<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, 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 November 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 Third Quarter Ended September 30, 2000
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets of Adams Outdoor
Advertising Limited Partnership as of
September 30, 2000 (unaudited) and December 31, 1999.................. 1
Consolidated Statements of Operations of
Adams Outdoor Advertising Limited Partnership
for the quarters and nine months ended September 30, 2000
and 1999 (unaudited).................................................. 2
Consolidated Statements of Cash Flows of
Adams Outdoor Advertising Limited Partnership
for the nine months ended September 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 September 30, 2000 (unaudited)
and December 31, 1999................................................. 6
Statements of Operations of
Adams Outdoor Advertising, Inc. for the quarters
and nine months ended September 30, 2000 and 1999 (unaudited)......... 7
Statements of Cash Flows of
Adams Outdoor Advertising, Inc. for the
nine months ended September 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
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
</TABLE>
i
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30,
2000 December 31,
ASSETS (unaudited) 1999
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,934 $ 1,616
Investments 2,937 3,166
Accounts receivable, less allowance for doubtful accounts of
$1,365 and $1,167 at September 30, 2000 and December 31,
1999, respectively 14,947 9,017
Receivables from related parties 8 45
Inventories 459 93
Prepaid rent 3,903 2,993
Prepaid expenses 850 680
-------- --------
Total current assets 25,038 17,610
Property, plant and equipment, net 61,104 56,526
Intangible assets, net 41,751 7,904
Other assets 61 66
-------- --------
$127,954 $ 82,106
======== ========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Bank loan $ 301 $ -
Current portion of long-term debt 5,136 -
Accounts payable 1,846 926
Interest payable 936 3,177
Accrued expenses and other liabilities 3,844 3,361
Deferred compensation 241 734
-------- --------
Total current liabilities 12,304 8,198
Long-term debt, less current portion 156,439 118,947
Deferred compensation 6,991 6,226
Advances from AOA Holding LLC 8,697 13,901
-------- --------
Total liabilities 184,431 147,272
Commitments and contingencies
Partners' deficit:
General partners' deficit (67,829) (67,829)
Limited partners' equity 11,352 2,663
-------- --------
Total partners' deficit (56,477) (65,166)
-------- --------
$127,954 $ 82,106
======== ========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
1
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
CONSOLIDATD STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenues $26,051 $20,226 $66,986 $56,152
Less agency commissions 2,029 1,858 5,476 5,122
-------- ---------- ----------- -----------
Net outdoor advertising revenue 24,022 18,368 61,510 51,030
Operating expenses:
Direct advertising expenses 11,849 8,499 30,829 24,774
Corporate general and administrative 807 946 2,382 2,244
Depreciation and amortization 2,434 1,403 5,747 5,152
Deferred compensation 510 360 1,230 1,230
-------- ---------- ----------- -----------
Total operating expenses 15,600 11,208 40,188 33,400
-------- ---------- ----------- -----------
Operating income 8,422 7,160 21,322 17,630
-------- ---------- ----------- -----------
Other expenses (income):
Interest expense 4,218 3,248 11,035 10,113
Interest expense - related parties 697 - 1,301 -
Payments to partners - - - 2,500
Other (income) expenses, net (19) 4 24 (10)
Loss (gain) on disposal of
property, plant and equipment, net 1 (63) 49 (42)
-------- ----------- ----------- -----------
Total other expenses 4,897 3,189 12,409 12,561
-------- ----------- ----------- -----------
Income before taxes and
extraordinary loss on early
extinguishment of debt 3,525 3,971 8,913 5,069
Extraordinary loss on early
extinguishment of debt - (194) - (194)
Income tax provision 155 - 224 -
-------- ----------- ---------- -----------
Net income $ 3,370 $ 3,777 $ 8,689 $ 4,875
======== =========== ========== ===========
</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,
2000 1999
------------------------ ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 8,689 $ 4,875
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 4,802 4,559
Amortization of intangible assets 944 1,009
Deferred compensation expense 1,230 1,230
Payments of deferred compensation (683) (4,044)
Barter (income) loss (111) 27
Loss (gain) on disposals of property, plant and
equipment, net 49 (42)
Purchases of investments - (598)
Extraordinary loss - 194
Changes in assets and liabilities:
Increase in accounts receivable, net (6,347) (1,504)
Decrease in inventories 38 6
Increase in prepaid rent and other prepaid expenses (881) (522)
Increase in other assets - (144)
Increase in accounts payable and accrued expenses 304 527
Decrease in interest payable (2,240) (2,866)
--------- --------
Net cash provided by operating activities 5,793 2,707
Cash flows from investing activities:
Additions to property, plant and equipment (5,985) (7,055)
Proceeds from sale of property, plant
and equipment 490 71
Purchase of Horizon Outdoor, net of cash acquired (15,369) -
HSP purchase price adjustment 1,668 -
--------- --------
Net cash used in investing activities (19,196) (6,984)
Cash flows from financing activities:
Debt financing costs (886) (99)
Debt premium - (194)
Payments on long- term debt (32,937) (27,119)
Advances on revolving line of credit 52,748 20,688
(Repayments) advances from parent company, net (5,205) 14,183
Distributions to partners - (1,500)
--------- --------
Net cash provided by financing activities 13,720 5,959
--------- --------
Net increase in cash and cash equivalents 318 1,682
Cash and cash equivalents at beginning of period 1,616 1,687
--------- --------
Cash and cash equivalents at end of period $ 1,934 $ 3,369
========= ========
</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, 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>
September 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)
Quarters Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues........................... $ -- $ -- $ -- $ --
Expenses........................... $ -- $ -- $ -- $ --
--------- -------- -------- --------
Net income......................... $ -- $ -- $ -- $ --
========= ======== ======== =========
See accompanying notes to unaudited interim financial statements
7
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 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............................... $ -- $ --
====== ======
See accompanying notes to unaudited interim financial statements
8
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
September 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 September 30, 2000 Compared With Quarter Ended September 30, 1999
-------------------------------------------------------------------------------
Net revenues (gross revenues net of agency commissions) for the quarter ended
September 30, 2000 of $24.0 million increased by 30.8% from $18.4 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 September 30, 2000 of $11.8
million increased by 39.4% from $8.5 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 September
30, 2000 of $807,000 decreased by 14.6% from $946,000 for the comparable period
in 1999. This decrease was attributable to a decrease in corporate taxes,
directors' fees and managers' meeting expenses for the third quarter of 2000.
Depreciation and amortization for the quarter ended September 30, 2000 of $2.4
million increased by 73.5% from $1.4 million for the comparable period in 1999.
Depreciation expense increased due to acquisitions and new builds, and
amortization expense increased due to the amortization of goodwill for HSP
Graphics and Horizon Outdoor Advertising.
10
<PAGE>
Deferred compensation expense for the quarter ended September 30, 2000 of
$510,000 increased by 41.7% from $360,000 for the comparable period in 1999.
Interest expense for the quarter ended September 30, 2000 of $4.9 million
increased by 51.3% from $3.2 million for the third quarter of 1999. For the
quarters ended September 30, 2000 and September 30, 1999, the effective interest
rates were 10.8% and 10.0%, respectively, on average outstanding balances of
$158.5 million and $123.8 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, 2000 decreased to $3.4 million
from $3.8 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 quarter ended
September 30, 2000 of $11.4 million increased by 27.4% from $8.9 million for the
comparable period in 1999.
Results of Operations
Nine Months Ended September 30, 2000 Compared With Nine Months Ended September
------------------------------------------------------------------------------
30, 1999
--------
Net revenues (gross revenues net of agency commissions) for the nine months
ended September 30, 2000 of $61.5 million increased by 20.5% from $51.0 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 nine months ended September 30, 2000 of
$30.8 million increased by 24.4% from $24.8 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 nine months ended
September 30, 2000 of $2.4 million increased by 6.1% from $2.2 million for the
comparable period in 1999. This increase was attributable to an increase in
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
nine months of 1999.
Depreciation and amortization for the nine months ended September 30, 2000 of
$5.7 million increased by 11.6% from $5.2 million for the comparable period in
1999. Depreciation expense decreased due to structures which became fully
depreciated at the end of 1999. This was offset by an increase in amortization
expense due to the amortization of goodwill for HSP Graphics and Horizon Outdoor
Advertising.
11
<PAGE>
Deferred compensation expense for the nine months ended September 30, 2000 of
$1.2 million did not change from the comparable period in 1999.
Interest expense for the nine months ended September 30, 2000 of $12.3 million
increased by 22.0% from $10.1 million for the comparable period in 1999. For
the nine months ended September 30, 2000 and September 30, 1999, the effective
interest rates were 10.3% and 10.0%, respectively, on average outstanding
balances of $145.0 million and $129.7 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, 2000 increased to $8.7
million from $4.9 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 nine months ended
September 30, 2000 of $28.3 million increased by 17.9% from $24.0 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 $5.8 million for the nine months ended
September 30, 2000 from $2.7 million for the nine months ended September 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
$6.0 million during the nine months ended September 30, 2000 compared to $7.1
million during the nine months ended September 30, 1999.
At September 30, 2000 and December 31, 1999, the Company's accrued liability for
deferred compensation payable under phantom stock agreements with key employees
was $4.3 million and $3.8
12
<PAGE>
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, 2000, payments
of deferred compensation totaled $730,000.
The Company has revolving credit facilities of up to $65 million, $35 million
secured and $30 million unsecured. At September 30, 2000, the outstanding
borrowings were $58.5 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.
13
<PAGE>
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" 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: November 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
