<PAGE> 1
EXHIBIT 99.1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ADVANTAGE OUTDOOR COMPANY, LP AND SUBSIDIARIES
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1999 and
March 31, 2000 (unaudited) F-3
Consolidated Statements of Operations for the year ended
December 31, 1999 and the three-months ended
March 31, 2000 and 1999 (unaudited) F-4
Consolidated Statement of Member's Equity for the
year ended December 31, 1999 F-5
Consolidated Statement of Cash Flows for the year ended December 31, 1999 and
for the three months ended March 31,
2000 and 1999 (unaudited) F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Managers
Advantage Outdoor Company, LP and subsidiaries:
We have audited the accompanying consolidated balance sheet of Advantage Outdoor
Company, LP and subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, member's equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audit 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
misstatement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Advantage Outdoor
Company, LP and subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for the year then ended.
/s/ KPMG, LLP
Houston, Texas
March 3, 2000
F-2
<PAGE> 3
ADVANTAGE OUTDOOR COMPANY, LP AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
Assets 1999 2000
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 241,715 261,229
Trade accounts receivable, net 2,500,664 2,347,511
Prepaid land leases and other current assets 1,123,189 1,217,379
------------- -------------
Total current assets 3,865,568 3,826,119
Property and equipment, net 49,849,432 49,561,963
Intangible assets, net 55,092,149 54,546,490
Other assets 292,593 281,634
------------- -------------
Total assets $ 109,099,742 108,216,206
============= =============
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 3,406,523 3,418,880
Trade accounts payable 195,508 181,672
Accrued expenses 1,655,148 87,853
Deferred revenue and customer deposits 289,304 69,527
Other current liabilities 1,253,933 1,094,513
------------- -------------
Total current liabilities 6,800,416 4,852,445
Long-term debt, excluding current maturities 69,800,617 72,527,387
Amounts payable under non-compete and holdback
agreements, excluding current portion 1,299,375 1,299,375
------------- -------------
Total liabilities 77,900,408 78,679,207
Commitments and contingencies
Member's equity:
Member's capital 41,164,287 41,164,287
Accumulated deficit (9,964,953) (11,627,288)
------------- -------------
Total member's equity 31,199,334 29,536,999
------------- -------------
Total liabilities and member's equity $ 109,099,742 108,216,206
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 4
ADVANTAGE OUTDOOR COMPANY, LP AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------------
1999 1999 2000
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Net revenues $ 18,444,769 3,687,781 5,334,853
Operating expenses:
Direct advertising expenses 5,740,983 1,132,957 1,664,774
Selling, general and administrative expenses 2,767,049 827,770 1,199,831
Depreciation and amortization 7,390,545 1,333,906 2,270,993
------------ ------------ ------------
Total operating expenses 15,898,577 3,294,633 5,135,598
------------ ------------ ------------
Operating income 2,546,192 393,148 199,255
Other income (expense):
Interest expense, net (5,657,513) (928,253) (1,785,048)
Management fees and other (1,801,837) (75,000) (76,542)
------------ ------------ ------------
Net loss $ (4,913,158) (610,105) (1,662,335)
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 5
ADVANTAGE OUTDOOR COMPANY, LP AND SUBSIDIARIES
Consolidated Statement of Member's Equity
Year ended December 31, 1999
<TABLE>
<CAPTION>
TOTAL
MEMBER'S ACCUMULATED MEMBER'S
CAPITAL DEFICIT EQUITY
----------- ----------- -----------
<S> <C> <C> <C>
Balances at December 31, 1998 $41,164,287 (5,051,795) 36,112,492
Net loss -- (4,913,158) (4,913,158)
----------- ----------- -----------
Balances at December 31, 1999 $41,164,287 (9,964,953) 31,199,334
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 6
ADVANTAGE OUTDOOR COMPANY, LP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------------
1999 1999 2000
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (4,913,158) (610,105) (1,662,335)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 7,390,545 1,333,906 2,270,993
Amortization of deferred loan costs 388,193 43,252 114,980
Changes in assets and liabilities, net of assets
acquired and liabilities assumed:
Trade accounts receivable (857,530) (308,709) 38,054
Prepaid land leases and other assets (112,734) (286,907) (299,636)
Trade accounts payable (89,032) 34,026 201,437
Accrued expenses and other current liabilities 442,219 (160,699) (2,862,243)
Deferred revenue and customer deposits 5,841 48,597 (19,639)
------------ ------------ ------------
Net cash provided by (used in) operating activities 2,254,344 93,361 (2,218,389)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (2,383,172) (67,847) (41,002)
Cash paid for acquisitions, net of working capital acquired (28,554,884) (4,287,185) (460,222)
------------ ------------ ------------
Net cash used in investing activities (30,938,056) (4,355,032) (501,224)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from borrowings 29,950,000 4,150,000 2,744,000
Repayments of borrowings (15,705,024) (14,686,955) (4,873)
Payments of debt issuance costs (180,063) (61,888) --
------------ ------------ ------------
Net cash provided by (used in) financing activities 14,064,913 (10,598,843) 2,739,127
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalent (14,618,799) (14,860,514) 19,514
Cash and cash equivalents, beginning of period 14,860,514 14,860,514 241,715
------------ ------------ ------------
Cash and cash equivalents, end of period $ 241,715 -- 261,229
============ ============ ============
Supplemental disclosure of cash flow information -
cash paid during the period for interest $ 4,472,032 798,298 1,428,038
============ ============ ============
Supplemental disclosure of noncash activities:
Long-term debt assumed in connection with acquisitions $ 27,039 -- --
============ ============ ============
Amounts payable under non-compete and holdback agreements
incurred in connection with acquisitions $ 1,232,523 500,000 --
============ ============ ============
Debt issuance costs financed by long-term debt $ 1,350,000 -- --
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 7
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Advantage Outdoor Company, LP and subsidiaries, (collectively, the
Company) currently own and operate approximately 5,100 billboard display
faces in markets throughout Texas and in selected markets in Arkansas and
Oklahoma.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the financial statements of
Advantage Outdoor Company, LP, and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated
in consolidation. Certain reclassifications of prior year amounts have
been made to conform with the current year presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include demand deposits in financial
institutions and investments with an original maturity of three months or
less.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets
which range from 2 to 15 years.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill, noncompete agreements,
deferred financing costs and organization costs.
Goodwill represents the excess of acquisition costs over the fair value
of net assets acquired and is amortized on a straight-line basis over 15
years. For the year ended December 31, 1999, the Company recorded
$3,437,745 of amortization related to goodwill. Accumulated amortization
of goodwill was $5,081,850 at December 31, 1999.
In connection with certain acquisitions, the Company has entered into
noncompete agreements with the previous owners of the acquired assets.
Noncompete agreements are amortized over the life of the agreement,
generally 2 to 10 years. Accumulated amortization related to noncompete
agreements was $1,574,958 at December 31, 1999.
Financing costs consist of deferred loan costs associated with various
debt issuances and are amortized over the terms of the related debt using
the interest method. Accumulated amortization relating to financing costs
was $560,756 at December 31, 1999.
IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS
The Company assesses the recoverability of long-lived and intangible
assets by determining whether the depreciation or amortization of the
assets' balances over their remaining lives can be recovered through
undiscounted future operating cash flows of the acquired operations. The
assessment of the recoverability of long-lived and intangible assets will
be impacted if estimated future operating cash flows are not achieved.
F-7
<PAGE> 8
OTHER CURRENT LIABILITIES
Other current liabilities consist primarily of the current portion of
amounts payable under non-compete agreements and purchase price holdback
amounts payable to the sellers of certain acquired assets (see note 2).
REVENUE RECOGNITION
The Company recognizes revenue from outdoor advertising, net of agency
commissions, as advertising services are provided. Deferred revenue
consists principally of advertising revenue received or billed in advance
and is recognized in income as services are provided over the term of the
contract.
FEDERAL AND STATE TAXES
As a limited partnership, the Company is taxed as a partnership for
federal income tax purposes. Accordingly, any federal tax liability is
the responsibility of the individual member. Texas franchise tax is
assessed at the individual company level and is computed based on stated
capital amounts. For the year ended December 31, 1999, Texas franchise
tax amounted to $3,392 and is included in selling, general and
administrative expenses in the accompanying consolidated statements of
operations.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
(2) ACQUISITIONS
During 1999, the Company made the following acquisitions, each of which
has been accounted for using the purchase method. The accompanying
consolidated financial statements include the results of operations of
each acquired entity from the date of acquisition. All acquisition costs
have been allocated to assets acquired and liabilities assumed based on
management's estimate of the fair value at the date acquired.
On February 19, 1999, the Company acquired all of the outstanding common
stock of Venture Outdoor Advertising, Inc., for a cash purchase price of
$2,800,000. In addition to the purchase price, the sellers entered into a
noncompete agreement totaling $500,000 to be paid out over five years in
installments of $100,000 per year. The excess purchase price of $800,000
was allocated to goodwill and is being amortized over a 15-year period.
On April 5, 1999, the Company acquired substantially all of the billboard
structures and related assets of Big Country Bulletin, Inc. for a total
purchase price of $5,100,000. Purchase price consideration consisted of
$4,800,000 in cash and $300,000 in holdbacks payable to sellers. The
excess purchase price of $1,700,000 was allocated to goodwill and is
being amortized over a 15-year period.
On September 1, 1999, the Company acquired substantially all of the
billboard structures and related assets of Joe Rabensburg d/b/a Texas
Displays for a total purchase price of $3,300,000. The excess purchase
price of $1,500,000 was allocated to goodwill and is being amortized over
a 15-year period.
F-8
<PAGE> 9
On September 9, 1999, the Company acquired substantially all of the
billboard structures and related assets of South Bend Outdoor Advertising
L.C. for a cash purchase price of $2,700,000. The excess purchase price
of $1,900,000 was allocated to goodwill and is being amortized over a
15-year period.
On November 4, 1999, the Company acquired substantially all of the
billboard structures and related assets of Outdoor Network Media, Inc.
for a total purchase price of $3,700,000. Purchase price consideration
consisted of $3,500,000 in cash and $200,000 in holdbacks payable to
sellers. The excess purchase price of $2,500,000 was allocated to
goodwill and is being amortized over a 15-year period.
During 1999, and in addition to the above, the Company purchased
billboard structures and related assets in ten unrelated transactions for
$8,900,000. Purchase price consideration consisted of $8,800,000 in cash,
and $100,000 in holdbacks payable to sellers. Included in the cash
purchase price were various noncompete agreements entered into by the
sellers for periods ranging from 3 to 10 years. The aggregate excess
purchase price of $4,900,000 was allocated to goodwill and is being
amortized over a 15-year period.
In connection with the 1999 acquisitions, the Company incurred and paid
approximately $1,700,000 of various acquisition costs. These costs have
been included as part of total consideration for these acquisitions and
allocated to assets and liabilities of the respective acquisitions. In
addition, the Company entered into noncompete agreements that provide for
total payments of $500,000 over five-year periods. The Company has
recorded a liability for these agreements at December 31, 1999 on the
accompanying consolidated balance sheets.
The following unaudited pro forma results for the year ended December 31,
1999, assume the above acquisitions occurred on January 1, 1999.
<TABLE>
<S> <C>
Revenues $ 20,762,526
Net loss (5,495,857)
</TABLE>
This pro forma data does not purport to be indicative of the actual
results that would have been achieved if these events actually occurred
at the beginning of the period presented and is not intended to be a
projection of future results.
F-9
(Continued)
<PAGE> 10
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999 consist of the following:
<TABLE>
<S> <C>
Billboard structures and land $ 53,565,597
Vehicles and other equipment 1,001,833
Buildings and improvements 214,678
-----------------
54,782,108
Less accumulated depreciation 4,932,676
-----------------
Property and equipment, net $ 49,849,432
=================
</TABLE>
On October 1, 1999, the Company entered into a nonmonetary transaction
whereby the Company exchanged certain of its billboard structures and
related assets with an unrelated third party in exchange for certain
billboard structures and related assets owned by the third party.
(4) LONG-TERM DEBT
Long-term debt at December 31, 1999 consists of the following:
<TABLE>
<S> <C>
Borrowing under a credit facility, as more fully
described below (1999 Credit Facility) $ 72,400,000
Notes payable to sellers, interest at rates ranging from
8% to 10% payable annually, principal payments due
in 2012 and 2014 807,140
-----------------
Total long-term debt 73,207,140
Less current maturities of long-term debt 3,406,523
-----------------
Long-term debt, excluding current
maturities $ 69,800,617
=================
</TABLE>
The 1999 Credit Facility allows the Company to borrow up to a total of
$100,000,000. At December 31, 1999, borrowings under the term loans were
$62,400,000 and borrowings under the revolving loan were $10,000,000.
Interest is at certain base rates, as defined, and was 9.19% with respect
to $55,000,000 of borrowings and 9.69% with respect to $17,400,000 of
borrowings at December 31, 1999. A fee of .75% per year is payable on any
unused portion of the 1999 Credit Facility ($27,600,000 was unused at
December 31, 1999). The 1999 Credit Facility is secured by substantially
all of the Company's assets and provides for certain reporting and
financial covenants. The Company was in compliance with these covenants
at December 31, 1999.
F-10
(Continued)
<PAGE> 11
ADVANTAGE OUTDOOR COMPANY, LP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999
Long-term debt maturities as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $ 3,406,523
2001 4,708,184
2002 6,961,074
2003 8,089,207
2004 9,217,609
Thereafter 40,824,543
----------------
$ 73,207,140
================
</TABLE>
(5) COMMITMENTS
The Company is party to various operating leases for its office buildings
and for sites upon which billboards are built. The leases expire at
various dates and have varying options to renew and to cancel. The
following is a summary of minimum annual rental payments required under
those operating leases that have original or remaining lease terms in
excess of one year:
<TABLE>
<CAPTION>
AMOUNT
----------------
<S> <C>
2000 $ 1,895,679
2001 1,704,319
2002 1,540,460
2003 1,328,497
2004 1,150,886
Thereafter 8,236,479
----------------
$ 15,856,320
================
</TABLE>
Total rent expense under all operating leases for the period ended
December 31, 1999 was $2,485,726.
(6) SUBSEQUENT EVENT
In March 2000, the Company signed a letter of intent to sell all of the
issued and outstanding member's units of the Company.
F-11
