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, 1998
--------------------------------------------------
[ ] 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
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(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
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(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 July 1, 1998, 3,862,498 shares of the issuer's common stock were
outstanding.
This report contains 9 pages. The only exhibit is the Financial Data
Schedule.
<PAGE>
OBIE MEDIA CORPORATION
Consolidated Balance Sheet
ASSETS
May 31, November 30,
Current assets: 1998 1997
--------------- ---------------
(Unaudited)
Cash $ - $ -
Accounts receivable, net 2,862,580 2,878,360
Prepaid expenses and other current assets 1,040,829 790,234
Deferred tax assets 1,105,240 1,105,240
--------------- ---------------
Total current assets 5,008,649 4,773,834
Property and equipment, net 9,514,428 9,264,855
Other assets 264,749 245,733
--------------- ---------------
Total assets $ 14,787,826 $ 14,284,422
=============== ===============
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Checks outstanding in excess of cash deposit $ 228,423 $ 173,611
Current portion of long-term debt 986,771 859,323
Line of credit 1,332,412 742,864
Accounts and note payable 862,779 403,449
Accrued expenses 778,451 1,166,883
Deferred revenue 716,269 781,204
--------------- ---------------
Total current liabilities 4,905,105 4,127,334
Deferred tax liability 965,095 630,551
Long-term debt, less current portion 5,147,452 5,695,219
--------------- ---------------
Total liabilities 11,017,652 10,453,104
Minority interest in subsidiary 67,625 35,424
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 6,173,967 6,173,967
authorized, 3,855,484 shares issued and outstanding
Accumulated deficit (2,471,418) (2,378,073)
--------------- ---------------
Total shareholders' equity 3,702,549 3,795,894
Total liabilities and
shareholders equity $ 14,787,826 $ 14,284,422
=============== ===============
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,
1998 1997 1998 1997
------------ ------------ ------------ ------------
Revenues:
<S> <C> <C> <C> <C>
Outdoor Advertising $1,412,918 $1,285,159 $2,757,853 $2,549,773
Transit Advertising 3,573,776 1,759,425 6,398,688 3,232,316
Gross Revenues 4,986,694 3,044,584 9,156,541 5,782,089
Less Agency Commission (448,531) (262,355) (799,016) (474,506)
Net Revenues 4,538,163 2,782,229 8,357,525 5,307,583
Operating expenses:
Direct Advertising Expenses 2,764,939 1,510,463 5,262,902 3,067,611
General and Administrative 765,202 509,215 1,453,568 948,952
Start-Up Costs 25,313 116,841 43,553 153,677
Depreciation and amortization 176,241 160,185 353,680 318,464
Operating Income 806,468 485,525 1,243,822 818,879
Interest Expense 165,064 136,733 331,242 290,600
Minority interest in subsidiary 28,439 5,161 32,201 12,674
Other - (40,492) - (40,492)
Income before taxes 612,965 384,123 880,379 556,097
Provision for income taxes 232,927 149,893 334,544 215,676
Net income $380,038 $234,230 $545,835 $340,421
Basic and diluted earnings per share $0.10 $0.06 $0.14 $0.09
Shares used in per-share calculations 3,921,829 3,870,690 3,918,931 3,872,417
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
Consolidated Statement of Cash Flow
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited)
Cash flows from operating activities
<S> <C> <C> <C> <C>
Net Income $ 380,038 $ 234,230 $ 545,835 $ 340,421
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amoritization 191,283 160,185 368,722 318,464
Changes in operating assets (655,553) (91,217) (594,165) (317,193)
Net cash provided by (used in) operating activities (84,232) 303,198 320,392 341,692
Cash flow from investing activities:
Capital expenditures (333,631) (411,190) (603,253) (804,280)
Net cash used in investing activities (333,631) (411,190) (603,253) (804,280)
Cash flows from financing activities:
Payments on long-term debt (147,895) (163,807) (420,319) (297,622)
Borrowings on line-of-cred 486,085 - 589,548 -
Other financing activities 79,673 271,799 113,632 285,270
Net cash provided (used in) financing activities 417,863 107,992 282,861 (12,352)
Net increase (decrease) in cash 0 0 0 (474,940)
Cash, beginning of period 0 0 0 474,940
Cash, end of period 0 0 0 0
Supplemental disclosures of cash flow information
Interest capitalized 3,438 7,470 6,142 8,470
Cash paid for intetest 288,788 12,999 326,650 136,340
Cash paid for taxes - - - -
Note payable issued to acquire
outdoor advertising structures - - 698,000 -
</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, 1998, and the results
of operations and cash flows of the Company for the six months ended May 31,
1998 and 1997. The condensed consolidated financial statements include the
accounts of the Company and its subsidiary. 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 filed as part of
the Company's November 30, 1997 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 cash flow coverage. The Company was in compliance with these
covenants at May 31, 1998.
3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128). SFAS 128 changes the standards for computing and presenting earnings per
share (EPS) and supersedes Accounting Principles Board Opinion No. 15, "Earnings
Per Share". This Statement requires restatement of all prior-period EPS data
presented. The Company implemented SFAS 128 for its year ended November 30,
1998.
Basic earnings per share common share is computed using the weighted average
number of shares of common stock outstanding for the period. Diluted earnings
per common share is computed using the weighted average number of shares of
common stock and dilutive common equivalent shares related to stock options and
warrants outstanding during the period.
As it relates to the Company, the principal differences between the provisions
of SFAS 128 and previous authoritative pronouncements are the exclusion of
common stock equivalents in the determination of Basic Earnings Per Share and
the market price at which common stock equivalents are calculated in the
determination of Diluted Earnings Per Share. All share and per share information
has been adjusted to give retroactive effect to an 11 for 10 stock split
effective in November 1997.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, 1998 May 31, 1997 May 31, 1998 May 31,1997
<S> <C> <C> <C> <C>
Issued and outstanding shares (weighted average) 3,855,484 3,850,000 3,855,484 3,850,000
Dilutive Effect of Stock Options 66,345 20,690 63,447 22,417
---------------------------------------------------------
3,921,829 3,870,690 3,918,931 3,872,417
========= ========= ========= =========
</TABLE>
<PAGE>
4. Newly Issued Financial Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income" (SAFAS 130). This statement establishes
standards for reporting and displaying comprehensive income and its components
in a full set of general purpose financial statements. The objective of SFAS 130
is to report a measure of all changes in equity of an enterprise that result
from transactions and other economic events of the period other than
transactions with owners. The Company adopted SFAS 130 during the first quarter
of 1998. Comprehensive income did not differ from currently reported net income
in the periods presented.
5. Related Party Transaction
In December 1997, the Company exercised its option to purchase several outdoor
advertising structures from an affiliated partnership. The structures had
previously been leased by the Company. The purchase price was $698,000. In
accordance with generally accepted accounting principles, the Company recorded
only the book value carried on the books of the affiliated partnership at the
date of purchase. The difference between the net book value of these assets and
the purchase price has been recorded as an addition to accumulated deficit.
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").
Transit Contracts
On April 6, 1998, the Company entered into a contract to provide advertising
services to Capital Metropolitan Transportation Authority (Austin), in Austin,
Texas. Austin operates approximately 300 vehicles. The contract is for two years
with two additional one year options at the discretion of Austin. The Company
agreed to pay Austin $1.4 million over the 4 year period or 53% of net space
revenue, whichever is greater.
On June 23, 1998, the Company was informed by BC Transit that it had been
selected to provide transit advertising services to substantially all of the
transit districts in British Columbia, Canada. BC Transit operates approximately
1,400 vehicles in these districts. The Company expects to sign two separate
contracts to provide these services, one covering approximately 900 vehicles in
the city of Vancouver, British Columbia, and another contract covering
approximately 500 vehicles in the remainder of the province, including Vancouver
Island. Both contracts are for a total term of 7 years including option years.
The Company expects to guarantee BC Transit CDN$37.7 million over the 7 year
period or 51% of net space revenue, whichever is greater. The Company
established a wholly owned subsidiary, Obie Media Ltd, a BC corporation, to
conduct Canadian operations.
<PAGE>
The Company has received notice that Tri-County Metropolitan Transit District
("Tri-Met") of Oregon has been requested to solicit proposals to provide
exclusive transit advertising services to the District beginning December 1998,
and Tri-Met intends to do so. Tri-Met's consideration of the request appears to
be based on pressure from the Federal Transportation Administration ("FTA"),
which contends that its rules prohibit contracts longer than five years. The
Company presently serves as exclusive transit advertising service provider for
Tri-Met under a contract set to expire on June 30, 2001. The Company intends to
participate in the proposal process. The Company cannot estimate the probable
outcome of this matter at this time.
Acquisition
On June 10, 1998, the Company signed a non-binding letter of intent to acquire
the stock of P&C Media. P&C Media sells transit advertising under contracts with
16 transit agencies in the Eastern and Midwestern United States, including
Cleveland and Cincinnati, Ohio, Milwaukee, Wisconsin, Hartford Connecticut and
Ft. Lauderdale Florida.. These districts operate approximately 3,000 vehicles.
The Company agreed to pay a cash purchase price ranging from $6.5 million to
$7.5 million, depending on P&C Media's future earnings, plus 125,000 shares of
Obie Media common stock. The acquisition is subject to several conditions,
including completion of due diligence and negotiation of a final agreement. P&C
Media's president and sole shareholder, Mr. Wayne P. Schur, would serve as
president of the Company's newly created P&C Media division and would become a
senior vice president of the Company.
Results of operations
(all dollars in $000 except per share amounts)
Gross revenues increased 62.2% from $3,045 for the three-month period ended May
31, 1997, to $ 4,987 for the three-month period ended May 31, 1998 due primarily
to the addition of new transit markets and additionally to higher rates and
increased occupancy in existing markets. Gross transit revenues increased
approximately 103.1% from $1,759 in the second quarter of 1997, to $3,574 in the
comparable period in 1998, while gross outdoor advertising revenues increased
9.9% from $1,285 in 1997 to $1,413 in 1998. Agency discounts increased 71.0%
from $262 to $449 in the second quarter of 1997 and 1998, respectively,
reflecting a greater proportion of agency business, particularly in new markets.
Direct advertising expenses increased 83.1% to $2,765 for the second quarter of
1998, from $1,510 in the comparable period in 1997, primarily due to increased
revenues. Direct advertising expenses rose as a percentage of net revenue
primarily due to the faster growth of transit advertising which has higher
occupancy costs as a percentage of net sales than outdoor advertising.
General and administrative (G&A) costs increased 50.3% to $765 in the second
quarter of 1998 from $509 in the comparable period in 1997. Increased G&A costs
are primarily due to increased payroll and other costs attributable to the
Company's growth. G&A costs decreased as a percentage of revenues primarily
because corporate costs did not need to be added proportionate to revenue for
the new markets.
Interest expense increased 20.7% from $137 for the three months ended May 31,
1997, to $165 for the comparable period in 1998, primarily due to increased
borrowings to support the growth of the Company.
For the reasons set out above, income before income taxes rose 59.6% from $384
in the second quarter of 1997, to $613 in the comparable period in 1998. Income
taxes and net income also rose for the reasons outlined above.
<PAGE>
Results of operations for the six months ended May 31, 1998 (all dollars in $000
except per share amounts)
Gross revenues increased 58.4% from $5,782 for the six-month period ended May
31, 1997, to $9,157 for the six-month period ended May 31, 1998 due primarily to
the addition of new transit markets and additionally to higher rates and
increased occupancy in existing markets. Gross transit revenues increased
approximately 98.0% from $3,232 in the second quarter of 1997, to $6,399 in the
comparable period in 1998, while gross outdoor advertising revenues increased
8.2% from $2,550 in 1997 to $2,758 in 1998. Agency discounts increased 68.4%
from $475 to $799 in the second quarter of 1997 and 1998, respectively,
reflecting a greater proportion of agency business, particularly in new markets.
Direct advertising expenses increased 71.6% to $5,263 for the second quarter of
1998, from $3,068 in the comparable period in 1997, primarily due to increased
revenues. Direct advertising expenses rose as a percentage of net revenue
primarily due to the faster growth of transit advertising which has higher
occupancy costs as a percentage of net sales than outdoor advertising.
General and administrative (G&A) costs increased 53.2% to $1,454 in the second
quarter of 1998 from $949 in the comparable period in 1997. Increased G&A costs
are primarily due to increased payroll and other costs attributable to the
Company's growth. G&A costs decreased as a percentage of revenues primarily
because corporate costs did not need to be added proportionate to revenue for
the new markets.
Interest expense increased 14.0% from $291 for the three months ended May 31,
1997, to $331 for the comparable period in 1998, primarily due to increased
borrowings to support the growth of the Company.
For the reasons set out above, income before income taxes rose 58.3% from $556
in the second quarter of 1997, to $880 in the comparable period in 1998. Income
taxes and net income also rose for the reasons outlined above.
Liquidity and Capital Resources
(All amounts in $000 except per share amounts)
The Company's working capital was $104 at May 31, 1998. The decrease in working
capital resulted primarily from the purchase of assets from a related party as
explained above. In addition there were seasonal reductions in working capital
items.
Net cash used by operating activities was $84 for the three months ended May 31,
1998. There were two transit contract anniversaries during the quarter resulting
in payments of $354 representing the difference between percentage payments and
minimum guarantees. For the six months ended May 31, 1998 cash provided by
operations was $320. Increases in income in 1998 were offset by increased
working capital needs resulting from the Company's growth.
The net cash used in investing activities, primarily investments in outdoor
advertising leases and structures, was $334 for the quarter and $603 for the
first half of 1998.
The Company's net cash provided by financing activities was $418, primarily due
to borrowings on the Company's line of credit, net of payments on long-term
debt.
At May 31, 1998, the Company had outstanding borrowings of approximately $8,165
of which $6,134 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, 1998, there were $1,332 in borrowings on
this line of credit, and the Company's available borrowing capacity, based on
collateralized accounts was $2,000.
The Company believes that cash generated from operations and borrowings under
its credit agreements will be sufficient to finance the Company's operations,
including anticipated capital expenditures, through fiscal 1998.
<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, 1998.
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 14, 1998 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 May 31, 1998 and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-END> May-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,139,113
<ALLOWANCES> 276,533
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 5,008,649
<PP&E> 13,312,946
<DEPRECIATION> 3,798,518
<TOTAL-ASSETS> 14,787,826
<CURRENT-LIABILITIES> 4,905,015
<BONDS> 6,134,223
0
0
<COMMON> 6,173,967
<OTHER-SE> (2,471,418)
<TOTAL-LIABILITY-AND-EQUITY> 14,787,826
<SALES> 0
<TOTAL-REVENUES> 9,156,541
<CGS> 0
<TOTAL-COSTS> 6,061,918
<OTHER-EXPENSES> 43,553
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 331,242
<INCOME-PRETAX> 880,379
<INCOME-TAX> 334,544
<INCOME-CONTINUING> 545,835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545,835
<EPS-PRIMARY> .14<F2>
<EPS-DILUTED> .14<F2>
<FN>
<F1> Information not included in Financial
Statements
<F2> The Company is not filing restated Financial
Data Schedules as the amounts reflected for
primary and diluted earnings per share do not
change as a result of SFAS No. 128 for the
applicable periods.
</FN>
</TABLE>
