U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
--------------------------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE
EXCHANGE ACT
For the transition period from to
---------------- --------------------------------
Commission File Number 000-21623
OBIE MEDIA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
OREGON 93-0966515
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1010 Obie St., Eugene, Oregon 97402
- --------------------------------------------------------------------------------
(Address of principal executive offices)
541-686-8400 FAX 541-345-4339
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or 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 [ ].
As of April 1, 1997, 3,500,000 shares of the issuer's common stock were
outstanding.
This report contains 7 pages. The only exhibit is the Financial Data
Schedule.
<PAGE>
OBIE MEDIA CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
February 28, November 30,
1997 1996
--------------- ---------------
<S> <C> <C>
Current assets: (Unaudited)
Cash $ - $ 474,940
Accounts receivable, net 1,279,799 1,550,193
Deferred tax assets 643,217 709,000
Other current assets 664,007 812,450
--------------- ---------------
Total current assets 2,587,023 3,546,583
Property and equipment, net 8,701,482 8,458,014
Deferred tax assets 380,000 380,000
Other assets 294,269 147,987
--------------- ---------------
Total assets $ 11,962,774 $ 12,532,584
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 44,316 $ -
Current portion of long-term debt 813,034 743,973
Accounts payable 460,395 757,020
Accrued expenses 821,415 1,070,440
Deferred revenue 577,935 595,302
--------------- ---------------
Total current liabilities 2,717,095 3,166,735
Long-term debt, less current portion 6,351,711 6,554,587
--------------- ---------------
Total liabilities 9,068,806 9,721,322
--------------- ---------------
Minority interest in subsidiary 34,767 27,407
--------------- ---------------
Shareholders' equity:
Preferred stock, without par value, 10,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, without par value; 20,000,000 shares
authorized, 3,500,000 shares issued and outstanding 6,131,147 6,161,992
Accumulated deficit (3,271,946) (3,378,137)
--------------- ---------------
Total shareholders' equity 2,859,201 2,783,855
--------------- ---------------
Total liabilities and shareholders' equity $ 11,962,774 $ 12,532,584
=============== ===============
</TABLE>
See accompanying notes
<PAGE>
OBIE MEDIA CORPORATION
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended
February 28, February 29,
1997 1996
--------------- ---------------
<S> <C> <C>
Revenues: (Unaudited)
Outdoor advertising $ 1,264,614 $ 1,144,042
Transit advertising 1,472,891 1,175,633
Less agency commissions (212,151) (159,563)
--------------- ---------------
Net revenues 2,525,354 2,160,112
Operating expenses:
Direct advertising expenses 1,557,148 1,296,186
General and administrative 476,573 325,611
Depreciation and amortization 158,279 140,734
--------------- ---------------
Operating income 333,354 397,581
Interest expense 153,867 342,778
Minority interest in subsidiary 7,513 9,167
--------------- ---------------
Income before income taxes 171,974 45,636
Provision for income taxes (65,783) (2,282)
--------------- ---------------
Net income $ 106,191 $ 43,354
=============== ===============
Net earnings per share $ 0 .03 $ 0.02
--------------- ---------------
Weighted average number of common
shares outstanding 3,509,641 2,500,000
=============== ===============
</TABLE>
See accompanying notes
<PAGE>
OBIE MEDIA CORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
February 28, February 29,
1997 1996
--------------- ---------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 106,191 $ 43,354
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 158,279 140,734
Changes in operating assets and liabilities (225,976) (324,862)
--------------- ---------------
Net cash provided by (used in) operating activities 38,494 (140,774)
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (393,090) (148,292)
--------------- ---------------
Net cash used in investing activities (393,090) (148,292)
--------------- ---------------
Cash flows from financing activities:
Payments on long-term debt (133,815) (233,903)
Other financing activities 13,471 522,969
--------------- ---------------
Net cash provided by (used in) financing activities (120,344) 289,066
--------------- ---------------
Net increase (decrease) in cash (474,940) -0-
Cash, beginning of year 474,940 -0-
--------------- ---------------
Cash, end of quarter $ -0- $ -0-
=============== ===============
</TABLE>
See accompanying notes
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The interim financial statements have been prepared by Obie Media Corporation
(the "Company") without audit. In the opinion of management, the accompanying
unaudited financial statements contain all adjustments necessary to present
fairly the financial position of the Company as of February 28, 1997, and the
results of operations and cash flows of the Company for the three months ended
February 28, 1997 and February 29, 1996. The condensed consolidated financial
statements include the accounts of the Company and its subsidiary, and all
significant intercompany accounts and transactions have been eliminated in
consolidation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as permitted by rules and regulations of the
Securities and Exchange Commission. The organization and business of the
Company, accounting policies followed by the Company and other information are
contained in the notes to the Company's financial statements files as part of
the Company's November 30, 1996 Form 10-KSB. This quarterly report should be
read in conjunction with such annual report.
2. Long Term Borrowings
The Company's Term Loan Agreement contains certain covenants including
maintenance of a current ratio and cash flow coverage. During the quarter ended
February 28, 1997, the Company incurred a significant amount of capital
expenditures which resulted in the Company not complying with their current
ratio covenant. The Company obtained forbearance from the bank as of February
28, 1997.
3. Income Per Share
Income per common share is computed on the weighted average number of common
shares outstanding during the period after consideration of the dilutive effect
of stock options.
<TABLE>
<CAPTION>
<S> <C> <C>
February 28, 1997 February 29, 1996
Issued and outstanding shares (weighted average) 3,500,000 2,500,000
Stock Options 9,641 -
--------- ---------
3,509,641 2,500,000
========= =========
</TABLE>
4. Newly Issued Financial Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") NO. 128, "Earnings Per Share." This
standard revises the disclosure requirements of earnings per share, simplifies
the computation of earnings per share and increases the comparability of
earnings per share on an international basis. SFAS No. 128 will be effective for
the Company for the year ending November 30, 1998. The earnings per share under
the new standard do not differ from those calculated under the existing
standard.
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements included elsewhere in this Form 10-QSB. The following discussion
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
forward-looking statements. Factors that could cause or contribute to such
differences include the following: a decline in the demand for advertising in
the areas where the Company conducts its business; a deterioration of business
conditions generally in such areas; slower than expected acceptance of the
Company's unique display products; competitive factors, including increased
competition and price pressures; changes in regulatory or other external
factors; and other factors listed from time to time in the Company's SEC
reports, including but not limited to, its "Risk Factors" discussion in the
Registration Statement it filed in connection with its initial public offering
(the "IPO").
New Transit Contracts
The Company is the apparent high bidder on two additional transit district
contracts: Dallas, Texas (DART), and Sacramento, California (RT). The DART
system has approximately 800 vehicles, while RT has 250. The Company has, for
the last two years, provided advertising services for the 32 RT light rail
vehicles only.
The Company expects its contract with RT to start in April 1997. The contract is
expected to be for three years with two additional years at the unilateral
discretion of RT. The contract will provide for RT to receive 51% of revenue
from the sale of advertising or a guaranteed minimum. Under the contract, RT
will receive a minimum of $1.7 million over the five years.
The Company expects its contract with DART to begin in the summer of 1997. The
contract is expected to continue through calendar year 2001. The Company will
pay DART approximately $13 million over the term of the contract. After the
Company was announced as the apparent high bidder for the DART contract, the
incumbent provider protested the anticipated award to the Company. This protest
was denied by DART. A motion to reconsider the denial of the protest was also
denied by DART. The incumbent has filed a final administrative appeal which has
been submitted to an administrative judge. The Company is incurring costs, both
to participate in the appeal process and to be ready to commence operations in
Dallas once the appeal process is complete. The Company is optimistic that the
appeal will ultimately be denied.
In addition to these two transit district contracts, on April 1, 1997, the
Company began providing advertising services on 80 paratransit vehicles in
Sacramento, California. From the revenues the Company generates from customers
advertising on the paratransit vehicles, the Company will pay the private owner
of the vehicles 51 percent of such revenues over $100,000, with a minimum
guarantee of $75,000 payable over the three-year term of the contract.
Results of operations
(all dollars in $000 except per share amounts)
Net revenues increased 17% from $2,160, for the three-month period ended
February 29, 1996, to $2,525 for the three-month period ended February 28, 1997
due to higher rates and increased occupancy. Gross transit revenues increased
approximately 25% from $1,176 in 1996, to $1,473 in 1997, while gross outdoor
advertising revenues increased 11% from $1,144 in 1996 to $1,265 in 1997. Agency
discounts increased 33% from $160 to $212 in the first quarter of 1996 and 1997,
respectively, reflecting a temporary sales mix change toward more agency
business primarily in transit. Net revenues in most districts increased;
however, net revenue in Portland, Oregon was substantially the same in the first
quarter of 1997 as compared to same period of 1996.
Direct advertising expenses increased 20% to $1,557 for the first quarter of
1997, from $1,296 in the comparable period in 1996, primarily due to increased
revenues.
<PAGE>
General and administrative costs increased 46% to $477 in the first quarter of
1997 from $326 in the comparable period in 1996. Increased G&A costs are
primarily due to increased payroll and other costs of the Company's growth and
the costs of being a public company. In addition, in the first quarter of 1996,
the Company was part of a larger consolidated group of companies, and,
accordingly, a portion of the Company's general and administrative costs were
paid by affiliates in the first quarter of 1996. For the remainder of 1997, G&A
costs, except for direct costs of developing new markets, should stabilize in
absolute terms and decline as a percentage of sales.
Interest expense decreased 55% from $343 for the three months ended February 29,
1996, to $154 for the comparable period in 1997, primarily due to the reduction
in debt from the IPO and from lower interest rates due to refinancing the
Company's primary long-term debt in the fourth quarter of 1996.
The Company's effective income tax rate for the first quarter of 1996 was
reduced due to the utilization of net operating loss carryforwards.
Liquidity and Capital Resources
The Company's working capital deficit was $130 at February 28, 1997. The
decrease in working capital resulted primarily from seasonal reductions in
working capital items and the use of cash balances to fund investing activities.
Net cash provided by operating activities was $38. The first quarter is a
seasonally slow time of the year. During this time, most operating assets and
liabilities decline from their year end balances.
The net cash used in investing activities was $393. As planned, construction
activity was above normal levels during the first quarter of 1997. The last half
of 1996, saw the development of a significant number of lease locations.
Construction on many of these was completed during the first quarter of 1997.
Almost 30% of the expected 1997 construction budget was expended in the first
quarter of 1997.
The Company's net cash used by financing activities was $120, primarily due to
payments on long-term debt.
At February 28, 1997, the Company had outstanding borrowings of approximately
$7,200 all of which were pursuant to long-term credit agreements. The Company
also maintains a $1,500 operating line of credit. The line carries interest at
the Prime rate of the lender. As of February 28, 1997, there were no borrowings
on this line of credit, and the Company's available borrowing capacity, based on
collateralized accounts was $816. At February 28, 1997, the Company was not in
compliance with one of the financial covenants required by the line of credit.
The Company subsequently obtained forbearance from the lender. This line of
credit will be reviewed on April 30, 1997. Management anticipates that the line
of credit will be renewed on the same terms and conditions.
The Company believes that cash generated from operations and available
borrowings under its credit agreements will be sufficient to finance the
Company's operations, including anticipated capital expenditures, through fiscal
1997.
Seasonality
The Company's transit advertising revenues have exhibited some degree of
seasonality. Typically, the Company experiences its lowest revenues during the
first quarter of each year. The Company expects this trend to continue. A
reduction in revenues in any quarter is likely to result in a period-to-period
decline in operating performance and net income.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the quarter ended
February 28, 1997.
Signature
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Obie Media Corporation
Date April 11, 1997 By: /s/ James W. Callahan
----------------- -----------------------
James W. Callahan
Chief Financial Officer
Signing on behalf of the registrant and
as principal financial and accounting officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the financial
statements of Obie Media Corporation which
are included in its quarterly report, Form
10-QSB, for the quarter ended February, 28
1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<MULTIPLIER> 1
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Feb-28-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,398,083
<ALLOWANCES> 118,284
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 2,587,023
<PP&E> 11,684,906
<DEPRECIATION> 2,983,424
<TOTAL-ASSETS> 11,962,774
<CURRENT-LIABILITIES> 2,717,095
<BONDS> 7,164,745
0
0
<COMMON> 6,131,147
<OTHER-SE> (3,271,946)
<TOTAL-LIABILITY-AND-EQUITY> 11,962,774
<SALES> 0
<TOTAL-REVENUES> 2,737,505
<CGS> 0
<TOTAL-COSTS> 1,557,148
<OTHER-EXPENSES> 158,279
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 153,867
<INCOME-PRETAX> 171,974
<INCOME-TAX> 65,783
<INCOME-CONTINUING> 106,191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,191
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<FN>
<F1> Information not included in Financial Statements
</FN>
</TABLE>
