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 May 31, 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.)
4211 West 11th Ave., 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 June 30, 1997, 3,500,000 shares of the issuer's common stock were
outstanding.
This report contains 8 pages. The only exhibit is the Financial Data
Schedule.
<PAGE>
OBIE MEDIA CORPORATION
Consolidated Balance Sheets
ASSETS
May 31, November 30,
1997 1996
------------ ------------
Current assets: (Unaudited)
Cash $ - $ 474,940
Accounts receivable, net 1,564,328 1,550,193
Deferred tax assets 501,280 709,000
Other current assets 659,022 812,450
------------ ------------
Total current assets 2,724,630 3,546,583
Property and equipment, net 8,960,425 8,458,014
Deferred tax assets 380,000 380,000
Other assets 214,113 147,987
------------ ------------
Total assets $12,279,168 $12,532,584
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 294,416 $ -
Current portion of long-term debt 827,771 743,973
Accounts payable 267,842 757,020
Accrued expenses 869,818 1,070,440
Deferred revenue 703,617 595,302
------------ ------------
Total current liabilities 2,963,464 3,166,735
Long-term debt, less current portion 6,173,167 6,554,587
------------ ------------
Total liabilities 9,136,631 9,721,322
------------ ------------
Minority interest in subsidiary 40,081 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 6,140,172 6,161,992
Accumulated deficit (3,037,716) (3,378,137)
------------ ------------
Total shareholders' equity 3,102,456 2,783,855
------------ ------------
Total liabilities and
shareholders' equity $12,279,168 $12,532,584
============ ============
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
Consolidated Statements of Income
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Revenues: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Outdoor advertising $ 1,285,159 $ 1,149,377 $ 2,549,773 $ 2,293,419
Transit advertising 1,759,425 1,330,627 3,232,316 2,506,260
Less agency commissions (262,355) (204,986) (474,506) (364,549)
------------ ------------ ------------ ------------
Net revenues 2,782,229 2,275,018 5,307,583 4,435,130
Operating expenses:
Direct advertising expenses 1,510,463 1,346,272 3,067,611 2,642,458
General and administrative 509,215 326,200 948,952 651,811
Start up costs 116,841 -- 153,677 --
Depreciation and amortization 160,185 141,234 318,464 281,968
------------ ------------ ------------ ------------
Operating income 485,525 461,312 818,879 858,893
Other income (40,492) (199,577) (40,492) (199,577)
Interest expense 136,733 367,684 290,600 710,462
Minority interest in subsidiary 5,161 13,349 12,674 22,516
------------ ------------ ------------ ------------
Income before income taxes 384,123 279,856 556,097 325,492
Provision for income taxes (149,893) (8,318) (215,676) (10,600)
------------ ------------ ------------ ------------
Net income $ 234,230 $ 271,538 $ 340,421 $ 314,892
============ ============ ============ ============
Net earnings per share $ 0.07 $ 0.11 $ 0.10 $ 0.13
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding 3,505,825 2,500,000 3,503,813 2,500,000
============ ============ ============ ============
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income $ 234,230 $ 271,538 $ 340,421 $ 314,892
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 160,185 141,234 318,464 281,968
Changes in operating assets
and liabilities (91,217) 62,801 (317,193) (262,061)
----------- ----------- ----------- -----------
Net cash provided by
operating activities 303,198 475,573 341,692 334,799
----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (411,190) (203,071) (804,280) (351,363)
----------- ----------- ----------- -----------
Net cash used in
investing activities (411,190) (203,071) (804,280) (351,363)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Payments on long-term debt (163,807) (130,322) (297,622) (364,225)
Other financing activities 271,799 (142,180) 285,270 380,789
----------- ----------- ----------- -----------
Net cash provided by (used
in) financing activities 107,992 (272,502) (12,352) 16,564
----------- ----------- ----------- -----------
Net increase (decrease) in cash -0- -0- (474,940) -0-
Cash , beginning of year -0- -0- 474,940 -0-
----------- ----------- ----------- -----------
Cash, end of quarter $ -0- -0- -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 May 31, 1997, and the results
of operations and cash flows of the Company for the three months and six months
ended May 31, 1997 and May 31, 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 cash flow coverage. The Company was in compliance with these
covenants as of May 31, 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>
Three Months Ended Six Months Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Issued and outstanding shares 3,500,000 2,500,000 3,500,000 2,500,000
(weighted average)
Stock Options 5,825 -- 3,813 --
------------ ------------ ------------ ------------
3,505,825 2,500,000 3,503,813 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").
Expansion Activities
The Company has signed four additional transit district contracts: Dallas, Texas
(DART), and three contracts in and around Sacramento, California, including
Sacramento Rapid Transit (RT), Paratransit (PARA), and Yolo County Transit
Authority (YOLO). The DART system has approximately 800 vehicles, while the
three districts in Sacramento have a combined total of 330 vehicles. The Company
has, for the last two years, provided advertising services for the 32 RT light
rail vehicles only.
The Company's contract with RT started April 1, 1997. The contract is for three
years with two additional years at the unilateral discretion of RT. The contract
provides for RT to receive 51% of revenue from the sale of advertising on RT
vehicles subject to a guaranteed minimum. Under the contract, RT will receive a
minimum of $1.7 million over the five years. The PARA contract began April 1,
1997 and is for three years with two additional years at the unilateral
discretion of PARA. The contract provides for PARA to receive approximately 51%
of advertising revenues in each year with no guaranteed minimum payment. The
YOLO contract began June 1, 1997 and is for three years with two additional
years at the unilateral discretion of YOLO. The contract provides for YOLO to
receive 51% of advertising revenues in excess of $100,000 in each year with a
guaranteed minimum of $110,000 over the five years.
The Company's contract with DART began July 1, 1997. The contract is for four
years and nine months. 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. The incumbents protests and appeals were denied. The
Company incurred start up costs, both to participate in the appeal process and
to be ready to commence operations in Dallas once the appeal process was
complete.
Results of operations for the three months ended May 31, 1997
(all dollars in $000 except per share amounts)
Net revenues increased 22.3% from $2,275, for the three-month period ended May
31, 1996, to $2,782 for the three-month period ended May 31, 1997 primarily due
to higher advertising rates and increased occupancy. Gross transit revenues
increased approximately 32.2% from $1,331 in 1996, to $1,759 in 1997, while
gross outdoor advertising revenues increased 11.8% from $1,149 in 1996 to $1,285
in 1997. Agency discounts increased 28.0% from $205 to $262 in the second
quarter of 1996 and 1997, respectively, reflecting an increase in advertising
agency business primarily in transit. Agency discounts as a percentage of gross
sales rose from 8.3% in the second quarter of 1996 to 8.6% in the same period in
1997 reflecting the more rapid growth of transit sales. The Company experiences
higher agency discounts on transit sales than outdoor sales.
Direct advertising expenses increased 12.2% to $1,510 for the second quarter of
1997, from $1,346 in the comparable period in 1996, primarily due to increased
revenues.
<PAGE>
General and administrative costs increased 56.1% to $509 in the second quarter
of 1997 from $326 in the comparable period in 1996. Increased general and
administrative 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 second quarter of 1996, the Company was part of a larger consolidated group
of companies, and, accordingly, a portion of the general and administrative
costs of the companies were paid by affiliates in the second quarter of 1996.
The direct costs of developing new markets was $117 in the three months ended
May 31, 1997. There were no comparable costs in the same period of 1996. These
costs primarily were incurred in obtaining the DART contract discussed above.
The Company's takeover in Dallas was expected to occur on April 1, 1997.
Administrative protests by the incumbent provider delayed the effective date of
the takeover until July 1, 1997 and caused the Company to incur significant
additional costs during the quarter to participate in the appeals process, and
to enable the Company to take over immediately once the appeal was resolved. The
Company will continue to incur costs to obtain and prepare to operate new
transit district contracts. However the amount of these costs is expected to
decline in absolute terms and as a percentage of sales.
Interest expense decreased 62.8%, from $368 for the three months ended May 31,
1996, to $137 for the comparable period in 1997, primarily due to the reduction
in debt resulting from the IPO and from lower interest rates due to refinancing
the Company's primary long-term debt in the fourth quarter of 1996.
Other income decreased from $199 in the second quarter of 1996 to $40 in the
same period in 1997. In the second quarter of 1996, the Company sold an outdoor
advertising structure for a gain of $183. In 1997, the Company received a
payment from a government agency to move one of its structures to accommodate
highway construction.
The Company's effective income tax rate for the second quarter of 1996 was lower
than in 1997 due to the utilization of net operating loss carryforwards in 1996.
For the above reasons, second quarter income before income tax increased from
$280 in 1996 to $384 in 1997. After tax net income declined from $272 in 1996 to
$234 in 1997. Earnings per share for the quarter declined to 7(cent) in 1997
from 11(cent) in 1996 due to the decline in net income and the increased number
of shares outstanding.
Results of operations for the six months ended May 31, 1997 (all dollars in $000
except per share amounts)
Net revenues increased 19.7%, from $4,435 for the six-month period ended May 31,
1996, to $5,308 for the six-month period ended May 31, 1997 primarily due to
higher advertising rates and increased occupancy. Gross transit revenues
increased approximately 29.0%, from $2,506 in 1996 to $3,232 in 1997, while
gross outdoor advertising revenues increased 11.2%, from $2,293 in 1996 to
$2,550 in 1997. Agency discounts increased 30.2%, from $365 to $475 in the
second quarter of 1996 and 1997, respectively, reflecting an increase in
advertising agency business primarily in transit.
Agency discounts as a percentage of sales increased from 7.6% in the first half
of 1996 to 8.2% in 1997 due primarily to increased transit sales as a percentage
of total sales.
Direct advertising expenses increased 16.1% to $3,068 for the first half of
1997, from $2,642 in the comparable period in 1996, primarily due to increased
revenues.
<PAGE>
General and administrative costs increased 45.6% to $949 in the first half of
1997 from $652 in the comparable period in 1996. Increased general and
administrative 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 half 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 of the companies were paid by affiliates in 1996.
The direct costs of developing new markets was $154 in the six months ended May
31, 1997. There were no comparable costs in the same period of 1996. These costs
primarily were incurred in obtaining the DART contract discussed above. The
Company will continue to incur costs to obtain and prepare to operate new
transit district contracts. However the amount of these costs should decline in
absolute terms and as a percentage of sales.
Interest expense decreased 59.1%, from $710 for the six months ended May 31,
1996, to $291 for the comparable period in 1997, primarily due to the reduction
in debt resulting 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 1996 was lower than in 1997 due to
the utilization of net operating loss carryforwards in 1996.
For the above reasons, pretax income for the first half of the year increased to
$556 in 1997 from $325 in 1996. After tax net income increased from $315 in 1996
to $340 in 1997. Earnings per share for the six-month period declined to
10(cent) in 1997 from 13(cent) in 1996, primarily due to the increase in the
number of shares outstanding.
Liquidity and Capital Resources
(All dollars in $000 except per share amounts)
The Company's working capital deficit was $239 at May 31, 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 $342 for the first half and $303
for the second quarter of 1997 respectively.
The net cash used in investing activities was $804 for the first six months of
1997, and was $411 for the second quarter. Expenditures in the second quarter
included costs of furniture and tenant improvements for the new office and
production facility in Eugene, Oregon.
The Company's net cash provided by (used in) financing activities was $(12) for
the six months ended May 31, 1997 and $108 for the second quarter, primarily due
to payments on long-term debt and an increase in the book overdraft.
At May 31, 1997, the Company had outstanding borrowings of approximately $7,000
substantially all of which were pursuant to long-term credit agreements. The
Company also maintains a $2,000 operating line of credit. The line carries
interest at the Prime rate of the lender. As of May 31, 1997, there were $63 in
borrowings on this line of credit, and the Company's available borrowing
capacity, based on collateralized accounts, was $864.
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.
<PAGE>
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.
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
May 31, 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 July 10, 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
June 23, 1997
Financial schedule to Form 10-QSB for the quarter ended 5/31/97 for Obie Media
Corporation.
<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 May 31, 1997
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<MULTIPLIER> 1
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,688,818
<ALLOWANCES> 124,490
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 2,724,630
<PP&E> 12,096,096
<DEPRECIATION> 3,135,671
<TOTAL-ASSETS> 12,279,168
<CURRENT-LIABILITIES> 2,963,464
<BONDS> 7,000,938
0
0
<COMMON> 6,140,172
<OTHER-SE> (3,037,716)
<TOTAL-LIABILITY-AND-EQUITY> 12,279,168
<SALES> 0
<TOTAL-REVENUES> 5,782,089
<CGS> 0
<TOTAL-COSTS> 3,067,611
<OTHER-EXPENSES> 153,677
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 290,600
<INCOME-PRETAX> 556,097
<INCOME-TAX> 215,676
<INCOME-CONTINUING> 340,421
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 340,421
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
<FN>
<F1> Information not included in Financial Statements
</FN>
</TABLE>
