SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 1, 1998
- --------------------------------------------------------------------------------
Obie Media Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Oregon 000-21623 93-0966515
- --------------------------------------------------------------------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
4211 West 11th Avenue, Eugene, Oregon 97402
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(541) 686-8400
- --------------------------------------------------------------------------------
<PAGE>
Item 7 (Financial Statements and Exhibits)is amended to add the
following
(a) Financial Statements of the business acquired
Philbin & Coine, Inc. Balance Sheets as of August
31, 1998 and December 31, 1997 and 1996, and the
related Statements of Operations and Shareholders'
Equity (Deficit)and of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 and the
eight months ended August 31, 1998 and independent
auditors report.
(b) Pro Forma Financial Information
(1) Obie Media Corporation Pro Forma Consolidated
Balance Sheets as of August 31, 1998
(unaudited)
(2) Obie Media Corporation Pro Forma Consolidated
Statements of Income for the nine months ended
August 31, 1998 and year ended November 30,
1997 (unaudited)
(3) Notes to Pro Forma Consolidated Financial
Statements (unaudited)
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Obie Media Corporation
----------------------
(Registrant)
Date: November 12, 1998 By /s/ James W. Callahan
------------------------- -------------------------
James W. Callahan
Chief Financial Officer
<PAGE>
Item 7. (a)
PHILBIN & COINE, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1997 AND AUGUST 31, 1998
TOGETHER WITH AUDITOR'S REPORT
<PAGE>
PHILBIN & COINE, INC.
---------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Page
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1997,
AND AUGUST 31, 1998 2
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1995, 1996 AND 1997, AND FOR THE EIGHT
MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) AND 1998 3
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND FOR
THE EIGHT MONTHS ENDED AUGUST 31, 1998 4
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1995, 1996 AND 1997, AND FOR THE EIGHT
MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) AND 1998 5
NOTES TO FINANCIAL STATEMENTS 6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Philbin & Coine, Inc.:
We have audited the accompanying balance sheets of Philbin & Coine, Inc. as of
December 31, 1996 and 1997, and August 31, 1998, and the related statements of
operations, shareholders' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1997, and for the eight months ended
August 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Philbin & Coine, Inc. as of
December 31, 1996 and 1997, and August 31, 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, and for the eight months ended August 31, 1998, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
Philadelphia, Pa.,
September 18, 1998
<PAGE>
<TABLE>
<CAPTION>
PHILBIN & COINE, INC.
---------------------
BALANCE SHEETS
--------------
December 31
----------------------------------- August 31,
1996 1997 1998
--------------- --------------- ---------------
ASSETS
------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,020 $ 205,123 $ 59,652
Marketable securities -- 222,261 --
Accounts receivable, net of allowance for doubtful
accounts of $21,974, $22,093 and $22,184,
respectively 700,760 707,820 1,077,485
Prepaid expenses and other current assets 239,800 102,528 42,832
--------------- --------------- ---------------
Total current assets 941,580 1,237,732 1,179,969
PROPERTY AND EQUIPMENT, net 352,799 247,342 273,564
OTHER ASSETS 40,970 9,392 11,680
--------------- --------------- ---------------
$ 1,335,349 $ 1,494,466 $ 1,465,213
=============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(DEFICIT)
---------
CURRENT LIABILITIES:
Checks outstanding in excess of cash deposits $ 118,475 $ -- $ --
Current portion of long-term debt 75,538 79,796 56,503
Line of credit -- 150,000 300,000
Accounts payable 80,613 76,113 39,084
Accrued expenses 991,264 794,816 517,540
Deferred revenue 32,103 82,491 235,407
--------------- --------------- ---------------
Total current liabilities 1,297,993 1,183,216 1,148,534
LONG-TERM DEBT, less current portion 189,576 110,073 71,976
OTHER LONG-TERM LIABILITIES 60,000 -- --
--------------- --------------- ---------------
Total liabilities 1,547,569 1,293,289 1,220,510
--------------- --------------- ---------------
COMMITMENTS (Note 10)
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, without par value, 200 shares
authorized, 200 shares issued and 170 shares
outstanding 77,342 77,342 77,342
Treasury stock, at cost, 30 shares of Common stock (196,312) (196,312) (196,312)
Retained earnings (Accumulated deficit) (93,250) 320,147 363,673
--------------- --------------- ---------------
Total shareholders' equity (deficit) (212,220) 201,177 244,703
--------------- --------------- ---------------
$ 1,335,349 $ 1,494,466 $ 1,465,213
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
PHILBIN & COINE, INC.
---------------------
STATEMENTS OF OPERATIONS
------------------------
Eight Months Ended
Year Ended December 31 August 31
--------------------------------------------- -----------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Transit advertising $ 6,706,552 $ 5,926,277 $ 6,786,454 $ 3,941,756 $ 6,076,187
Less- Agency commissions (658,583) (581,960) (666,430) (387,080) (596,682)
------------- ------------- ------------- ------------- -------------
Net revenues 6,047,969 5,344,317 6,120,024 3,554,676 5,479,505
------------- ------------- ------------- ------------- -------------
OPERATING EXPENSES:
Direct advertising expenses 4,300,326 3,707,239 4,736,854 3,083,326 4,060,713
General and administrative 1,896,502 1,923,871 1,645,256 980,179 1,371,573
Depreciation and amortization 129,695 150,362 104,608 69,737 59,205
------------- ------------- ------------- ------------- -------------
6,326,523 5,781,472 6,486,718 4,133,242 5,491,491
------------- ------------- ------------- ------------- -------------
Operating loss (278,554) (437,155) (366,694) (578,566) (11,986)
------------- ------------- ------------- ------------- -------------
OTHER EXPENSE (INCOME):
Gain on Transit Agreement sales -- (236,000) (695,704) (695,704) --
Service and other income (Note 8) (220,509) (119,169) (75,479) (57,322) (61,207)
Interest expense 44,721 25,860 28,904 18,560 30,428
Interest and dividend income (21,256) (11,499) (37,812) (25,842) (24,733)
------------- ------------- ------------- ------------- -------------
(197,044) (340,808) (780,091) (760,308) (55,512)
------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (81,510) $ (96,347) $ 413,397 $ 181,742 $ 43,526
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
PHILBIN & COINE, INC.
---------------------
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
Retained
Common Stock Treasury Stock Earnings
---------------------------------------------- (Accumulated
Shares Amount Shares Amount (deficit) Total
-------- --------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 200 $ 77,342 -- $ -- $ 84,607 161,949
Net loss -- -- -- -- (81,510) (81,510)
-------- --------- -------- ----------- ---------- ---------
BALANCE, DECEMBER 31, 1995 200 77,342 -- -- 3,097 80,439
Purchase of Common stock for -- -- 30 (196,312) -- (196,312)
Treasury
Net loss -- -- -- -- (96,347) (96,347)
-------- --------- -------- ----------- ---------- ---------
BALANCE, DECEMBER 31, 1996 200 77,342 30 (196,312) (93,250) (212,220)
Net income -- -- -- -- 413,397 413,397
-------- --------- -------- ----------- ---------- ---------
BALANCE, DECEMBER 31, 1997 200 77,342 30 (196,312) 320,147 201,177
Net income -- -- -- -- 43,526 43,526
-------- --------- -------- ----------- ---------- ---------
BALANCE, AUGUST 31, 1998 200 $ 77,342 30 $ (196,312) $ 363,673 244,703
======== ========= ======== =========== ========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
PHILBIN & COINE, INC.
---------------------
STATEMENTS OF CASH FLOWS
------------------------ Eight Months Ended
Year Ended December 31 August 31
--------------------------------- -----------------------
1995 1996 1997 1997 1998
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (81,510) $ (96,347) $ 413,397 $ 181,742 $ 43,526
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities-
Depreciation and amortization 129,695 150,362 104,608 69,737 59,205
Gain on Transit Agreement sales -- (236,000) (695,704) (695,704) --
Gain on asset sales -- -- -- -- (17,603)
Changes in assets and liabilities--
(Increase) decrease in-
Accounts receivable (129,105) 92,276 (7,060) (130,512) (369,665)
Prepaid expenses and other
current assets 38,754 (186,128) 137,272 150,245 59,696
Other assets 10,531 (4,356) (1,757) (1,756) (2,288)
Increase (decrease) in-
Accounts payable 26,845 41,937 (4,500) (28,529) (37,029)
Accrued expenses 11,064 142,726 (196,448) (39,925) (277,276)
Deferred revenue 2,600 (49,138) 50,388 47,642 152,916
Other long-term liabilities -- 60,000 (60,000) (60,000) --
--------- --------- --------- ---------- ----------
Net cash provided by (used in)
operating activities 8,874 (84,668) (259,804) (507,060) (388,518)
--------- --------- --------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (170,369) (100,778) (100,112) (100,112) (88,903)
Proceeds from disposition of property
and equipment -- -- -- -- 8,050
Proceeds from Transit Agreement sales -- 236,000 830,000 830,000 --
Purchases of marketable securities -- -- (473,258) (466,965) (1,731)
Proceeds from sales of marketable securities -- -- 250,997 250,997 237,021
--------- --------- --------- ---------- ----------
Net cash provided by (used in)
investing activities (170,369) 135,222 507,627 513,920 154,437
--------- --------- --------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on line of credit 50,000 (50,000) 150,000 150,000 150,000
Checks outstanding in excess of cash deposits -- 118,475 (118,475) (99,362) --
Proceeds from long-term debt 149,000 220,000 -- -- --
Payments on long-term debt (249,544) (361,895) (75,245) (58,518) (61,390)
Purchase of Common stock for Treasury -- (52,842) -- -- --
--------- --------- --------- ---------- ---------
Net cash provided by (used in)
financing activities (50,544) (126,262) (43,720) (7,880) 88,610
--------- --------- --------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENT
(212,039) (75,708) 204,103 (1,020) (145,471)
CASH AND CASH EQUIVALENTS, beginning
of period 288,767 76,728 1,020 1,020 205,123
--------- --------- --------- ---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $ 76,728 $ 1,020 $ 205,123 $ -- $ 59,652
========= ========= ========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest $ 44,721 $ 25,860 $ 28,904 $ 18,560 $ 30,428
========= ========= ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
PHILBIN & COINE, INC.
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1997 AND AUGUST 31, 1998
----------------------------------------------
(Information for the eight months ended
August 31, 1997 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Company
- -------
Philbin & Coine, Inc. (the "Company"), a New York corporation, provides turnkey
advertising services through exclusive contracts with municipal and regional
transit systems across the United States, principally in Ohio, Wisconsin,
Virginia, Florida and Connecticut.
Interim Financial Statements
- ----------------------------
The financial statements for the eight months ended August 31, 1997 are
unaudited, and in the opinion of management, include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
results of its operations for the eight months ended August 31, 1997. The
results of operations for the eight months ended August 31, 1998, are not
necessarily indicative of the results to be expected for the entire year.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
- -------------------
The Company has contracts to provide future advertising to its customers.
Advertising revenue is recognized ratably over the period the advertising is
displayed. Payments received and amounts billed for advertising revenue in
advance of display are deferred.
-6-
<PAGE>
Concentration of Credit Risk
- ----------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and accounts receivable. The Company
places its cash with high credit quality financial institutions. Concentrations
of credit risk with respect to accounts receivable are not significant due to
the large number of customers, and their dispersion across different industries
and geographic areas.
At August 31, 1998, the Company had Transit Agreements with approximately 20
transit authorities. Customers advertising on transit vehicles owned by five of
these authorities represented 61%, 73% and 79% of the Company's total revenues
for the years ended December 31, 1995, 1996 and 1997, and 78% and 76% of the
Company's total revenues for the eight months ended August 31, 1997 and 1998,
respectively.
Transit Agreements typically range from three to five years and are subject to
renewal either at the discretion of the transit authority or upon mutual
agreement between the Company and the transit authority. Generally, these
agreements require the Company to pay the transit authority the greater of a
percentage of the related advertising revenues or a guaranteed minimum amount
(see Note 9).
Fair Value of Financial Instruments
- -----------------------------------
The Company's financial instruments consist of cash, accounts receivable,
marketable securities, accounts payable, accrued expenses and debt instruments.
At December 31, 1996 and 1997 and August 31, 1998, the fair value of the
Company's financial instruments are estimated to be equal to their reported
carrying value. The carrying value of long-term debt approximates fair value.
The resulting estimates of fair value require subjective judgments and are
approximates. Changes in the methodologies and assumptions could significantly
affect the estimates.
Cash and Cash Equivalents
- -------------------------
Cash consists of demand deposits with federally insured banks. At times,
balances may exceed amounts insured.
-7-
<PAGE>
Marketable Securities
- ---------------------
Marketable securities consist of amounts invested in a high-yield bond mutual
fund. The Company determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation at each
balance sheet date. Marketable securities have been classified as
available-for-sale and are carried at fair value, which approximated cost at
December 31, 1997.
Prepaid Expenses and Other Current Assets
- -----------------------------------------
Prepaid expenses and other current assets primarily consist of payments for
items the Company anticipates will be utilized within one year and include
payments for insurance rent and deposits. Included in the balance at December
31, 1996, is a proposal deposit of $71,000.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives. Normal repairs and
maintenance are expensed as incurred. The cost and accumulated depreciation of
assets sold or otherwise retired are removed from the accounts and the resulting
gain or loss is recognized.
Severance Agreement
- -------------------
In July 1996, the Company entered into a severance agreement with an employee,
requiring payments of $230,000 in 23 monthly installments. This cost was
recorded in 1996 and is included in general and administrative expenses in the
accompanying statements of operations.
Income Taxes
- ------------
The Company is an "S" Corporation for federal and state income tax purposes and,
accordingly, is not taxed as a separate entity. The Company's taxable income or
loss is allocated to each stockholder and recognized on their individual income
tax returns.
Recently Issued Accounting Standards
- ------------------------------------
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 applies to all public
companies and is effective for fiscal years beginning after December 15, 1997.
SFAS No. 131 requires that business segment financial information be reported in
the financial statements utilizing the management approach. The management
approach is defined as the manner in which management organizes the segments
within the enterprise for making operating decisions and assessing performance.
Management believes that the adoption of SFAS No. 131 will not have a material
impact on the financial statements.
-8-
<PAGE>
2. PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment consist of the following:
December 31
---------------------------- August 31,
1996 1997 1998
------------ ------------ -------------
Furniture and fixtures $ 392,643 $ 442,153 $ 457,133
Vehicles 119,768 147,771 132,771
Bus shelters 566,266 463,864 535,789
------------ ------------ -------------
1,078,677 1,053,788 1,125,693
Less - Accumulated depreciation (725,878) (806,446) (852,129)
------------ ------------ -------------
$ 352,799 $ 247,342 $ 273,564
============ ============ ===========
Depreciation expense for the years ended December 31, 1995, 1996 and 1997, and
the eight months ended August 31, 1997 and 1998, was $96,362, $117,029,
$104,608, $69,737 and $59,205, respectively.
3. OTHER ASSETS:
-------------
Other assets consist of the following:
December 31
---------------------------- August 31,
1996 1997 1998
------------ ------------ -------------
Acquired Transit Agreement $ 200,000 $ -- $ --
Deposits 7,635 9,392 11,680
------------ ------------ -------------
207,635 9,392 11,680
Less- Accumulated amortization (166,665) -- --
------------ ------------ -------------
$ 40,970 $ 9,392 $ 11,680
============ ============ =============
The Transit Agreement was acquired in 1992 and sold in January 1997.
-9-
<PAGE>
4. ACCRUED EXPENSES:
-----------------
Accrued expenses consist of the following:
December 31
---------------------------- August 31,
1996 1997 1998
------------ ------------ ------------
Transit authority fees $ 731,357 $ 639,850 $ 378,378
Payroll and related items 128,070 65,583 63,836
Other 131,837 89,383 75,326
------------ ------------ -------------
$ 991,264 $ 794,816 $ 517,540
============ ============ ===========
5. LINE OF CREDIT AGREEMENT:
-------------------------
In January 1997, the Company entered into an $800,000 demand line of credit
agreement with a bank. In September 1998, the line of credit was repaid in
connection with the sale of the Company (see Note 11). The interest rate on the
line was at the bank's prime rate (8.5% at August 31, 1998) plus 1%. The line of
credit was secured by all of the Company's assets and the personal guarantee of
the Company's sole shareholder.
At August 31, 1998, the amount available for borrowing under the line of credit
was $800,000. At December 31, 1997 and August 31, 1998, outstanding borrowings
under the line were $150,000 and $300,000, respectively.
6. LONG-TERM DEBT:
---------------
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31
---------------------------- August 31,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Note payable to bank, payable in monthly
installments of $5,435 including interest
at 8.5%, through October 2000
$ 212,272 $ 163,448 $ 128,479
Note payable to former stockholder,
interest at 8.25%
52,842 26,421 --
------------ ------------ -------------
265,114 189,869 128,479
Less- Current portion (75,538) (79,796) (56,503)
------------ ------------ --------------
$ 189,576 $ 110,073 $ 71,976
============ ============ ==============
</TABLE>
The note payable to bank, which was cross-collateralized with the line of credit
(see Note 5), was also secured by all of the Company's assets and the personal
guarantee of the Company's sole shareholder. In September 1998, the note was
repaid in connection with the sale of the Company (see Note 11).
-10-
<PAGE>
7. REPURCHASE OF STOCKHOLDER'S INTEREST:
-------------------------------------
Prior to July 1996, the Common stock was owned by two individuals. In July 1996,
the Company purchased the 15% interest, or 30 shares of Common stock, held by
one of its shareholders for $196,312. The consideration paid to the retiring
shareholder was forgiveness of a $90,628 loan due to the Company, $52,842 in
cash and a $52,842 note (see Note 6).
8. RELATED-PARTY TRANSACTIONS:
---------------------------
The Company had a financial and accounting services agreement with an entity
whose majority owner is the sole stockholder of the Company. This entity also
managed transit authority advertising. The agreement was terminated on December
31, 1997. For the years ended December 31, 1995, 1996, and 1997, and the eight
months ended August 31, 1997, the Company generated service revenues of
$172,000, $81,000, $44,000 and $29,333, respectively. Service revenues generated
under this agreement have been classified as a component of other expense
(income) in the accompanying statements of operations.
9. COMMITMENTS:
------------
The Company is required under certain Transit Agreements to remit the greater of
a percentage of the related advertising revenues or a guaranteed minimum amount.
At August 31, 1998, future guaranteed minimum payments under these Transit
Agreements are as follows for the years ending December 31:
Remainder of 1998 (4 months) $ 1,461,289
1999 4,753,929
2000 5,247,983
2001 4,266,841
Thereafter 1,546,000
The Company leases office space under noncancelable operating leases expiring
through February 2002. Rent expense under these leases for the years ended
December 31, 1995, 1996 and 1997, and for the eight months ended August 31, 1997
and 1998, was $91,292, $102,338, $102,526, $70,972 and $77,192, respectively.
The Company leases certain transportation equipment under noncancelable
operating leases expiring through March 2001. Rent expense under these leases
for the years ended December 31, 1995, 1996 and 1997, and for the eight months
ended August 31, 1997 and 1998, was $11,514, $9,101, $12,628, $7,943 and $8,426,
respectively. At August 31, 1998, future minimum lease payments for all
operating leases above are as follows:
Remainder of 1998 (4 months) $ 26,715
1999 77,020
2000 75,058
2001 63,250
2002 4,859
At August 31, 1998, the Company had outstanding letters of credit of $408,750
with several municipal transit authorities, which expire through 1999.
-11-
<PAGE>
10. EMPLOYEE BENEFIT PLAN:
----------------------
The Company has a 401(k) defined contribution plan for eligible employees.
Employees are eligible to participate in the plan provided they are at least
20.5 years old and have completed six months of service. Employer matching
contributions are up to 50% of employee contributions up to a maximum of 5% of
the employee's salary in addition to a discretionary amount which is determined
on an annual basis. Employee contributions are fully vested, while employer
contributions vest ratably over six years. For the years ended December 31,
1995, 1996 and 1997, and the eight months ended August 31, 1997 and 1998,
employer contributions to the plan were $18,477, $17,423, $14,731, $9,906 and
$9,294, respectively.
11. SALE OF BUSINESS:
-----------------
In September 1998, all of the outstanding stock of the Company was sold to Obie
Media Corporation ("Obie"). Obie is a full-service, out-of-home advertising
company providing transit and outdoor advertising in various regions throughout
the United States.
-12-
<PAGE>
Item 7. (b)
OBIE MEDIA CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
AS OF AUGUST 31, 1998 AND NOVEMBER 30, 1997
TOGETHER WITH AUDITORS' REPORT
<PAGE>
<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 1998
ASSETS
Unaudited
Pro Forma
Obie Media Philbin & Pro Forma Consolidated
Corporation Coine, Inc. Adjustments As Adjusted
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 90,895 $ 59,652 $ - $ 150,547
Accounts receivable, net 3,433,357 1,077,485 - 4,510,842
Prepaid expenses and other
current assets 1,157,193 42,832 19,119(e) 1,219,144
Deferred income taxes 644,997 - - 644,997
----------- ---------- ---------- -----------
Total current assets 5,326,442 1,179,969 19,119 6,525,530
PROPERTY AND EQUIPMENT, net 10,017,554 273,564 - 10,291,118
GOODWILL - - 7,741,639 (a) 7,741,639
OTHER ASSETS 403,705 11,680 (109,677)(b) 305,708
----------- ---------- ---------- -----------
Total assets $15,747,701 $1,465,213 $7,651,081 $24,863,995
=========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks outstanding in
excess of cash deposits $ 224,552 $ - $ - $ 224,552
Current portion of long-
term debt 1,182,039 56,503 (56,503)(c) 1,182,039
Line of credit 1,527,198 300,000 (300,000)(c) 1,527,198
Accounts payable 177,661 39,084 - 216,745
Accrued expenses 1,283,680 517,540 - 1,801,220
Accrued compensation - - - -
Deferred revenue 889,567 235,407 - 1,124,974
----------- ---------- ---------- -----------
Total current
liabilities 5,284,697 1,148,534 (356,503) 6,076,728
----------- ---------- ---------- -----------
DEFERRED TAX LIABILITIES 733,103 - - 733,103
LONG-TERM DEBT, less current
portion 5,434,227 71,976 7,528,024 (d) 13,034,227
----------- ---------- ---------- -----------
Total liabilities 11,452,027 1,220,510 7,171,521 19,844,058
MINORITY INTEREST IN
SUBSIDIARY 77,993 - - 77,993
SHAREHOLDERS' EQUITY:
Preferred stock - - - -
Common stock 6,316,864 77,342 435,158 (f) 6,829,364
Treasury stock - (196,312) 196,312 (f) -
Options for common stock - - 211,763 (g) 211,763
Retained earnings
(accumulated deficit) (2,099,183) 363,673 (363,673)(f) (2,099,183)
----------- ---------- ---------- -----------
Total shareholders'
equity 4,217,681 244,703 479,560 4,941,944
----------- ---------- ---------- -----------
Total liabilities and
shareholders' equity $15,747,701 $1,465,213 $7,651,081 $24,863,995
=========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma consolidated balance sheet.
<PAGE>
<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED AUGUST 31, 1998
Unaudited
Pro Forma
Obie Media Philbin & Pro Forma Consolidated
Corporation Coine, Inc. Adjustments As Adjusted
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Outdoor advertising $ 4,252,092 $ - $ - $ 4,252,092
Transit advertising 10,619,404 6,076,187 - 16,695,591
Less- Agency commissions (1,409,004) (596,682) - (2,005,686)
----------- ---------- ---------- -----------
Net revenues 13,462,492 5,479,505 - 18,941,997
OPERATING EXPENSES:
Direct advertising expenses 8,556,792 4,060,713 - 12,617,505
General and administrative 2,222,152 1,371,573 - 3,593,725
Start-up costs 99,194 - - 99,194
Depreciation and
amortization 581,578 59,205 387,082 (h) 1,027,865
----------- ---------- ---------- -----------
Operating income (loss) 2,002,776 (11,986) (387,082) 1,603,708
OTHER (INCOME) EXPENSE:
Interest expense 479,342 30,428 368,244 (i) 878,014
Minority interest in
subsidiary 42,569 - - 42,569
Other - (85,940) - (85,940)
----------- ---------- ---------- -----------
INCOME BEFORE INCOME TAXES 1,480,865 43,526 (755,326) 769,065
INCOME TAX PROVISION 562,795 - (270,484)(j) 292,311
----------- ---------- ---------- -----------
NET INCOME $ 918,070 $ 43,526 $ (484,842) $ 476,754
=========== ========== ========== ===========
NET INCOME PER SHARE:
Basic and diluted 0.12
SHARES USED IN PER SHARE
CALCULATIONS 3,909,419
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma consolidated statement.
<PAGE>
<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1997
Unaudited
Pro Forma
Obie Media Philbin & Pro Forma Consolidated
Corporation Coine, Inc. Adjustments As Adjusted
<S> <C> <C> <C> <C>
REVENUES:
Outdoor advertising $ 5,373,609 $ - $ - $ 5,373,609
Transit advertising 9,251,346 6,786,454 - 16,037,800
Less- Agency commissions (1,322,129) (666,430) - (1,988,559)
----------- ---------- ----------- -----------
Net revenues 13,302,826 6,120,024 - 19,422,850
OPERATING EXPENSES:
Direct advertising expenses 8,004,869 4,736,854 - 12,741,723
General and administrative 2,241,849 1,645,256 - 3,887,105
Start-up costs 236,743 - - 236,743
Depreciation and
amortization 664,207 104,608 516,109 (h) 1,284,924
----------- ---------- ----------- -----------
Operating income (loss) 2,155,158 (366,694) (516,109) 1,272,355
OTHER (INCOME) EXPENSE:
Transit agreement sales - (695,704) - (695,704)
Interest expense 584,258 28,904 502,659 (i) 1,115,821
Minority interest in
subsidiary 8,017 - - 8,017
Other (51,492) (113,291) - (164,783)
----------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,614,375 413,397 (1,018,768) 1,009,004
INCOME TAX PROVISION 614,311 - (230,041)(j) 384,270
----------- ---------- ----------- -----------
NET INCOME $ 1,000,064 $ 413,397 $ (788,727) $ 624,734
=========== ========== =========== ===========
NET INCOME PER SHARE:
Basic and diluted 0.16
SHARES USED IN PER SHARE
CALCULATIONS 3,950,230
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma consolidated statement.
<PAGE>
OBIE MEDIA CORPORATION
----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
AUGUST 31, 1998 AND NOVEMBER 30, 1997
-------------------------------------
1. BASIS OF PRESENTATION:
----------------------
The accompanying unaudited pro forma consolidated financial statements have been
prepared to present the effect of the acquisition (the Acquisition) of Philbin &
Coine, Inc. (P&C) by Obie Media Corporation (the Company) on September 1, 1998.
P&C, a New York corporation, provides turnkey advertising services through
exclusive contracts with municipal and regional transit systems across the
United States, principally in Ohio, Wisconsin, Virginia and Connecticut. The
unaudited pro forma statements of income for the nine months ended August 31,
1998 and for the fiscal year ended November 30, 1997 have been prepared based
upon the historical statements of income of P&C and the Company as if the
Acquisition had occurred on the first date of each such period. The unaudited
pro forma consolidated balance sheet as of August 31, 1998 has been prepared
based upon the historical balance sheets of P&C and the Company as if the
Acquisition had occurred on August 31, 1998.
For purposes of the unaudited pro forma consolidated financial statements (i)
the statement of income of the Company for the nine months ended August 31, 1998
has been combined with the statement of income of P&C for the eight months ended
August 31, 1998, (ii) the statement of income of the Company for the fiscal year
ended November 30, 1997 has been combined with the statement of income of P&C
for the fiscal year ended December 31, 1997, and (iii) the balance sheet of the
Company as of August 31, 1998 has been combined with the balance sheet of P&C as
of August 31, 1998.
The unaudited pro forma consolidated financial statements give effect to the
Acquisition under the purchase method of accounting.
The unaudited pro forma consolidated financial statements may not be indicative
of the results of operations or financial position that would have occurred if
the Acquisition had been in effect as of the beginning of the respective periods
or as of the balance sheet date, nor do they purport to indicate the results of
operations of the Company for any future period or as of any future date. The
unaudited pro forma consolidated financial statements should be read in
conjunction with the Company's audited financial statements and notes thereto,
included in the Company's Form 10-K for the year ended November 30, 1997.
Management believes that all adjustments necessary to present fairly such
unaudited pro forma consolidated financial statements have been made based on
the terms and structure of the Acquisition.
<PAGE>
2. PRO FORMA ADJUSTMENTS:
----------------------
<TABLE>
<CAPTION>
The pro forma entries consist of the following:
As of and
For the
Nine
Months For the
Ended Year Ended
Balance Sheet August 31, November 30,
- ------------- 1998 1997
---------- ----------
<S> <C> <C>
(a) To record the goodwill associated with the Acquisition $7,741,639 $ -
(b) To transfer deferred Acquisition costs to goodwill (109,677) -
(c) To record the payoff of P&C debt balances associated
with the Acquisition:
Current portion of long-term debt (56,503) -
Line of credit (300,000) -
(d) To record the long-term borrowings utilized for the
Acquisition
7,600,000 -
To record the payoff of P&C debt balances associated
with the Acquisition:
Long-term debt (71,976) -
(e) To record a receivable from selling shareholder for
purchase price adjustment
19,119 -
(f) To record the elimination of P&C historical equity
balances:
Common stock (77,342) -
Treasury stock 196,312 -
Retained earnings (363,673) -
To record the issuance of common stock related to the
Acquisition 512,500 -
(g) To record the issuance of vested options related to
the Acquisition 211,763 -
Income Statement
(h) To record the amortization of goodwill, based on a
15-year life 387,082 516,109
(i) To record interest expense related to P&C acquisition
debt 368,244 502,659
(j) To record income taxes for P&C at an effective rate of
38% 16,540 157,091
To record the tax benefit on the amortization of
goodwill (147,091) (196,122)
To record the tax benefit on the additional interest
expense (139,933) (191,010)
</TABLE>
