99.4 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.25 -- Form of Indenture by and among the Registrant, the
subsidiary guarantors named therein, and a trustee to be
selected by the Registrant (filed as Exhibit 99.5 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
10.26 -- First Supplemental Indenture dated as of August 22, 1996, by
and between the Registrant and United States Trust Company
of New York (filed as Exhibit 99.5 to the Registrant's
Current Report on Form 8-K dated August 27, 1996 and
incorporated herein by reference).
10.27 -- Securities Purchase Agreement dated July 9, 1996, by and
between the Registrant and CIBC WG Argosy Merchant Fund 2,
L.L.C. The Exhibit contains a list briefly identifying the
contents of Schedules and Exhibits which have been omitted.
The Registrant agrees to furnish supplementally a copy of
any omitted Schedule or Exhibit to the Commission upon
request (filed as Exhibit 99.6 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.28 -- Form of Certificate of Designations of Senior Increasing
Rate Cumulative Preferred Stock, Series A (filed as Exhibit
99.7 to the Registrant's Current Report on Form 8-K dated
July 10, 1996 and incorporated herein by reference).
10.29 -- Form of Warrant Agreement by and between the Registrant and
a Warrant Agent to be selected by the Registrant (filed as
Exhibit 99.8 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
10.30 -- Form of Registration Rights Agreement by and among the
Registrant, the guarantors names therein, and the holders
name therein (filed as Exhibit 99.9 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.31 -- Form of Common Stock Registration Rights Agreement by and
between the Registrant and CIBC WG Argosy Merchant Form 2,
L.L.C. (filed as Exhibit 99.10 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.32 -- Underwriting Agreement dated August 19, 1996 by and among
the Registrant and Alex. Brown & Sons Incorporated, CIBC
Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette
Securities Corporation (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.33 -- Asset Purchase Agreement between RailCom, Ltd. and the
Registrant dated May 8, 1996 (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
69
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.34 -- Purchase and Sales Agreement Between CSX Realty Development
Corporation, The Three Rivers Railway Company, The Atlantic
Land and Improvement Company, Winston-Salem Southbound
Railway Company, Gainesville Midland Railroad Company, and
Richmond, Fredericksburg and Potomac Railway Company and
RailCom, Ltd. dated January 23, 1996, as amended March 29,
1996, and May 21, 1996 (filed as Exhibit 2.2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
10.35 -- Amendment to Purchase Agreement, dated March 29, 1996 (filed
as Exhibit 2.2.2 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
10.36 -- Second Amendment to Purchase Agreement dated May 21, 1996
(filed as Exhibit 2.2.3 to the Registrant's Current Report
on Form 8-K dated May 22, 1996 and incorporated herein by
reference).
10.37 -- Grant of Easement and Agreement dated May 21, 1996 (filed as
Exhibit 2.3 to the Registrant's Current Report on Form 8-K
dated May 22, 1996 and incorporated herein by reference).
10.38 -- Assignment of License Agreements, dated May 21, 1996 (filed
as Exhibit 2.4 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
10.39 -- Assignment and Assumption Agreement dated May 22, 1996
(filed as Exhibit 2.5 to the Registrant's Current Report on
Form 8-K dated May 22, 1996 and incorporated herein by
reference).
10.41 -- Underwriting Agreement dated October 9, 1996 by and among
the Registrant, its United States subsidiaries, CIBC Wood
Gundy Securities Corp. and Alex. Brown & Sons Incorporated
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated October 9, 1996 and incorporated herein by
reference).
10.42 -- Agreement of Purchase and Sale dated April 30, 1997 by and
between the Registrant and Minnesota Mining and
Manufacturing Company. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.1 to the
Registrant's Form S-3 Registration Statement (Reg. No. 333-
26407) and incorporated herein by reference).
10.43 -- Stock Purchase Agreement dated April 11, 1997 by and among
the Registrant, Van Wagner Communications, Inc., Richard M.
Schaps and Jason Perline. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule or
Exhibit to the Commission upon request (filed as Exhibit
99.2 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.44 -- Signboard Easements Sale Agreement dated March 21, 1997
between the Registrant and the Burlington Northern and Santa
Fe Railway Company. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.3 to the
Registrant's Form S-3 Registration Statement (Reg. No.
333-26407) and incorporated herein by reference).
10.45 -- Asset Purchase Agreement dated as of February 24, 1997 by
and between the Registrant and GRTP, Ltd. The Exhibit
contains a list briefly identifying the contents of
Schedules and Exhibits, some of which have been omitted. The
Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request
(filed as Exhibit 99.4 to the Registrant's Form S-3
Registration Statement (Reg. No. 333-26407) and incorporated
herein by reference).
70
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.46 -- Joint Venture Asset Purchase Agreement dated as of February
28, 1997 by and between the Registrant and Reynolds/Tower
Outdoor Sign Joint Venture. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant agrees to
furnish supplementally a copy of any omitted Schedule or
Exhibit to the Commission upon request (filed as Exhibit
99.5 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.47 -- Joint Venture Asset Purchase Agreement dated as of February
28, 1997 by and between the Registrant and Reynolds/McCrary
Joint Venture. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.6 to the
Registrant's Form S-3 Registration Statement (Reg. No. 333-
26407) and incorporated herein by reference).
10.48 -- Joint Venture Asset Purchase Agreement dated as of February
28, 1997 by and between the Registrant and RV Outdoor Sign
Joint Venture. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant Agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 99.7 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
10.49 -- Asset Purchase Agreement dated as of January 21, 1997 by and
among the Registrant and Scadron Enterprises, Robert B.
Scadron, Jeffrey Scadron and Barry Scadron. The Exhibit
contains a list briefly identifying the contents of
Schedules and Exhibits, some of which have been omitted. The
Registrant Agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request
(filed as Exhibit 99.8 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 333-26407) and incorporated
herein by reference).
10.50 -- Asset Purchase Agreement dated as of December 27, 1996 by
and among the Registrant, Villepigue Outdoor Advertising
Corporation, Villepigue International Advertising, Inc.,
S.B. Properties, Inc., Third & Eighth Realty Corp. and
Mobile Outdoor Media, Inc. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant Agrees to
furnish supplementally a copy of any omitted Schedule or
Exhibit to the Commission upon request (filed as Exhibit
99.9 to the Registrant's Registration Statement on Form S-3
(Reg. No. 333-26407) and incorporated herein by reference).
10.51 -- Amendment dated as of March 12, 1997 to the Fourth amended
and Restated Credit Agreement dated as of October 22, 1996,
among the Registrant, Mediacom Inc., the several banks and
other financial institutions parties thereto and Canadian
Imperial Bank of Commerce as administrative agent (filed as
Exhibit 99.10 to the Registrant's Registration Statement on
Form S-3 (Reg. No. 333-26407) and incorporated herein by
reference).
10.52 -- Second Amendment dated as of May 9, 1997 to the Fourth
Amended and Restated Credit Agreement dated as of October
22, 1996, as amended, among the Registrant, Mediacom Inc.,
the several banks and other financial institutions parties
thereto and Canadian Imperial Bank of Commerce as
administrative agent (filed as Exhibit 99.11 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
10.53 -- Amendment No. 1 dated as of May 22, 1997 to Stock Purchase
Agreement dated April 11, 1997 by and among Richard M.
Schaps, Jason Perline, Van Wagner Communications, Inc. and
the Registrant (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K dated May 28, 1997 and
incorporated herein by reference).
10.54 -- Underwriting Agreement dated May 22, 1997 by and among the
Registrant, the selling stockholders named therein, Alex.
Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, CIBC Wood Gundy Securities Corp.,
Montgomery Securities and Prudential Securities Corporation
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated May 28, 1997 and incorporated herein by
reference).
71
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.55 -- Amendment No. 1 dated June 2, 1997 to Underwriting Agreement
dated May 22, 1997 by and among the Registrant, the selling
stockholders named therein, Alex. Brown & Sons Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, CIBC
Wood Gundy Securities Corp., Montgomery Securities and
Prudential Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated June 4,
1997 and incorporated herein by reference).
10.56 -- Purchase Agreement dated June 17, 1997 among the Registrant,
its United States subsidiaries, CIBC Wood Gundy Securities
Corp., Alex. Brown & Sons Incorporated and Donaldson, Lufkin
& Jenrette Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Registration Statement on Form S-4 (Reg.
No. 333-30957) and incorporated herein by reference).
10.57 -- Registration Rights Agreement dated June 17, 1997 among the
Registrant, the Guarantors named therein, CIBC Wood Gundy
Securities Corp., Alex. Brown & Sons Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation (filed
as Exhibit 99.2 to the Registrant's Registration Statement
on Form S-4 (Reg. No. 333-30957) and incorporated herein by
reference).
10.58 -- Asset Purchase Agreement dated August 15, 1997, by and
between the Registrant and The Lamar Corporation (filed as
Exhibit 99.2 to the Registrant's Current Report on Form 8-K
dated August 29, 1997 and incorporated herein by reference).
10.59 -- Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom Inc., the
several lenders parties thereto and Canadian Imperial Bank
of Commerce, as agent (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 29,
1997 and incorporated herein by reference).
10.60 -- 1966 Non-Employee Director Stock Option Plan (filed as
Exhibit 99.3 to the Registrant's Registration Statement on
Form S-8 (Reg. No. 333-38589) and incorporated herein by
reference).*
10.61 -- Stock Purchase Agreement dated November 7, 1997 among the
Registrant, Salm Enterprises, Inc., Joslyn Stuart and
Hillary Salm. The Exhibit contains a list briefly
identifying the contents of Schedules and Exhibits, some of
which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to
the Commission upon request (filed as Exhibit 10.61 to the
Registrant's Annual Report on Form 10-K, as filed with the
Commission on March 19, 1998, and incorporated herein by
reference).
10.62 -- Asset Purchase Agreement dated November 25, 1997 by and
between the Registrant and Outdoor Media Group, Inc. The
Exhibit contains a list briefly identifying the contents of
Schedules and Exhibits, some of which have been omitted. The
Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request
(filed as Exhibit 10.62 to the Registrant's Annual Report on
Form 10-K, as filed with the Commission on March 19, 1998,
and incorporated herein by reference).
10.63 -- Incentive Bonus Plan for the Chief Executive Officer (filed
as Annex A to the Registrant's Proxy Statement dated April
30, 1997, and incorporated herein by reference).*
10.64 -- Amendment dated as of March 17, 1998, to the Fifth Amended
and Restated Credit Agreement dated as of August 15, 1997,
among the Registrant, Mediacom, Inc., the several banks and
other financial institutions parties thereto and Canadian
Imperial Bank of Commerce, as administrative agent (filed as
Exhibit 99.1 to the Registrant's Quarterly Report on Form
10-Q, as filed with the Commission on May 11, 1998, and
incorporated herein by reference).
10.65 -- Asset Purchase Agreement dated as of April 8, 1998, by and
among the Registrant, the Barbara Shop, Inc. d/b/a
Philadelphia Outdoor and Leslie Kaplan. The Exhibit contains
a list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant
agrees to furnish supplementally a copy of any omitted
Schedule or Exhibit to the Commission upon request (filed as
Exhibit 99.2 to the Registrant's Quarterly Report on Form
10-Q, as filed with the Commission on May 11, 1998, and
incorporated herein by reference).
72
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.66 -- Assumption and Amendment Agreement dated as of April 15,
1998, made by Salm Enterprises, Inc. and Atlantic Prospect,
Inc. in favor of Canadian Imperial Bank of Commerce, as
administrative agent (filed as Exhibit 99.3 to the
Registrant's Quarterly Report on Form 10-Q, as filed with
the Commission on May 11, 1998, and incorporated herein by
reference).
10.67 -- Agreement and Plan of Merger dated as of May 19, 1998, by
and among the Registrant, Gator Outdoor Advertising, Inc.,
GATOA, Inc., and Peter D. Sleiman, Anthony T. Sleiman,
Joseph E. Sleiman and Eli T. Sleiman, Jr. (filed as Exhibit
99.1 to the Registrant's Registration Statement on Form S-3
(Reg. No. 333-53113) and incorporated herein by reference).
10.68 -- Asset Purchase and Assignment Agreement dated June 4, 1998,
among the Registrant, Vendor S.A. de C.V., Outdoor Systems
Mexico, S.A. de C.V., Promoindustrias Metropolitanas, S.A.
de C.V., Televisa, S.A. de C.V., and Francisco A. Gonzales
Sanchez (filed as Exhibit 99.1 to the Registrant's Current
Report on Form 8-K dated July 16, 1998 and incorporated
herein by reference).
10.69 -- Stock Purchase Agreement dated July 1, 1998, between Vendor
S.A. de C.V. and Outdoor Systems Mexico, S.A. de C.V. (filed
as Exhibit 99.2 to the Registrant's Current Report on Form
8-K dated July 16, 1998 and incorporated herein by
reference).
10.70 -- Asset Purchase and Assignment Agreement dated June 4, 1998,
among the Registrant, Multimedios Estrellas de Oro, S.A. de
C.V., MM Billboard, S.A. de C.V., Outdoor Systems Mexico,
S.A. de C.V. and Francisco A. Gonzales Sanchez (filed as
Exhibit 99.3 to the Registrant's Current Report on Form 8-K
dated July 16, 1998 and incorporated herein by reference).
10.71 -- Amendment and Consent, dated as of June 18, 1998, to the
Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom, Inc., the
several banks and other financial institutions from time to
time parties thereto and Canadian Imperial Bank of Commerce,
as administrative agent.
10.72 -- Third Amendment, dated as of November 4, 1998, to the Fifth
Amended and Restated Credit Agreement, dated as of August
15, 1997, among the Registrant, Mediacom, Inc., the several
banks and other financial institutions from time to time
parties thereto and Canadian Imperial Bank of Commerce, as
administrative agent.
10.73 -- Fourth Amendment, dated as of December 15, 1998, to the
Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom, Inc., the
several banks and other financial institutions from time to
time parties thereto and Canadian Imperial Bank of Commerce,
as administrative agent.
10.74 -- Fifth Amendment, dated as of February 3, 1999, to the Fifth
Amended and Restated Credit Agreement, dated as of August
15, 1997, among the Registrant, Mediacom, Inc., the several
banks and other financial institutions from time to time
parties thereto and Canadian Imperial Bank of Commerce, as
administrative agent.
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Deloitte & Touche LLP
27 -- Financial Data Schedule
- ---------------
* Indicates management contract or compensatory plan or arrangement.