<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 1999
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Commission File No. 333-3338
Minnesota 41-1540241
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
____________________
ADAMS OUTDOOR ADVERTISING, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 333-3338-01
Minnesota 41-1540245
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1380 West Paces Ferry Road, N.W.
Suite 170, South Wing
Atlanta, GA 30327
(Address of principal executive offices)
(404) 233-1366
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None.
Securities Registered Pursuant to Section 12(g) of the Act:
10 3/4% Senior Notes Due 2006
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. (Applicable only to Adams
Outdoor Advertising, Inc.)
Class Outstanding as of November 12, 1999
- ----- -----------------------------------
Common Stock,
$.001 par value 10,000
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
ADAMS OUTDOOR ADVERTISING, INC.
Securities and Exchange Commission Form 10-Q
for the Third Quarter Ended September 30, 1999
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets of Adams Outdoor
Advertising Limited Partnership as of
September 30, 1999 (unaudited) and December 31, 1998......... 1
Consolidated Statements of Operations of
Adams Outdoor Advertising Limited Partnership
for the quarters and nine months ended September 30, 1999
and 1998 (unaudited)......................................... 2
Consolidated Statements of Cash Flows of
Adams Outdoor Advertising Limited Partnership
for the nine months ended September 30, 1999
and 1998 (unaudited)......................................... 3
Notes to Interim Consolidated Financial Statements of
Adams Outdoor Advertising Limited Partnership (unaudited).... 4
Balance Sheets of Adams Outdoor
Advertising, Inc. as of September 30, 1999 (unaudited)
and December 31, 1998........................................ 5
Statements of Operations of
Adams Outdoor Advertising, Inc. for the quarters and
nine months ended September 30, 1999 and 1998 (unaudited).... 6
Statements of Cash Flows of
Adams Outdoor Advertising, Inc. for the
nine months ended September 30, 1999 and 1998 (unaudited).... 7
Notes to Interim Financial Statements of
Adams Outdoor Advertising, Inc. (unaudited).................. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 9
i
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 15
Item 2. Changes in Securities................................ 15
Item 3. Defaults Upon Senior Securities...................... 15
Item 4. Submission of Matters to a Vote of Security Holders.. 15
Item 5. Other Information.................................... 15
Item 6. Exhibits and Reports on Form 8-K..................... 15
SIGNATURES......................................................... 16
ii
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30,
1999 December 31,
ASSETS (unaudited) 1998
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,369 $ 1,687
Investments 2,742 1,879
Accounts receivable, less allowance for doubtful accounts of $1,136 and $648
at September 30, 1999 and December 31, 1998, respectively 9,985 8,424
Receivables from related parties 72 129
Inventories 63 69
Prepaid rent 3,221 2,826
Prepaid expenses 774 647
-------- ---------
Total current assets 20,226 15,661
Property, plant and equipment, net 55,901 53,350
Intangible assets, net 8,198 9,108
Other assets 218 74
-------- ---------
$ 84,543 $ 78,193
======== =========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable $ 625 $ 558
Interest payable 740 3,606
Accrued expenses and other liabilities 2,868 2,583
Deferred compensation 738 4,108
-------- ---------
Total current liabilities 4,971 10,855
Long-term debt 126,297 132,728
Advances from AOA Holding, Inc. 14,183 0
Deferred compensation 5,163 4,057
-------- ---------
Total liabilities 150,614 147,640
Commitments and contingencies
Partners' equity (deficit):
General partners' deficit (67,829) (67,829)
Limited partners' equity (deficit) 1,758 (1,618)
-------- ---------
Total partners' deficit (66,071) (69,447)
-------- ---------
$ 84,543 $ 78,193
======== =========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
1
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION> Quarter Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Gross Revenues $ 20,226 $ 19,083 $ 56,152 $ 53,447
Less agency commissions 1,858 1,942 5,122 5,335
-------- -------- -------- --------
Net outdoor advertising revenue 18,368 17,141 51,030 48,112
Operating expenses:
Direct advertising expenses 8,499 8,226 24,774 23,593
Corporate general and administrative 946 1,067 2,244 3,177
Depreciation and amortization 1,403 2,084 5,152 6,217
Deferred compensation 360 203 1,230 533
-------- -------- -------- --------
Total operating expenses 11,208 11,580 33,400 33,520
-------- -------- -------- --------
Operating income 7,160 5,561 17,630 14,592
-------- -------- -------- --------
Other expenses (income):
Interest expense 3,248 3,568 10,113 10,859
Interest expense - related parties 0 1 0 15
Payments to partners 0 0 2,500 0
Other expenses (income), net 4 (6) (10) 56
(Gain) loss on disposals of property, plant
and equipment, net (63) 81 (42) 100
-------- -------- -------- --------
Total other expenses 3,189 3,644 12,561 11,030
-------- -------- -------- --------
Income before extraordinary loss
on early extinguishment of debt 3,971 1,917 5,069 3,562
Extraordinary loss on early extinguishment
of debt (194) (330) (194) (330)
-------- -------- -------- --------
Net income $ 3,777 $ 1,587 $ 4,875 $ 3,232
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
2
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 4,875 $ 3,232
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 4,559 5,587
Amortization of intangible assets 1,009 1,020
Deferred compensation expense 1,230 533
Payments of deferred compensation (4,044) (1,262)
Barter loss (income) 27 (40)
(Gain) loss on disposals of property, plant and
equipment, net (42) 100
Purchases of investments (598) (95)
Extraordinary loss 194 330
Changes in assets and liabilities:
Increase in accounts receivable, net (1,504) (1,841)
Decrease in inventories 6 20
Increase in prepaid rent and other prepaid expenses (522) (310)
(Increase) decrease in other assets (144) 223
Increase in accounts payable and accrued expenses 527 83
Decrease in interest payable (2,866) (3,157)
Decrease in other liabilities - long term - -
-------- --------
Net cash provided by operating activities 2,707 4,423
Cash flows from investing activities:
Additions to property, plant and equipment (7,055) (8,191)
Proceeds from sale of property, plant
and equipment 71 343
-------- --------
Net cash used in investing activities (6,984) (7,848)
Cash flows from financing activities:
Debt financing costs (99) (68)
Debt premium (194) -
Payments on revolving line of credit (27,119) (15,944)
Advances on revolving line of credit 20,688 19,910
Advances from parent company, net 14,183 -
Premium on Senior Notes redemption - (198)
Distributions to partners (1,500) (546)
-------- --------
Net cash provided by financing activities 5,959 3,154
-------- --------
Net increase (decrease) in cash and cash equivalents 1,682 (271)
Cash and cash equivalents at beginning of period 1,687 3,121
-------- --------
Cash and cash equivalents at end of period $ 3,369 $ 2,850
======== ========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
3
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements included herein
have been prepared by Adams Outdoor Advertising Limited Partnership (the
"Company") in accordance with the instructions for Form 10-Q and therefore, do
not include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of management,
all adjustments, which consist of normal recurring accruals necessary for a fair
presentation of the information for the periods described, have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been considered or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
consolidated financial statements be read in conjunction with the Company's 1998
Annual Report on Form 10-K. Certain reclassifications have been made to prior
year amounts to conform with the current year presentation.
(2) Reorganization and Offering
In May 1999, the Partnerships' majority partner contributed his direct and
indirect interests in the Company and Adams Outdoor Advertising Inc. to a newly
formed Limited Liability Company, AOA Holding LLC ("AOA Holding".) Following the
reorganization, AOA Holding and its 100% owned subsidiary, AOA Capital Corp.,
issued $50 million of 10 3/8% Senior Notes due 2006. The net proceeds from the
offering were used by AOA Holding to make a distribution to its sole member, to
repay $13.5 million of indebtedness of the Company, and to make a $2.5 million
payment to the minority limited partner. Amounts loaned to the Company are non-
interest bearing and are reflected as Advances from AOA Holding LLC in the
accompanying consolidated balance sheets.
In connection with the reorganization, the partnership agreement was amended to
provide that the limited partnership interest of AOA Holding LLC become a
"priority" interest whereby all limited partner distributions (other than
permitted tax distributions) will be made only to AOA Holding until the notes
are paid in full. In recognition of the change in the partnership agreement,
the company paid to the minority limited partners approximately $2.5 million,
which has been reflected as Other Expense in the accompanying consolidated
statements of operations.
4
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
BALANCE SHEETS
<TABLE>
<S> <C> <C>
September 30,
1999 December 31,
ASSETS (Unaudited) 1998
--------------- ------------
Investment............................................................ $ 40 $ 40
===== =====
STOCKHOLDER'S EQUITY
Preferred stock, $0.001 par value
Authorized 800,000 shares; no shares issued and outstanding.... $ --- $ ---
Common stock, $0.001 par value
Authorized 200,000 shares; 10,000 shares issued and outstanding.... 100 100
Additional paid-in capital............................................ 900 900
Common stock subscribed............................................... <960> <960>
----- -----
$ 40 $ 40
===== =====
</TABLE>
See accompanying notes to unaudited interim financial statements
5
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Quarter Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues................................................. $ --- $ --- $ --- $ ---
Expenses................................................. --- --- --- ---
----- ----- ----- -----
Net income............................................... $ --- $ --- $ --- $ ---
===== ===== ===== =====
</TABLE>
See accompanying notes to unaudited interim financial statements
6
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Nine Months Ended
September 30,
------------------------
1999 1998
----- ----
<S> <C> <C>
Cash flows from operating activities............................................ $ --- $ ---
Cash flows from investing activities............................................ --- ---
Cash flows from financing activities............................................ --- ---
---------- ----------
Net change in cash........................................................ --- ---
Cash at beginning of period..................................................... --- ---
---------- ----------
Cash at end of period........................................................... $ --- $ ---
========== ==========
</TABLE>
See accompanying notes to unaudited interim financial statements
7
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited financial statements included herein have been
prepared by Adams Outdoor Advertising, Inc. ("AOAI") in accordance with the
instructions for Form 10-Q and, therefore, do not include all information and
footnotes necessary for a fair presentation of financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. However, in the opinion of management, all adjustments, which
consist of normal recurring accruals necessary for a fair presentation of the
information for the periods described, have been made. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been considered or
omitted pursuant to such rules and regulations. Although AOAI believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these financial statements be read in conjunction with AOAI's
1998 Annual Report on Form 10-K.
(2) Reorganization and Offering
In May 1999, the Partnerships' majority partner contributed his direct and
indirect interests in Adams Outdoor Advertising Limited Partnership ("AOALP")
and AOAI to a newly formed Limited Liability Company, AOA Holding LLC ("AOA
Holding".) Following the reorganization, AOA Holding and its 100% owned
subsidiary AOA Capital Corp. issued $50 million of 10 3/8% Senior Notes due
2006. The net proceeds from the offering were used by AOA Holding to make a
distribution to its sole member, to repay $13.5 million of indebtedness of
AOALP, and to make a $2.5 million payment to the minority limited partner.
In connection with the reorganization, the partnership agreement was amended to
provide that the limited partnership interest of AOA Holding LLC become a
"priority" interest whereby all limited partner distributions (other than
permitted tax distributions) will be made only to AOA Holding until the notes
are paid in full. In recognition of the change in the partnership agreement,
the company paid to the minority limited partners approximately $2.5 million.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for its interests and activities as managing general partner of Adams
Outdoor Advertising Limited Partnership (the "Company"), Adams Outdoor
Advertising, Inc. ("AOAI") has nominal assets and does not conduct any
operations. Accordingly, the following "Management's Discussion and Analysis of
Financial Condition and Results of Operations" relate to the Company and the
consolidated financial statements of the Company included in this filing.
Certain matters discussed in this Quarterly Report on Form 10-Q are "forward-
looking statements" intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements can generally be identified as such because the
context of the statement will include forward-looking terminology such as
"believes," "anticipates," "expects," "would," "estimate," "continue," or the
negative thereof or variations thereon or comparable terminology. Similarly,
statements that describe the Company's future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those anticipated as of the date of this report. Certain of
such risks and uncertainties are described in close proximity to such forward-
looking statements. Other factors that could affect such results, performance
or achievement are set forth in "Risk Factors" in Amendment No. 3 to the
Company's Registration Statement on Form S-4 (Registration No. 33303338) as
updated by the Company's Annual Report on Form 10-K for the year ended December
31, 1998 including those risks to the Company presented by financial leverage,
government regulation with respect to zoning, restrictions on outdoor
advertising by the tobacco industry, competition and general economic
conditions.
Results of Operations
Quarter Ended September 30, 1999 Compared With Quarter Ended September 30, 1998
- -------------------------------------------------------------------------------
Net revenues (gross revenues net of agency commissions) for the quarter ended
September 30, 1999 of $18.4 million increased by 7.2% from $17.1 million for the
comparable period in 1998. This increase resulted from higher advertising rates
and an increase in the number of displays sold.
Direct advertising expenses for the quarter ended September 30, 1999 of $8.5
million increased by 3.3% from $8.2 million for the comparable period in 1998.
The increase was attributable to direct costs associated with increased sales
from new displays and an increase in sales commissions due to higher average
rates.
9
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Corporate, general and administrative expenses for the quarter ended September
30, 1999 of $946,000 decreased by 11.4% from $1.1 million for the comparable
period in 1998. This decrease was attributable to a decrease in professional
fees, travel expenses and costs associated with the new Company logo and
identification project in 1998.
Depreciation and amortization for the quarter ended September 30, 1999 of $1.4
million decreased by 32.7 % from $2.1 million for the comparable period in 1998.
Depreciation expense decreased due to structures which became fully depreciated
at the end of 1998.
Deferred compensation expense for the quarter ended September 30, 1999 of
$360,000 increased significantly from $203,000 for the comparable period in 1998
primarily due to increased Operating Income and vesting and the reinstatement of
the CEO into the plan.
Interest expense for the quarter ended September 30, 1999 of $3.2 million
decreased by 9.0% from $3.6 million for the third quarter of 1998. For the
quarters ended September 30, 1999 and September 30, 1998, the effective interest
rate was 10.0% on average outstanding balances of $123.8 million and $137.3
million, respectively.
During the quarter ended September 30, 1999, the Company incurred an
extraordinary loss of $194,000 on the early extinguishment of $3.3 million of
its Senior Notes.
Net income for the quarter ended September 30, 1999 increased to $3.8 million
from $1.6 million for the comparable period in 1998 as a result of the items
discussed above.
Results of Operations
Nine Months Ended September 30, 1999 Compared With Nine Months Ended September
- ------------------------------------------------------------------------------
30, 1998
- --------
Net revenues (gross revenues net of agency commissions) for the nine months
ended September 30, 1999 of $51.0 million increased by 6.1% from $48.1 million
for the comparable period in 1998. This increase resulted from higher
advertising rates and an increase in the number of displays sold.
Direct advertising expenses for the nine months ended September 30, 1999 of
$24.8 million increased by 5.0% from $23.6 million for the comparable period in
1998. The increase was attributable to direct costs associated with increased
sales from new displays and an increase in sales commissions due to higher
average rates.
Corporate, general and administrative expenses for the nine months ended
September 30, 1999 of $2.2 million decreased by 29.4% from $3.2 million for the
comparable period in 1998. This decrease was attributable to a decrease in
professional fees, travel expenses and costs associated with the new Company
logo and identification project in 1998.
10
<PAGE>
Depreciation and amortization for the nine months ended September 30, 1999 of
$5.2 million decreased by 17.1 % from $6.2 million for the comparable period in
1998. Depreciation expense decreased due to structures which became fully
depreciated at the end of 1998.
Deferred compensation expense for the nine months ended September 30, 1999 of
$1.2 million increased significantly from $533,000 for the comparable period in
1998 primarily due to increased Operating Income and vesting and the
reinstatement of the CEO into the plan.
Interest expense for the nine months ended September 30, 1999 of $10.1 million
decreased by 7.0% from $10.9 million for the comparable period in 1998. For the
nine months ended September 30, 1999 and September 30, 1998, the effective
interest rates were 10.0% and 10.2%, respectively, on average outstanding
balances of $129.7 million and $137.1 million, respectively.
During the nine months ended September 30, 1999, the Company incurred an
extraordinary loss of $194,000 on the early extinguishment of $3.3 million of
its Senior Notes.
Net income for the nine months ended September 30, 1999 increased to $4.9
million from $3.2 million for the comparable period in 1998 as a result of the
items discussed above.
Operating Cash Flow is defined as operating income (loss) before (i)
depreciation and amortization expenses and (ii) deferred compensation expense.
As a partnership, the Company is not subject to federal corporate income tax.
Operating Cash Flow is not intended to represent net cash provided by operating
activities as defined by generally accepted accounting principles and should not
be considered as an alternative to net income or loss as an indicator of the
Company's operating performance or to net cash provided by operating, investing
and financing activities as a measure of liquidity or ability to meet cash
needs. The Company believes Operating Cash Flow is a measure commonly reported
and widely used by analysts, investors and other interested parties in the media
industry. Accordingly, this information is disclosed herein to permit a more
complete comparative analysis of the Company's performance relative to other
companies in the media industry. Operating Cash Flow for the nine months ended
September 30, 1999 of $24.0 million increased by 12.5% from $21.3 million for
the comparable period in 1998. Operating Cash Flow for the quarter ended
September 30, 1999 of $8.9 million increased by 13.7% from $7.8 million for the
comparable period in 1998.
Liquidity and Capital Resources
In 1996, the Company, together with its managing general partner, AOAI, placed
$105,000,000 of their 10 3/4% Senior Notes due 2006 issued under an indenture
(the "Indenture") and entered into a Credit Facility (the "Credit Facility). As
part of the refinancing, substantially all of the Company's outstanding debt was
refinanced. As a result of the refinancing, the average maturities of the
Company's debt were extended to 2006.
Historically, the Company's cash needs have arisen from operating expenses
(primarily direct advertising expenses and corporate general and administrative
expenses), debt service, capital
11
<PAGE>
expenditures and deferred compensation payments under phantom stock agreements.
As a result of the refinancing, the Company's interest expense has increased due
to the higher weighted average interest rate.
The Company's primary sources of cash are net cash generated from operating
activities and borrowings under the Credit Facility. The Company's net cash
provided by operations decreased significantly to $2.7 million for the nine
months ended September 30, 1999 from $4.4 million for the nine months ended
September 30, 1998.
The Company expects that its capital expenditures during 1999 will be
approximately $9.0 million and will be primarily for new billboard construction
and the upgrading of existing displays. The Company made capital expenditures of
$7.1 million during the nine months ended September 30, 1999 compared to $8.2
million during the nine months ended September 30, 1998.
At September 30, 1999 and December 31, 1998, the Company's accrued liability for
deferred compensation payable under phantom stock agreements with key employees
was $3.2 million and $6.3 million, respectively, in the aggregate. The Credit
Facility and the Indenture permit the payment of the deferred compensation when
due, subject to certain annual limitations. Such payments are scheduled to be
paid during the 1998 through 2002 period. During the nine months ended
September 30, 1999, payments of deferred compensation totaled $4.0 million.
The Company has revolving credit facilities of up to $43.0 million, $35 million
secured and $8 million unsecured. At September 30, 1999, the outstanding
borrowings were $28.6 million. Substantially all of the assets of the Company
are pledged to secure indebtedness under the secured credit facility. The
agreement governing the secured credit facility contains a number of covenants
that are more restrictive than those contained in the Indenture, including
covenants requiring the Company to maintain certain financial ratios that become
more restrictive over time. Adverse operating results could cause noncompliance
with one or more of these covenants, reducing the Company's borrowing
availability and, in certain circumstances, entitling the lenders to accelerate
the maturity of outstanding borrowings.
The Company believes that net cash provided from operations and available credit
under its credit facilities will be sufficient to meet its cash needs for its
current operations, required debt payments, anticipated capital expenditures and
deferred compensation payments for the next twelve months.
Impact of Inflation
Though increases in operating costs could adversely affect the Company's
operations, management does not believe that inflation has had a material effect
on operating income during the past several years.
12
<PAGE>
Seasonality
Although revenues during the first and fourth quarter are slightly lower than
the other quarters, management does not believe that seasonality has a
significant impact on the operations or cash flow of the Company.
Information contained in this 10-Q including, without limitation, in the
foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, which can be
identified by the use of forward-looking terminology as "may," "will," "would,"
"expect," "anticipate," "estimate," or "continue" or the negative thereof or
other variations thereon or comparable terminology. Certain factors, including
financial leverage, government regulation with respect to zoning and
restrictions on outdoor advertising by the tobacco industry, competition and
general economic condition could cause actual results to differ materially from
those in such forward-looking statements.
Year 2000 Compliance
Overview
The "Year 2000 issue" is a general term used to describe the various problems
that may result from the improper processing of dates and date-sensitive
calculations by computers and other machinery as the year 2000 approaches. The
Year 2000 issue exists because many existing computer systems and software
products have been written using two digits, rather than four, to define the
applicable year, thus not properly recognizing dates after December 31, 1999.
Company's State of Readiness
The Company recognizes the need to ensure that its operations will not be
adversely impacted by Year 2000 software failures and has therefore undertaken
the project of identifying and resolving its Year 2000 issues. The Company's
assessment included both its software and hardware. The Company has identified
all significant applications that require modification to ensure Year 2000
compliance and during the second quarter of 1998, Year 2000 compliant versions
of these programs (primarily financial applications) were installed. The vendor
upgrades have been tested and certified as Year 2000 compliant by an independent
third party.
In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
The Company's principal suppliers are local power companies. However, there can
be no guarantee that the systems of other companies on which the Company's
systems rely will be timely converted, or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
not have a material adverse effect on the Company. Certain power companies may
13
<PAGE>
experience problems supplying power to us. If that occurs, our only liability
will be to issue immaterial illumination credits.
Costs to Address the Company's Year 2000 Issues
During 1998, the Company incurred approximately $150,000 in Year 2000
compliance efforts and estimates of additional costs to complete its Year 2000
compliance plan are not anticipated to be material to the Company's financial
condition or results of operations. No costs have been incurred during 1999.
Risks of the Company's Year 2000 Issues and the Company's Contingency Plans
Based on the results of its review of Year 2000 issues to date and compliance
efforts completed, the Company does not believe that the Year 2000 issue
presents a significant risk of disruption of the Company's ability to transact
business with its major customers and suppliers. Therefore, the Company does
not believe that a contingency plan to handle Year 2000 problems is necessary at
this time and has not yet developed such a plan. The Company will, however,
continue to monitor the Year 2000 issues and evaluate the need for a contingency
plan to handle the most reasonably likely worst case Year 2000 scenario.
New Accounting Standards
In September 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." In July 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of Effective Date of FASB Statement No. 133 - An Amendment to FASB
Statement No. 133. This statement delayed the effective date of SFAS No. 133
for one year and is effective for the Company beginning January 1, 2001. This
statement establishes accounting and reporting standards requiring that every
derivative instrument (including certain instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or a liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company has not yet quantified the
impact of adopting SFAS No. 133 and has not determined the timing or method of
its adoption, however it is not expected that adoption will have a material
impact on earnings.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the period covered by this Report, the constituent instruments
defining the rights of the holders of registered securities were not materially
modified, nor were the rights evidenced by the registered securities limited or
qualified by the issuance or modification of any other class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the period covered by this Report, there has been no material
default with respect to any indebtedness of the Registrants.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
(27) Financial data schedule
(b) No reports on Form 8-K have been filed during the quarter for which
the report is filed.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 12, 1999 ADAMS OUTDOOR ADVERTISING
LIMITED PARTNERSHIP
By Adams Outdoor Advertising, Inc.
Its General Partner
By /s/ J. Kevin Gleason
-------------------------------
J. Kevin Gleason
President and Chief Executive
Officer
By /s/ Abe Levine
-------------------------------
Abe Levine
Chief Financial Officer
(Principal Financial and
Accounting Officer)
ADAMS OUTDOOR ADVERTISING, INC.
By /s/ J. Kevin Gleason
-------------------------------
J. Kevin Gleason
President and Chief Executive
Officer
By /s/ Abe Levine
-------------------------------
Abe Levine
Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
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<NAME> ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
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<PERIOD-TYPE> 3-MOS
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