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 August 31, 2000
-------------------------------------------------
[ ] 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
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4211 West 11th Ave., Eugene, Oregon 97402
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(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 October 4, 2000, 5,896,232 shares of the issuer's common stock were
outstanding.
This report contains 12 pages. The only exhibit is the Financial Data
Schedule.
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<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
Consolidated Balance Sheets
ASSETS
August 31, November 30,
2000 1999
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 305,266 $ 34,224
Accounts receivable, net 10,392,797 8,715,044
Prepaids and other current assets 3,690,406 2,375,237
Deferred income taxes 959,427 959,427
-------------- --------------
Total current assets 15,347,896 12,083,932
Property and equipment, net 15,583,011 12,837,224
Goodwill, net 6,792,731 7,183,581
Other assets 602,468 599,464
-------------- --------------
$38,326,106 $32,704,201
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $1,752,072 $1,743,718
Line of credit 4,439,543 2,505,534
Accounts payable 1,595,277 999,894
Accrued expenses 433,295 2,085,357
Income taxes payable 1,012,159 443,916
Deferred revenue 2,047,468 1,610,855
------------- -------------
Total current liabilities 11,279,814 9,389,274
Deferred income taxes 995,407 995,407
Long-term debt, less current portion 7,516,850 4,919,353
------------- -------------
Total liabilities 19,792,071 15,304,034
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Minority interest in subsidiary 35,424 35,424
Shareholders' equity:
Preferred stock, without par value, 10,000,000 shares
authorized, no shares issued or outstanding
Common stock, without par value; 20,000,000 shares
authorized, 5,896,232 and 5,855,244 shares
issued and outstanding, respectively 16,908,476 16,657,650
Note receivable from shareholder (59,895) 0
Options issued for common stock 211,763 211,763
Foreign currency translation (3,213) (993)
Retained earnings 1,441,480 496,323
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Total shareholders' equity 18,498,611 17,364,743
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$38,326,106 $32,704,201
============= =============
</TABLE>
See accompanying notes
1
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<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
Consolidated Statements of Operations
Three Months Ended August 31, Nine Months Ended August 31,
------------------------------ ------------------------------
2000 1999 2000 1999
-------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Transit advertising $12,568,186 $9,187,179 $31,236,535 $23,761,395
Outdoor advertising 1,746,323 1,569,939 4,953,885 4,383,332
-------------- -------------- --------------- -------------
Gross revenue 14,314,509 10,757,118 36,190,420 28,144,727
Less - Agency commissions (1,288,677) (1,117,276) (3,290,034) (2,775,011)
-------------- -------------- --------------- -------------
Net revenues 13,025,832 9,639,842 32,900,386 25,369,716
OPERATING EXPENSES:
Direct advertising expenses 9,402,547 6,970,318 24,143,847 18,266,418
General and administrative 1,789,404 1,161,717 4,988,876 3,473,445
Contract settlement 0 (191,528) . 0 (1,077,469)
Start-up costs 17,497 158,745 78,597 454,527
Depreciation and amortization 491,546 363,686 1,346,786 1,086,582
-------------- -------------- --------------- -------------
Operating income 1,324,838 1,176,904 2,342,280 3,166,213
OTHER (INCOME) EXPENSE:
Interest expense 285,238 284,880 792,841 846,765
-------------- -------------- --------------- -------------
Income before income taxes 1,039,600 892,024 1,549,439 2,319,448
PROVISION FOR INCOME TAXES 405,426 347,892 604,282 904,584
-------------- -------------- --------------- -------------
NET INCOME $634,174 $544,132 $945,157 $1,414,864
============== ============== =============== =============
Earnings per share:
Basic $0.11 $0.11 $0.16 $0.29
Diluted $0.11 $0.11 $0.16 $0.29
</TABLE>
See accompanying notes
2
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<TABLE>
<CAPTION>
OBIE MEDIA CORPORATION
Consolidated Statements of Cash Flows
Nine Months Ended August 31,
2000 1999
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $945,157 $1,414,864
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,346,786 1,086,582
Contract settlement 0 (527,469)
Changes in operating assets and liabilities (2,953,585) (1,546,965)
--------------- ----------------
Net cash provided by (used in) operating activities (661,642) 427,012
--------------- ----------------
Cash Flows From Investing Activities:
Capital expenditures (3,667,223) (1,203,787)
Other (37,504) (46,946)
--------------- ----------------
Net cash used in investing activities (3,704,727) (1,250,733)
--------------- ----------------
Cash Flows From Financing Activities:
Net proceeds from issuance of common stock 0 10,103,603
Net borrowing (payments) on line of credit 1,934,009 (912,099)
Borrowings of long-term debt 4,000,000 0
Payments on long-term debt (1,394,149) (8,265,671)
Other 99,771 (7,376)
--------------- ----------------
Net cash provided by financing activities 4,639,631 918,457
--------------- ----------------
Effect of exchange rate changes on cash (2,220) 584
--------------- ----------------
Net increase in cash 271,042 95,320
Cash, beginning of period 34,224 326,140
--------------- ----------------
Cash, end of period $305,266 $421,460
=============== ================
Supplemental Disclosure:
Issuance of stock to employee benefit plan $91,160 $85,928
Accrual of stock offering costs 0 389,370
Interest capitalized 13,101 11,727
Cash Paid for Interest 727,323 267,338
Cash Paid for Taxes $36,039 $934,805
</TABLE>
See accompanying notes
3
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The interim financial statements have been prepared by Obie Media
Corporation ("Obie Media," the "Company," "We," "Us," or "Our") 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 August 31, 2000 and November 30, 1999, and the results of
operations and cash flows of the Company for the three and nine months ended
August 31, 2000 and 1999, as applicable. 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, 1999 Form 10-KSB. This quarterly report should be
read in conjunction with such annual report.
2. Acquisition of Outdoor Advertising Displays
In January 2000, the Company acquired approximately 200 outdoor
advertising displays, located primarily in Montana and Wyoming, from JOSCO
Outdoor. The Company financed the purchase price of approximately $2.5 million
with borrowings under the Bridge Loan described below (see Note 4).
3. Contract Settlement
The Company had a contract to provide advertising sales services to the
Tri-County Metropolitan Transit District ("Tri-Met") in Portland, Oregon, which,
by its terms, was scheduled to expire in June 2001. The Company originally began
serving Tri-Met in January 1994, pursuant to a five-year agreement, which was
later extended for an additional two years. The Federal Transit Administration
("FTA"), which provides substantial monies to transit districts, has taken the
position that transit advertising contracts, in most instances, may not exceed
five years in length. At the request of the FTA, Tri-Met and the Company agreed
that the Company's agreement with Tri-Met was to terminate on June 30, 1999 and,
in December 1998, entered into a settlement agreement to compensate the Company
for early termination of the existing contract. During the first and third
quarters of fisca1 1999, the Company recorded pre-tax gains of $885,941 and
$191,528, respectively, which has been reflected in the accompanying
consolidated statements of operations as an offset to operating expenses.
In anticipation of the termination of the Company's transit district
agreement, Tri-Met solicited proposals for the operation of the Portland transit
district. Tri-Met awarded the Company a new multi-year contract in September
1999.
4. Debt Agreements
In January 2000, the Company borrowed $4,000,000 under a Bridge Loan
(the Loan) from U.S. Bank (the Bank). The proceeds were used to finance the
billboard acquisition described above (see Note 2) and to repay borrowings under
the Company's line of credit. The Loan, which is collateralized by substantially
all of the Company's assets, had an original maturity date of July 3, 2000 and
bears interest based, at the Company's option, on the London Inter-Bank Offering
Rate (LIBOR) plus 2% (8.62% at August 31, 2000) or at the Bank's prime rate plus
0.5% (9.5% at August 31, 2000). The bank has extended the maturity date of the
Loan to September 30, 2000 and has agreed to refinance the Loan with long-term
financing. Accordingly, the balance has been reflected in the accompanying
consolidated balance sheet as long-term debt.
In June 2000 the company amended its loan agreement, increasing the
maximum available borrowing capacity under the line of credit by $2,000,000 from
$4,000,000 to $6,000,000.
4
<PAGE>
The Company's Term Loan Agreement contains certain covenants including
maintenance of a current ratio and cash flow coverage. The Company was in
compliance with these covenants as of August 31, 2000.
5. Earnings Per Share
Basic earnings per share (EPS) is calculated using the weighted average
number of common shares outstanding for the period and diluted EPS is calculated
using the weighted average number of common shares and dilutive common
equivalent shares outstanding. All share and per-share information has been
adjusted to give retroactive effect to an 11-for-10 stock split which occurred
in November 1999. The following is a reconciliation of the basic and diluted
shares used in the per share calculation:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------------- -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic shares (weighted average) 5,884,253 4,997,003 5,880,825 4,834,235
Dilutive effect of stock options 36,296 46,503 49,596 90,315
----------- ----------- ----------- -----------
Diluted shares 5,920,549 5,043,506 5,930,421 4,924,550
=========== =========== =========== ===========
</TABLE>
6. Comprehesive Income
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS
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. Comprehensive
income did not materially differ from reported net income for the three and nine
month periods ended August 31, 2000 and 1999.
7. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133), which establishes accounting and reporting standards for
all derivative instruments. SFAS 133 was to be effective for fiscal years
beginning after June 15, 1999. In June 1999, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 137 as an amendment
to SFAS 133 and deferred the effective date of SFAS 133 to fiscal years
beginning after June 15, 2000. The Company currently has no derivative
instruments and, therefore, the adoption of SFAS 133 is not expected to have an
impact on the Company's financial position or results of operations.
8. Reclassifications
Certain amounts previously reported in the Company's financial
statements as of November 30, 1999 have been reclassified to conform to the
current fiscal year presentation.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINACIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion includes certain forward-looking statements
that involve a number of 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: 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 innovative display products; competitive
factors, including increased competition and price pressures; changes in
regulatory or other external factors; failure to successfully conclude
negotiations on pending transactions or to successfully assimilate expanded
operations, inability to generate advertising revenues to meet contractual
guarantees, and cancellation or interruption of contracts with governmental
agencies, as well as those factors listed from time to time in the Company's SEC
reports, including, but not limited to, the factors discussed in Exhibit 99.1
incorporated by reference in the Company's Annual Report for the year ended
November 30, 1999.
Recent Developments
In January 2000, the Company acquired approximately 200 outdoor
advertising displays, located primarily in Montana and Wyoming, from JOSCO
Outdoor for approximately $2.5 million.
In February 2000, the Board of Directors of the Greater Vancouver
Transit Authority (GVTA), also known as TransLink, voted to renew its contract
with the Company for a five-year period. The contract, which was originally
awarded in 1998, was guaranteed for two years with an option to renew for the
next five years.
In March 2000, the Company was awarded the right to sell interior and
exterior transit advertising space on the transit fleet of Hillsboro Area
Regional Transit Authority (HART), in Tampa, Florida. In April 2000, HART
advised us that the contract award was void due to procedural defects in the
bidding process. A new request for proposal was issued by HART on August 17,
2000 and the Company has responded to it.
In May 2000 we were notified by the Greater Richmond Transit Company
that effective May 31, 2000, they would begin using their own employees to
manage their advertising services and would no longer be contracting with Obie
Media (representing a loss of approximately 151 vehicles).
In June 2000, The Sacramento Regional Transit District in Sacramento,
California renewed our contract for two additional years and the Capital
Metropolitan Transportation Authority (Capital METRO) in Austin, Texas granted
us the first of two one-year renewals available under our existing contract.
Also in June 2000, we created a digital graphics division with the
acquisition of state-of-the-art digital vinyl printing equipment. The purchase
of this equipment is anticipated to double our in-house production capability.
Prior to the acquisition of this equipment we were able to produce approximately
30% of our total ad production in-house.
In September 2000, Connecticut Transit, CTTRANSIT awarded Obie Media
the transit advertising contract on its total fleet of 380 buses for an
additional three years, with two one-year options. Also in September 2000, The
San Joaquin Regional Transit District (SMART) in Stockton, California has
granted Obie Media a one-year renewal on its fleet of 111 buses.
Comparison of the Three Months Ended August 31, 2000 and 1999
Gross revenues increased $3.6 million, or 33.1%, to $14.3 million for
the three months ended August 31, 2000 from $10.8 million for the comparable
period in fiscal 1999. Transit revenues increased $3.4 million, or 36.8%, to
$12.6 million for the three months ended August 31, 2000 from $9.2 million for
the third quarter of fiscal 1999. This increase was due to volume and rate
increases in our existing markets, as well as revenues associated with new
transit operations in St. Louis, Kansas City and Ft Worth, off-set by our loss
of markets in Virginia. Outdoor advertising revenues increased $176,000, or
11.2%, to $1.7 million for the third quarter of fiscal 2000 from $1.6 million
6
<PAGE>
for the comparable period in fiscal 1999, primarily as a result of revenues
associated with our acquisition of outdoor advertising displays in the fourth
quarter of fiscal 1999 and the first quarter of fiscal 2000. Agency commissions
increased $171,000, or 15.3%, to $1.3 million for the three months ended August
31, 2000 from $1.1 million for the third quarter of fiscal 1999, primarily due
to volume increases in our existing markets, as well as agency commissions on
revenues associated with new transit operations in St. Louis, Kansas City and Ft
Worth, off-set by our loss of markets in Virginia. As a result of the foregoing
reasons, net revenues increased $3.4 million, or 35.1%, to $13.0 million for the
three months ended August 31, 2000 from $9.6 million for the comparable period
in fiscal 1999.
Direct advertising expenses increased $2.4 million, or 34.9%, to $9.4
million for the three months ended August 31, 2000 from $7.0 million for the
comparable period in fiscal 1999. Direct advertising expenses decreased, as a
percentage of gross revenues, to 65.7% for the third quarter of fiscal 2000 from
64.8% for the same period in fiscal 1999.
General and administrative expenses increased $628,000, or 54.0%, to
$1.8 million for the three months ended August 31, 2000 from $1.2 million for
the comparable period in fiscal 1999. The increase resulted primarily from
increases in personnel and related costs associated with managing the growth of
our transit business, including the addition of new districts. General and
administrative expenses, as a percentage of gross revenues, increased to 12.5%
for the three months ended August 31, 2000 from 10.8% for the same period in
fiscal 1999. We expect general and administrative expenses to decease as a
percentage of gross revenues during the fourth quarter of fiscal 2000, as
compared to the first nine months of fiscal 2000, as a result of anticipated
seasonal revenue increases.
During the third quarter of fiscal 1999, we recognized a pre-tax gain
of $192,000 associated with our contract settlement with Tri-Met (See Note 3 to
our Condensed Consolidated Financial Statements).
Start-up costs decreased to $17,000 for the three months ended August
31, 2000 from $159,000 for the comparable period in fiscal 1999. Start-up costs
include expenses incurred in new markets prior to the time the Company begins
its sales operations, as well as costs incurred in obtaining new transit
district contracts. These costs vary depending on the number and size of transit
districts that become available for proposal during the period and our success
in obtaining new contracts.
Depreciation and amortization expenses increased $128,000, or 35.2%, to
$492,000 for the three months ended August 31, 2000 from $364,000 for the
comparable period in fiscal 1999, primarily due to capital expenditures for
outdoor advertising displays as well as our investment in equipment in new
markets and our upgrading of computer capabilities in our existing markets.
Due to the above factors, operating income increased $148,000, or
12.6%, to $1,325,000 for the three months ended August 31, 2000 from $1,177,000
for the third quarter of fiscal 1999. Excluding the effect of the Tri-Met
contract settlement, operating income increased $339,000, or 34.4%, to $1.3
million for the quarter ended August 31, 2000 from $985,000 for the same period
in fiscal 1999.
Interest expense held constant at $285,000 for the three months ended
August 31, 2000 and 1999.
Provision for income taxes increased $58,000, or 16.5%, to $405,000 for
the three months ended August 31, 2000, from $348,000 for the comparable period
in fiscal 1999. The Company's effective tax rates was 39.0% the three months
ended August 31, 2000 and 1999. The difference between the statutory United
States federal income tax rate and the effective tax rates was primarily the
result of foreign, state and local taxes.
As a result of the foregoing factors, net income decreased $90,000, or
16.5%, to $634,000 for the three months ended August 31, 2000 from $544,000 for
the same period in fiscal 1999. Excluding the tax-effected benefit of the
Tri-Met contract settlement, net income increased $207,000, or 48.4%, to
$634,000 for three months ended August 31, 2000 from $427,000 for the comparable
period in fiscal 1999.
7
<PAGE>
Comparison of the Nine Months Ended August 31, 2000 and 1999
Gross revenues increased $8.0 million, or 28.6%, to $36.2 million for
the nine months ended August 31, 2000 from $28.1 million for the comparable
period in fiscal 1999. Transit revenues increased $7.5 million, or 31.5%, to
$31.2 million for the nine months ended August 31, 2000 from $23.8 million for
the same period in fiscal 1999. This increase was principally due to volume and
rate increases in our existing markets, as well as revenues associated with new
transit operations in St. Louis, Kansas City and Ft. Worth, off-set by our loss
of markets in Virginia. Outdoor advertising revenues increased $571,000, or
13.0%, to $5.0 million for the nine months of fiscal 2000 from $4.4 million for
the comparable period in fiscal 1999, primarily as a result of revenues
associated with our acquisition of outdoor advertising displays in the fourth
quarter of fiscal 1999 and the first half of fiscal 2000. Agency commissions
increased $515,000, or 18.6%, to $3.3 million for the nine months ended August
31, 2000 from $2.8 million for fiscal 1999, primarily due to increased sales
volume in our existing markets, as well as agency commissions on revenues
associated with new transit operations in St. Louis, Kansas City and Ft Worth,
off-set by our loss of markets in Virginia. As a result of the foregoing
reasons, net revenues increased $7.5 million, or 29.7%, to $32.9 million for the
nine months ended August 31, 2000 from $25.4 million for the comparable period
in fiscal 1999.
Direct advertising expenses increased $5.9 million, or 32.2%, to $24.1
million for the nine months ended August 31, 2000 from $18.3 million for the
comparable period in fiscal 1999. Direct advertising expenses increased, as a
percentage of gross revenues, to 66.7% for the first nine months of fiscal 2000
from 64.9% for the same period in fiscal 1999. These increases are primarily
due to the faster growth of the transit advertising business, where costs,
especially occupancy costs, are higher than in the outdoor advertising business.
General and administrative expenses increased $1.5 million, or 43.6%,
to $5.0 million for the nine months ended August 31, 2000 from $3.5 million for
the comparable period in fiscal 1999. The increase resulted primarily from
increases in personnel and related costs associated with managing the growth of
our transit business, including the addition of new districts. General and
administrative expenses, as a percentage of gross revenues, increased to 13.8%
for the nine months ended August 31, 2000 from 12.3% for the same period in
fiscal 1999. We expect general and administrative expenses to decease as a
percentage of gross revenues during the fourth quarter of fiscal 2000, as
compared to the first nine months of the year, as a result of anticipated
seasonal revenue increases.
During the nine months ended August 31, 1999, we recognized a pre-tax
gain of $1,077,000 associated with our contract settlement with Tri-Met (See
Note 3 to our Condensed Consolidated Financial Statements).
Start-up costs decreased to $79,000 for the nine months ended August
31, 2000 from $455,000 for the comparable period in fiscal 1999. Start-up costs
include expenses incurred in new markets prior to the time the Company begins
its sales operations, as well as costs incurred in obtaining new transit
district contracts. These costs vary depending on the number and size of transit
districts that become available for proposal during the period and our success
in obtaining new contracts.
Depreciation and amortization expenses increased $260,000, or 23.9%, to
$1.3 million for the nine months ended August 31, 2000 from $1.1 million for the
comparable period in fiscal 1999, primarily due to capital expenditures for
outdoor advertising displays as well as our investment in equipment in new
markets and our upgrading of computer capabilities in our existing markets.
Operating income decreased $824,000, or 26.0%, to $2.3 million for the
nine months ended August 31, 2000 from $3.2 million for the same period in
fiscal 1999, primarily due to the effect of our contract settlement with
Tri-Met. Excluding the effect of the Tri-Met contract settlement, operating
income increased $254,000, or 12.1%, to $2.3 million for the nine months ended
August 31, 2000 from $2.1 million for the same period in fiscal 1999.
8
<PAGE>
Interest expense decreased $54,000, or 6.4%, to $793,000 for the first
nine months of fiscal 2000 from $847,000 for the comparable period in fiscal
1999.
Provision for income taxes decreased $300,000, or 33.2%, to $604,000
for the nine months ended August 31, 2000, from $905,000 for the comparable
period in fiscal 1999, primarily due to the tax effect of our contract
settlement with Tri-Met. The Company's effective tax rate was 39.0% for the nine
months ended August 31, 2000 and 1999. The difference between the statutory
United States federal income tax rate and the effective tax rate was primarily
the result of foreign, state and local taxes.
Net income decreased $470,000, or 33.2%, to $945,000 for the nine
months ended August 31, 2000 from $1.4 million for the same period in fiscal
1999. Excluding the tax-effected benefit of the Tri-Met contract settlement, net
income increased $188,000, or 24.8%, to $945,000 for the nine months ended
August 31, 2000 from $758,000 for the comparable period in fiscal 1999.
Liquidity and Capital Resources
We have historically satisfied our working capital requirements with
cash from operations and revolving credit borrowings. Our working capital at
August 31, 2000 and November 30, 1999 was $4.1 million and $2.7 million,
respectively. The increase in working capital is primarily due to our increased
sales which has resulted in an increase in accounts receivable. Acquisitions and
capital expenditures, primarily for the construction of new outdoor advertising
displays, have been financed primarily with borrowed funds. At August 31, 2000,
Obie Media had outstanding borrowings of $13.7 million, of which $8.3 million
was pursuant to long-term credit agreements, $1.0 million was pursuant to the
agreement to acquire P & C Media in September 1998, and $4.4 million was
pursuant to our operating line of credit. Our indebtedness is collateralized by
substantially all of our assets. See Note 4 to our condensed consolidated
financial statements. At August 31, 2000, available borrowing capacity under the
line of credit, based on collateralized accounts, was $1.6 million.
Obie Media's net cash used in operating activities was $662,000 during
the nine months ended August 31, 2000 as compared to net cash provided by
operating activities of $427,000 for the same period in fiscal 1999. The change
between periods was primarily due to cash received in connection with the
Company's contract settlement with Tri-Met in first quarter of fiscal 1999 and
larger payments to transit districts during the first nine months of fiscal
2000.
Net cash used in investing activities was $3.7 million and $1.3 million
during the nine months ended August 31, 2000 and 1999, respectively. The
increase in these expenditures during the first nine months of fiscal 2000 was
principally related to the costs associated with the acquisition and
construction of outdoor advertising displays as well as expenditures related to
opening new offices. We have no material future commitments for capital
expenditures but anticipate that our capital expenditures, exclusive of those
related to any future acquisitions, may be up to $750,000 during the remainder
of fiscal 2000.
Net cash provided by financing activities was $4.6 million and $918,000
during the nine months ended August 31, 2000 and 1999, respectively. The
increase was primarily the result of borrowings used to finance our acquisition
of outdoor advertising displays in first quarter of fiscal 2000.
We expect to pursue a policy of continued growth through obtaining new
transit district agreements, acquiring out-of-home advertising companies or
assets and constructing new outdoor advertising displays. We intend to finance
our future expansion activities using a combination of internal and external
sources. We believe that internally generated funds and funds available for
borrowing under our bank credit facilities will be sufficient to satisfy all
debt service obligations and to finance our existing operations, including
anticipated capital expenditures, but excluding possible acquisitions, through
fiscal 2000. Future acquisitions by Obie Media, if any, may require additional
debt or equity financing.
9
<PAGE>
Seasonality
Obie Media's revenues and operating results historically have
fluctuated by season, generally following the advertising trends in our major
transit markets. Typically, our results of operations are strongest in the
fourth quarter and weakest in the first quarter of our fiscal year which ends on
November 30. Our transit advertising operations are more seasonal than our
outdoor advertising operations as our outdoor advertising display space, unlike
our transit advertising display space, is and has been sold nearly exclusively
by means of 12-month contracts. We believe that the seasonality of our revenues
and operating results will increase as our transit advertising operations
continue to expand more rapidly than our outdoor advertising operations. This
seasonality, together with fluctuations in general and regional economic
conditions and the timing and expenses related to acquisitions, the obtaining of
new transit agreements and other actions we have taken to implement our growth
strategy, have contributed to fluctuations in our periodic operating results.
These fluctuations likely will continue. Accordingly, our results of operations
in any period may not be indicative of the results to be expected for any future
period.
Year 2000 Compliance
The Year 2000 problem is the result of the inability of some computers
and computer software programs to accurately recognize, for dates after 1999,
dates which are often expressed as a two-digit number. The inability to
accurately recognize date information could adversely affect computer operations
and calculations or cause computer systems and computer-dependent mechanical
systems not to operate at all.
To date, we have not, nor to our knowledge, has any third party transit
district, vendor or service provider significant to our operations, experienced
any material Year 2000 related problems. However, we cannot determine if we will
be subject to Year 2000 compliance problems in the future.
We will continuously monitor our systems to resolve any Year 2000
problems that may arise in the future. We believe that our efforts to achieve
Year 2000 compliance and the impact of the Year 2000 problem will not have a
material effect on our operations.
Market Risk
We have not entered into derivative financial instruments. We may be
exposed to future interest rate changes on our debt. We do not believe that a
hypothetical 10% change in interest rates would have a material effect on our
cash flows.
10
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The Company held its annual meeting of shareholders on April 21, 2000.
At the meeting Randall C. Pape and Stephen A. Wendell were elected to the Board
of Directors for three-year terms. Voting on the election of directors was as
follows:
Votes Votes
For Withheld Abstained
--------- -------- ---------
Randall C. Pape 5,367,193 30,502 0
Stephen A. Wendell 5,367,193 30,502 0
In addition, the following directors continued in office following the
shareholder meeting: Brian B. Obie, Delores M. Mord, Wayne P. Schur and Richard
C. Williams.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27)Financial Data Schedule
(b) A report on Form 8-K was filed by the Company on October 11, 2000 which
reported the company's earnings for the period ended August 31, 2000
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 October 16, 2000 By: /s/ Michael E. Hubbard *
Michael E. Hubbard
Vice President - Corporate Controller
* Signing on behalf of the registrant as principal financial
and accounting officer
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