<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
June 30, 2000
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 August 14, 2000
----- ---------------------------------
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 Second Quarter Ended June 30, 2000
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets of Adams Outdoor
Advertising Limited Partnership as of
June 30, 2000 (unaudited) and December 31, 1999.................. 1
Consolidated Statements of Operations of
Adams Outdoor Advertising Limited Partnership
for the quarters and six months ended June 30, 2000
and 1999 (unaudited)............................................. 2
Consolidated Statements of Cash Flows of
Adams Outdoor Advertising Limited Partnership
for the six months ended June 30, 2000
and 1999 (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 June 30, 2000 (unaudited)
and December 31, 1999............................................ 6
Statements of Operations of
Adams Outdoor Advertising, Inc. for the quarters
and six months ended June 30, 2000 and 1999 (unaudited).......... 7
Statements of Cash Flows of
Adams Outdoor Advertising, Inc. for the
six months ended June 30, 2000 and 1999 (unaudited).............. 8
Notes to Interim Financial Statements of
Adams Outdoor Advertising, Inc. (unaudited)...................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... 10
i
<PAGE>
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>
June 30,
2000 December 31,
ASSETS (unaudited) 1999
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,463 $ 1,616
Investments 3,174 3,166
Accounts receivable, less allowance for doubtful accounts of
$1,296 and $1,167 at June 30, 2000 and December 31, 1999, respectively 12,978 9,017
Receivables from related parties 15 45
Inventories 522 93
Prepaid rent 3,668 2,993
Prepaid expenses 1,055 680
-------- --------
Total current assets 23,875 17,610
Property, plant and equipment, net 62,869 56,526
Intangible assets, net 45,001 7,904
Other assets - 66
-------- --------
$131,745 $ 82,106
======== ========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Bank loan $ 188 $ -
Current portion of long-term debt 1,050 -
Accounts payable 1,276 926
Interest payable 3,352 3,177
Accrued expenses and other liabilities 3,629 3,361
Deferred compensation 241 734
-------- --------
Total current liabilities 9,736 8,198
Long-term debt, less current portion 163,848 118,947
Deferred compensation 6,718 6,226
Advances from AOA Holding LLC 11,290 13,901
-------- --------
Total liabilities 191,592 147,272
Commitments and contingencies
Partners' deficit:
General partners' deficit (67,829) (67,829)
Limited partners' equity 7,982 2,663
-------- --------
Total partners' deficit (59,847) (65,166)
-------- --------
$313,745 $82,106
======== ========
</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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Gross Revenues $23,605 $19,374 $40,935 $35,926
Less agency commissions 1,995 1,761 3,447 3,264
------- ------- ------- -------
Net outdoor advertising revenue 21,610 17,613 37,488 32,662
Operating expenses:
Direct advertising expenses 10,504 8,308 18,980 16,275
Corporate general and administrative 870 704 1,575 1,298
Depreciation and amortization 1,711 1,892 3,313 3,749
Deferred compensation 360 510 720 870
------- ------- ------- -------
Total operating expenses 13,445 11,414 24,588 22,192
------- ------- ------- -------
Operating income 8,165 6,199 12,900 10,470
------- ------- ------- -------
Other expenses (income):
Interest expense 3,560 3,420 6,817 6,865
Interest expense - related parties 492 0 604 0
Payments to partners 0 2,500 0 2,500
Other expenses (income), net 53 (26) 43 (14)
Loss on disposals of property, plant
and equipment, net 49 22 48 21
------- ------- ------- -------
Total other expenses 4,154 5,916 7,512 9,372
------- ------- ------- -------
Income before taxes 4,011 283 5,388 1,098
Income tax provision 69 0 69 0
------- ------- ------- -------
Net income $ 3,942 $ 283 $ 5,319 $ 1,098
======= ======= ======= =======
</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>
Six Months Ended
June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 5,319 $ 1,098
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 3,189 3,354
Amortization of intangible assets 125 668
Deferred compensation expense 720 870
Payments of deferred compensation (683) (3,678)
Barter income (123) (55)
Loss on disposals of property, plant and
equipment, net 48 21
Purchases of investments - (380)
Changes in assets and liabilities:
Increase in accounts receivable, net (4,387) (1,527)
Increase in inventories (25) (4)
Increase in prepaid rent and other prepaid expenses (789) (336)
Increase in other assets - (2)
(Decrease) increase in accounts payable and accrued expenses (469) 160
Increase (decrease) in interest payable 176 (167)
-------- --------
Net cash provided by operating activities 3,101 22
Cash flows from investing activities:
Additions to property, plant and equipment (6,137) (4,856)
Proceeds from sale of property, plant
and equipment 490 8
Purchase of Horizon Outdoor, net of cash acquired (15,368) -
HSP purchase price adjustment (1,341) -
-------- --------
Net cash used in investing activities (22,356) (4,848)
Cash flows from financing activities:
Debt financing costs (307) (99)
Payments on long-term debt (23,260) (18,240)
Advances on revolving line of credit 46,280 9,412
(Repayments) advances from parent company, net (2,611) 16,105
Distributions to partners - (1,000)
-------- --------
Net cash provided by financing activities 20,102 6,178
-------- --------
Net increase in cash and cash equivalents 847 1,352
Cash and cash equivalents at beginning of period 1,616 1,687
-------- --------
Cash and cash equivalents at end of period $ 2,463 $ 3,039
======== ========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
3
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(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 1999
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.
(3) Acquisitions
On March 9, 2000, two indirect wholly-owned subsidiaries of the Partnership
together acquired all of the outstanding stock of HSP Graphics, a company with
which the Partnership has been doing business for a number of years. The total
purchase price was $21.0 million. Approximately $21.4 million of goodwill was
recorded as a result of this purchase, which will be amortized over a period of
20 years. The acquisition was financed by issuing Notes Payable to the former
owners, which are payable over a 1 year period.
4
<PAGE>
On June 28, 2000, the Partnership acquired all of the outstanding stock of
Horizon Outdoor, an outdoor advertising company in Charlotte, NC for $15.5
million in cash at closing and $1.5 million in cash to be paid over the next 18
months. Approximately $14.2 million of goodwill was generated as a result of
this purchase, which will be amortized over a period of 20 years. The
acquisition was financed by borrowing against the Partnership's revolving line
of credit.
The above purchase price allocations under Accounting Principles Board Opinion
No. 16, "Business Combinations", were based on preliminary information.
Subsequent adjustments may be made.
5
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
BALANCE SHEETS
<TABLE>
June 30,
2000 December 31,
ASSETS (Unaudited) 1999
----------- ------------
<S> <C> <C>
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
6
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Quarters Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues.................................................... $ -- $ -- $ -- $ --
Expenses.................................................... -- -- -- --
--------- --------- ---------- ---------
Net income.................................................. $ -- $ -- $ -- $ --
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited interim financial statements
7
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<S> <C> <C>
Six Months Ended
June 30,
-------------------------
2000 1999
---------- ----------
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
8
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
June 30, 2000
(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
1999 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.
9
<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. 333-03338) as
updated by the Company's Annual Report on Form 10-K for the year ended December
31, 1999 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 June 30, 2000 Compared With Quarter Ended June 30, 1999
---------------------------------------------------------------------
Net revenues (gross revenues net of agency commissions) for the quarter ended
June 30, 2000 of $21.6 million increased by 22.7% from $17.6 million for the
comparable period in 1999. This increase resulted from higher advertising rates
and an increase in the number of displays sold, as well as revenues generated by
HSP Graphics.
Direct advertising expenses for the quarter ended June 30, 2000 of $10.5 million
increased by 26.4% from $8.3 million for the comparable period in 1999. 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,
as well as direct advertising expenses generated by HSP Graphics.
Corporate general and administrative expenses for the quarter ended June 30,
2000 of $870,000 increased by 23.6% from $704,000 for the comparable period in
1999. This increase was attributable to an increase in travel expenses and
corporate taxes, as well as the monthly dues paid to the Outdoor Advertising
Association of America, which were expensed at the plant level during the second
quarter of 1999.
Depreciation and amortization for the quarter ended June 30, 2000 of $1.7
million decreased by 9.6 % from $1.9 million for the comparable period in 1999.
Depreciation expense decreased due to structures which became fully depreciated
at the end of 1999.
10
<PAGE>
Deferred compensation expense for the quarter ended June 30, 2000 of $360,000
decreased by 29.4% from $510,000 for the comparable period in 1999.
Interest expense for the quarter ended June 30, 2000 of $4.1 million increased
by 18.5% from $3.4 million for the second quarter of 1999. For the quarters
ended June 30, 2000 and June 30, 1999, the effective interest rates were 10.0%
and 10.2%, respectively, on average outstanding balances of $150.2 million and
$129.4 million, respectively.
Net income for the quarter ended June 30, 2000 increased to $3.9 million from
$283,000 for the comparable period in 1999 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 quarter ended June
30, 2000 of $10.2 million increased by 19.0% from $8.6 million for the
comparable period in 1999.
Results of Operations
Six Months Ended June 30, 2000 Compared With Six Months Ended June 30, 1999
---------------------------------------------------------------------------
Net revenues (gross revenues net of agency commissions) for the six months ended
June 30, 2000 of $37.5 million increased by 14.8% from $32.7 million for the
comparable period in 1999. This increase resulted from higher advertising rates
and an increase in the number of displays sold, as well as revenues generated by
HSP Graphics since the purchase date.
Direct advertising expenses for the six months ended June 30, 2000 of $19.0
million increased by 16.6% from $16.3 million for the comparable period in 1999.
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, as well as direct advertising expenses generated by HSP Graphics since
the purchase date.
Corporate general and administrative expenses for the six months ended June 30,
2000 of $1.6 million increased by 21.3% from $1.3 million for the comparable
period in 1999. This increase was attributable to an increase in travel
expenses and corporate taxes, as well as the monthly dues paid to the Outdoor
Advertising Association of America, which were expensed at the plant level
during the first six months of 1999.
Depreciation and amortization for the six months ended June 30, 2000 of $3.3
million decreased by 11.6% from $3.7 million for the comparable period in 1999.
Depreciation expense decreased due to structures which became fully depreciated
at the end of 1999.
Deferred compensation expense for the six months ended June 30, 2000 of $720,000
decreased by 17.2% from $870,000 for the comparable period in 1999.
11
<PAGE>
Interest expense for the six months ended June 30, 2000 of $7.4 million
increased by 8.1% from $6.9 million for the comparable period in 1999. For the
six months ended June 30, 2000 and June 30, 1999, the effective interest rates
were 10.1% and 10.0%, respectively, on average outstanding balances of $138.3
million and $132.6 million, respectively.
Net income for the six months ended June 30, 2000 increased to $5.3 million from
$1.1 million for the comparable period in 1999 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 six months ended
June 30, 2000 of $16.9 million increased by 12.2% from $15.1 million for the
comparable period in 1999.
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 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 increased to $3.1 million for the six months ended June
30, 2000 from $22,000 for the six months ended June 30, 1999.
The Company expects that its capital expenditures during 2000 will be
approximately $11.0 million and will be primarily for new billboard construction
and the upgrading of existing displays. The Company made capital expenditures of
$6.1 million during the six months ended June 30, 2000 compared to $4.9 million
during the six months ended June 30, 1999.
At June 30, 2000 and December 31, 1999, the Company's accrued liability for
deferred compensation payable under phantom stock agreements with key employees
was $3.8 million 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 six months ended June 30, 2000, payments of deferred
compensation totaled $730,000.
12
<PAGE>
The Company has revolving credit facilities of up to $65 million, $35 million
secured and $30 million unsecured. At June 30, 2000, the outstanding borrowings
were $56.8 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.
Acquisitions
On March 9, 2000, two indirect wholly-owned subsidiaries of the Partnership
together acquired all of the outstanding stock of HSP Graphics, a company with
which the Partnership has been doing business for a number of years. The total
purchase price was $21.0 million. Approximately $21.4 million of goodwill was
recorded as a result of this purchase, which will be amortized over a period of
20 years. The acquisition was financed by issuing Notes Payable to the former
owners, which are payable over a 1 year period.
On June 28, 2000, the Partnership acquired all of the outstanding stock of
Horizon Outdoor, an outdoor advertising company in Charlotte, NC, for $15.5
million in cash at closing and $1.5 million in cash to be paid over the next 18
months. Approximately $14.2 million of goodwill was generated as a result of
this purchase, which will be amortized over a period of 20 years. The
acquisition was financed by borrowing against the Partnership's revolving line
of credit.
The above purchase price allocations under Accounting Principles Board Opinion
No. 16, "Business Combinations", were based on preliminary information.
Subsequent adjustments may be made.
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.
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.
13
<PAGE>
Year 2000 Compliance
Overview
The "Year 2000 issue" has had no significant effect on the Company, and the
Company does not believe that a significant future impact is likely.
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: August 14, 2000 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
