<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission file number 0-28256
OUTDOOR SYSTEMS, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 86-0736400
- ---------------------------------------------- -----------------------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009
- -------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code (602) 246-9569
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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
--- ---
Number of Common Shares outstanding at August 13, 1997: 80,748,093 SHARES.
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets June 30, 1997 (unaudited) and
December 31, 1996............................................................. 1
Condensed Consolidated Statements of Operations for the Three and Six Months ended
June 30, 1997 and 1996 (unaudited)............................................ 2
Condensed Consolidated Statements of Cash Flows Six Months ended
June 30, 1997 and 1996 (unaudited)............................................ 3
Notes to Condensed Consolidated Financial Statements.............................. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................... 6
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.......................................................... 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................ 10
SIGNATURES ......................................................................... 11
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OUTDOOR SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 318,430 $ 11,887
Accounts receivable, net 67,168 56,975
Prepaid land leases 12,256 10,938
Prepaid expenses and other 17,819 17,374
----------- -----------
Total current assets 415,673 97,174
----------- -----------
Property and Equipment, net 1,005,458 742,144
Prepaid Land Leases and Other 12,298 10,155
Deferred Financing Costs 34,440 24,151
Goodwill, net 91,341 59,831
----------- -----------
$ 1,559,210 $ 933,455
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 8,317 $ 8,323
Accrued interest 6,104 7,056
Accrued expenses and other liabilities 23,106 17,653
Current maturities of long-term debt 3,910 28,000
----------- -----------
Total current liabilities 41,437 61,032
Long-term Debt 831,176 578,409
Other Long-term Obligations 3,924 5,835
----------- -----------
Total liabilities 876,537 645,276
----------- -----------
Common Stockholders' Equity:
Common stock, $.01 par value - authorized, 200,000,000
shares; issued and outstanding 80,748,054
and 60,233,447 shares, respectively 807 602
Additional paid-in-capital 711,129 316,788
Accumulated deficit (24,998) (25,275)
Treasury stock at cost - 17,213,331 shares (4,053) (4,053)
Foreign currency translation adjustment (212) 117
----------- -----------
Total common stockholders' equity 682,673 288,179
----------- -----------
$ 1,559,210 $ 933,455
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
OUTDOOR SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30 JUNE 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Outdoor advertising $ 110,520 $ 22,207 $ 200,233 $ 41,929
Less agency commissions and discounts 15,471 2,923 27,968 5,700
------------ ------------ ------------ ------------
95,049 19,284 172,265 36,229
Other income 4,515 298 7,379 298
------------ ------------ ------------ ------------
Net Revenues 99,564 19,582 179,644 36,527
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Direct advertising 52,901 8,292 97,516 16,151
General and administrative 6,167 1,135 12,884 2,213
Depreciation and amortization 13,529 2,698 25,164 5,259
------------ ------------ ------------ ------------
72,597 12,125 135,564 23,623
------------ ------------ ------------ ------------
Operating income 26,967 7,457 44,080 12,904
INTEREST - NET 16,106 3,777 32,029 7,929
------------ ------------ ------------ ------------
Income before items set forth below 10,861 3,680 12,051 4,975
INCOME TAX PROVISION 4,501 1,472 5,001 1,990
------------ ------------ ------------ ------------
Income before extraordinary loss 6,360 2,208 7,050 2,985
EXTRAORDINARY LOSS 6,773 844 6,773 844
------------ ------------ ------------ ------------
Net income (loss) $ (413) $ 1,364 $ 277 $ 2,141
============ ============ ============ ============
LESS STOCK DIVIDENDS,
ACCRETIONS AND DISCOUNTS
ON REDEMPTIONS 2,554 3,461
------------ ------------ ------------ ------------
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON SHAREHOLDERS $ (413) $ (1,190) $ 277 $ (1,320)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON
AND EQUIVALENT SHARE:
Income (loss) before extraordinary loss $ .08 $ (.01) $ .10 $ (.01)
Extraordinary loss (.09) (.02) (.09) (.03)
------------ ------------ ------------ ------------
Net income (loss) per common share $ (.01) $ (.03) $ .01 $ (.04)
============ ============ ============ ============
Weighted average number of shares 77,779,515 38,397,021 73,506,851 35,039,514
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
OUTDOOR SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ 277 $ 2,141
Extraordinary loss 11,288 844
Decrease in deferred taxes (5,002) 1,428
Depreciation and amortization 25,164 5,259
Other 597 912
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (9,856) 1,322
Decrease in prepaid expenses and other 1,859 210
Decrease in accrued interest (950) (123)
Increase in accounts payable and other liabilities 5,908 566
--------- ---------
Net Cash Provided by Operating Activities 29,285 12,559
--------- ---------
INVESTING ACTIVITIES:
Acquisitions of outdoor advertising assets (313,737) (23,342)
Capital expenditures (9,697) (2,891)
--------- ---------
Net Cash Used in Investing Activities (323,434) (26,233)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from Senior Credit Facility 331,348 28,353
Proceeds from 8 7/8% Senior Subordinated Notes, net 485,795
Principal payments on long-term debt and capital leases (587,265) (33,744)
Increase in deferred financing costs (23,636)
Cash dividends paid on preferred stock (293)
Redemption of preferred and exchangeable preferred stock (16,369)
Issuance of common stock, net 394,547 36,643
--------- ---------
Net Cash Provided by Financing Activities 600,789 14,590
--------- ---------
Effect of exchange rate changes on cash (97) --
--------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 306,543 916
CASH AND CASH EQUIVALENTS - BEGINNING 11,887 1,739
--------- ---------
CASH AND CASH EQUIVALENTS - ENDING $ 318,430 $ 2,655
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
OUTDOOR SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable presentation
have been included and are of a normal recurring nature. Operating results for
the three and six months ended June 30, 1997, are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997. The
enclosed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-K filed with the Securities and Exchange Commission on March 31, 1997.
NOTE 2 - NET INCOME (LOSS) PER SHARE
Primary income (loss) per common and common equivalent share is computed on
the weighted average number of common and common equivalent shares outstanding
during each period and includes shares issuable upon exercise of stock options.
NOTE 3 - 1997 ACQUISITIONS
During the first six months of 1997, the Company acquired outdoor advertising
assets in the following locations for the following purchase prices:
<TABLE>
<CAPTION>
DATE PURCHASE
ACQUIRED PRICE
----------- --------
(In thousands)
<S> <C> <C>
Villepigue Outdoor - New York January 9 $ 27,261
Atlanta Bus Shelters - Atlanta January 10 6,401
Philbin & Coine, Inc. - Louisville January 22 830
Scadron Enterprises - Chicago February 14 24,515
Murad Communications - Toronto February 28 5,418
Reynolds Outdoor, LP - Dallas February 28 31,651
Ad Outdoor - Halifax March 6 946
Burlington Northern/Santa Fe - Western and Midwestern states March 26 17,500
3M Transit - Toronto March 31 3,381
Van Wagner - New York & Los Angeles May 22 172,824
Key One - Canada May 29 803
Deposit on 3M Acquisition 20,214
Other 1,993
--------
$313,737
========
</TABLE>
Each of these acquisitions has been accounted for using the purchase method
of accounting. The purchase prices above include working capital purchased and
applicable fees and expenses; such working capital is subject to final
adjustment before December 31, 1998. These acquisitions were financed,
primarily, utilizing cash flows and borrowings under the Company's senior credit
facility.
4
<PAGE> 7
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENT
Effective in 1997, the Company is required to implement SFAS No. 128,
"Earnings Per Share" which requires, among other matters, presentation of basic
earnings per share, which is calculated utilizing only weighted average common
shares outstanding. Basic and fully diluted earnings (loss) per share would have
been $(0.01) and $(0.04) for the three months ended June 30, 1997 and 1996, and
$0.01 and $(0.05) for the six months ended June 30, 1997 and 1996 under SFAS
128.
The Financial Accounting Standards Board recently issued SFAS No. 130 on
"Reporting Comprehensive Income" and SFAS No. 131 on "Disclosures about Segments
of an Enterprise and Related Information". The "Reporting Comprehensive Income"
standard is effective for fiscal years beginning after December 15, 1997. The
standard changes the reporting of certain items currently reported in the common
stock equity section of the balance sheet. The Company is currently evaluating
what impact this standard will have on the Company's financial statements. The
"Disclosures about Segments of an Enterprise and Related Information" standard
is effective for fiscal years beginning after December 15, 1997. This standard
requires that public companies report certain information about operating
segments in their financial statements. It also establishes related disclosures
about products and services, geographic areas, and major customers. The Company
is currently evaluating what impact this standard will have on its disclosures.
NOTE 5 - SUBSEQUENT EVENTS
PENDING ACQUISITION
3M Media Acquisition - On April 30, 1997, the Company entered into an
Agreement of Purchase and Sale to acquire the outdoor advertising operations
of Minnesota Mining and Manufacturing Company ("3M") through the purchase of
the capital stock of National Advertising Company, a subsidiary of 3M ("3M
Media"), for approximately $1.0 billion in cash.
The 3M Media acquisition is subject to various conditions, including
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
The Company intends to finance the purchase price of the pending
acquisition and the fees and expenses associated with the pending acquisition
and the acquisition financing through (i) proceeds from the offering of
13,500,000 shares of common stock (the "Common Stock Offering") to the
public, completed on May 28, 1997, (ii) proceeds of an offering of $500
million aggregate principal amount of 87/8% Senior Subordinated Notes due
2007 completed on June 23, 1997 (the "Notes Offering"), and (iii) borrowings
under the Company's senior credit facility which is expected to be amended to
provide for a revolving credit facility and term loans of up to approximately
$900 million.
The Company received written commitments from Canadian Imperial Bank of
Commerce ("CIBC") to increase the amounts that may be borrowed under its
senior credit facility to up to $400 million of revolving credit loans and up
to $500 million of term loans.
PENDING DISPOSAL
On August 4, 1997, the Company announced that it had entered into a letter
of intent with Lamar Advertising Company ("Lamar") to sell to Lamar certain
outdoor advertising assets the Company will acquire from 3M upon the closing
of the 3M Media acquisition. The assets contemplated to be sold to Lamar
consist of approximately 1,800 advertising displays in Atlanta, Denver,
Detroit, Grand Rapids, Houston, New Orleans, Kansas City, Louisville, Phoenix
and Sacramento. The purchase price for such assets is expected to be
approximately $115 million in cash. The transaction is subject to the closing
of the 3M Media acquisition, execution of a definitive agreement with Lamar
and other customary conditions, including expiration or early termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 for the Lamar transaction.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Operating results for the three and six months ended June 30, 1997 include
the operations of the Gannett Outdoor acquisition (the "Gannett Outdoor
Acquisition") completed August 23, 1996, and the several acquisitions completed
during the first and second quarters of 1997 (see Note 3 to the Condensed
Consolidated Financial Statements (unaudited)) (collectively the
"Acquisitions").
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND
JUNE 30, 1996
Gross revenues increased 397.7% to $110.5 million during the second quarter
of 1997 compared to $22.2 million in the second quarter of 1996. Gross revenues
increased approximately 12.8% during the second quarter of 1997 compared to the
second quarter of 1996 for markets where the Company operated both in the 1997
and 1996 periods. The balance of the increased revenues were a result of the
1997 Acquisitions.
Agency commissions were 14.0% and 13.2% of gross revenues in the second
quarter of 1997 and the second quarter of 1996, respectively. Agency commissions
were higher in the 1997 quarter primarily as a result of a slightly higher
proportion of revenues generated through advertising agencies.
Net revenues increased by 408.4% to $99.6 million in the second quarter of
1997 compared to $19.6 million in the second quarter of 1996, primarily as a
result of the increase in gross revenues combined with an increase of $4.2
million of other income. Other income increased primarily due to the inclusion
of revenues from a printing operation acquired in connection with the Gannett
Outdoor Acquisition.
Direct advertising expenses increased to $52.9 million in the second quarter
of 1997 compared to $8.3 million in the second quarter of 1996. This was
primarily a result of the Acquisitions. As a percentage of net revenues, direct
advertising expenses were approximately 53.1% in the second quarter of 1997
compared to 42.3% in the second quarter of 1996.
General and administrative expenses increased to $6.2 million in the second
quarter of 1997 compared to $1.1 million in the second quarter of 1996,
primarily as a result of the Acquisitions. As a percentage of net revenues,
general and administrative expenses increased to 6.2% from 5.8% in the second
quarter of 1997 compared to the second quarter of 1996.
EBITDA (operating income (loss) before interest, taxes, depreciation and
amortization expense) increased by 298.8% to $40.5 million in the second quarter
of 1997 from $10.2 million in the second quarter of 1996, as a result of the
Acquisitions.
Depreciation and amortization expense increased to $13.5 million in the
second quarter of 1997 compared to $2.7 million in the second quarter of 1996,
primarily due to the Acquisitions, offset in part by certain assets becoming
fully depreciated during the second quarter of 1997. As a percentage of net
revenues, depreciation and amortization expense decreased to 13.6% from 13.8% in
the second quarter of 1997 compared to the second quarter of 1996.
Interest expense increased to $16.1 million in the second quarter of 1997
from $3.8 million in the second quarter of 1996, as a result of interest expense
related to the obligations incurred in connection with the Acquisitions. As a
percentage of net revenues, interest expense decreased to 16.2% for the second
quarter of 1997 compared to 19.3% for the second quarter of 1996.
The Company recorded an income tax provision of approximately $4.5 million in
the second quarter of 1997 compared to $1.5 million in the second quarter of
1996. The Company reported a $6.8 million extraordinary loss, net of $4.5
million tax benefit, in the second quarter of 1997 resulting from one time
financing fees in connection with the Common Stock Offering and the Notes
Offering.
6
<PAGE> 9
The foregoing factors contributed to the Company's $.4 million net loss in
the second quarter of 1997 compared to $1.4 million net income in the second
quarter of 1996.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND
JUNE 30, 1996
Gross revenues increased by 377.6% to $200.2 million during the first six
months of 1997 compared to $41.9 million in the first six months of 1996. Gross
revenues increased approximately 10.6% during the first six months of 1997
compared to the first six months quarter of 1996 for markets where the Company
operated both in the 1997 and 1996 periods. The balance of the increased
revenues were a result of the 1997 Acquisitions.
Agency commissions were 14.0% and 13.6% of gross revenues in the first six
months of 1997 and the first six months of 1996, respectively. Agency
commissions were higher in the first six months of 1997 primarily as a result of
a slightly higher proportion of revenues generated through advertising agencies.
Net revenues increased by 391.8% to $179.6 million in the first six months of
1997 compared to $36.5 million in the first six months of 1996, primarily as a
result of the increase in gross revenues combined with an increase of $7.1
million of other income. Other income increased primarily due to the inclusion
of license fee revenue from perpetual easements acquired in the second quarter
of 1996 and the inclusion of revenues from a printing operation acquired in
connection with the Gannett Outdoor Acquisition.
Direct advertising expenses increased to $97.5 million in the first six
months of 1997 compared to $16.2 million in the first six months of 1996. This
increase was primarily a result of the Acquisitions. As a percentage of net
revenues, direct advertising expenses were approximately 54.3% in the first six
months of 1997 compared to 44.2% in the first six months of 1996.
General and administrative expenses increased to $12.9 million in the first
six months of 1997 compared to $2.2 million in the first six months of 1996,
primarily as a result of the Acquisitions. As a percentage of net revenues,
general and administrative expenses increased to 7.2% from 6.1% in the first six
months of 1997 compared to the first six months of 1996.
EBITDA (operating income (loss) before interest, taxes, depreciation and
amortization expense) increased by 281.2% to $69.2 million in the first six
months of 1997 from $18.2 million in the first six months of 1996, as a result
of the Acquisitions.
Depreciation and amortization expense increased to $25.2 million in the first
six months of 1997 compared to $5.3 million in the first six months of 1996,
primarily due to the Acquisitions, offset in part by certain assets becoming
fully depreciated during the first six months of 1997. As a percentage of net
revenues, depreciation and amortization expense decreased to 14.0% from 14.4% in
the first six months of 1997 compared to the first six months of 1996.
Interest expense increased to $32.0 million in the first six months of 1997
from $7.9 million in the first six months of 1996, as a result of interest
expense related to the obligations incurred in connection with the Acquisitions.
As a percentage of net revenues, interest expense decreased to 17.8% for the
first six months of 1997 compared to 21.7% for the first six months of 1996.
The Company recorded an income tax provision of approximately $5.0 million in
the first six months of 1997 compared to $2.0 million in the first six months of
1996. The Company reported a $6.8 million extraordinary loss, net of $4.5
million tax benefit, in the first six months of 1997 resulting from one time
financing fees in connection with the Common Stock Offering and the Notes
Offering.
The foregoing factors contributed to the Company's $.3 million net income in
the first six months of 1997 compared to $2.1 million net income in the first
six months of 1996.
7
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $374.2 million at June 30, 1997
compared to $36.1 million at December 31, 1996. This increase resulted primarily
from cash provided by the Common Stock Offering and the Notes Offering intended
to be used to finance the 3M Media Acquisition (as defined below), offset in
part by cash used for the acquisitions completed during the first and second
quarters of 1997 (the "1997 Acquisitions") and for the repayment of borrowings
under its senior credit facility.
Net cash provided by operating activities increased by $16.7 million to $29.3
million for the six months ended June 30, 1997, compared to $12.6 million for
the six months ended June 30, 1996, primarily due to changes in working capital
accounts and the effect of a larger depreciation and amortization expense as a
component of net income. Net cash used in investing activities increased to
$322.6 million in the first six months of 1997 from $26.2 million in the first
six months of 1996, primarily because of the 1997 Acquisitions. Net cash
provided by financing activities was $600.0 million for the first six months of
1997 compared to net cash provided by financing activities of $14.6 million for
the first six months of 1996, primarily because of proceeds received from the
Common Stock Offering and the Notes Offering intended to be used to finance the
3M Media Acquisition.
The Company made approximately $9.7 million of capital expenditures during
the first six months of 1997, an increase from approximately $6.8 million during
the first six months of 1996. Currently, the Company has no material commitments
for capital expenditures in the ordinary course of business, although it
anticipates ongoing capital expenditures, other than for acquisitions, will be
approximately $26.0 million to $30.0 million in each of the next two years.
On April 30, 1997, the Company entered into an Agreement of Purchase and Sale
to acquire (the "3M Media Acquisition") the outdoor advertising operations of 3M
through the purchase of the capital stock of 3M Media for approximately $1.0
billion in cash. The 3M Media Acquisition is subject to various conditions,
including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
The Company completed the Common Stock Offering on May 28, 1997, resulting in
net proceeds to the Company of $392.1 million. The Company also completed the
Notes Offering on June 23, 1997, resulting in net proceeds to the Company of
$485.8 million.
The Company intends to finance the purchase price of the pending 3M Media
Acquisition and the fees and expenses associated with the pending 3M Media
Acquisition and the acquisition financing through (i) proceeds from the Common
Stock Offering, (ii) proceeds from the Notes Offering, and (iii) borrowings
under the Company's senior credit facility which is expected to be amended to
provide for a revolving credit facility and term loans of up to approximately
$900 million.
Pending the completion of the 3M Media Acquisition, the Company used
approximately $579 million of the net proceeds of the Common Stock Offering and
the Notes Offering to reduce indebtedness outstanding under the senior credit
facility and has invested the balance of such net proceeds in short term
interest bearing securities.
The Company received written commitments from Canadian Imperial Bank of
Commerce ("CIBC") to increase the amounts that may be borrowed under its senior
credit facility to up to $400 million of revolving credit loans and up to $500
million of term loans.
The Company believes that the net proceeds of the Common Stock Offering and
the Notes Offering, internally generated funds and available borrowings under
the senior credit facility, as proposed to be amended, will be sufficient to
satisfy its operating cash requirements for at least the next twelve to
twenty-four months. The Company may, however, require additional capital to
consummate significant acquisitions in the future and there can be no assurance
that such capital will be available.
8
<PAGE> 11
RECENT DEVELOPMENTS
On August 4, 1997, the Company announced that it had entered into a letter of
intent with Lamar Advertising Company ("Lamar") to sell to Lamar certain outdoor
advertising assets the Company will acquire from 3M upon the closing of the 3M
Media Acquisition. The assets contemplated to be sold to Lamar consist of
approximately 1,800 advertising displays in Atlanta, Denver, Detroit, Grand
Rapids, Houston, New Orleans, Kansas City, Louisville, Phoenix and Sacramento.
The purchase price for such assets is expected to be approximately $115 million
in cash. The transaction is subject to the closing of the 3M Media Acquisition,
execution of a definitive agreement with Lamar and other customary conditions,
including expiration or early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 for the Lamar transaction.
The Company expects to complete the 3M Media Acquisition and the Lamar
transaction on or about August 15, 1997. There can be no assurance, however,
that these closings will occur as anticipated.
FORWARD-LOOKING STATEMENTS
This report contains certain statements that are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this report, the words "estimate", "expect", "anticipate", "believe" and similar
expressions are intended to identify forward-looking statements. The Company
cautions that reliance on any forward-looking statement involves risk and
uncertainties, and that although the Company believes that the assumptions on
which the forward-looking statements contained herein are based are reasonable,
any of those assumptions could prove to be inaccurate, and as a result, the
forward-looking statements based on those assumptions also could be incorrect.
The uncertainties in this regard include, but are not limited to, those
identified in the risk factors discussed under "Risk Factors" in the Company's
Prospectus dated July 24, 1997 included in the Company's Registration Statement
on Form S-4 (Reg. No. 333-30957).
9
<PAGE> 12
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May 29,
1997. The following matters were submitted to a vote at the meeting:
(1) A proposal to elect one Class I director to the Board of Directors
to serve for a term of three years. The results of the voting with
respect to the election were as follows:
<TABLE>
<CAPTION>
Nominee For Authority Withheld
------- --- ------------------
<S> <C> <C>
Stephen F. Butterfield 35,298,393 276,735
</TABLE>
The directors whose terms of office continued after the 1997 Annual
Meeting of Stockholders are Brian J. O'Connor (term expiring 1998) and William
S. Levine and Arturo R. Moreno (terms expiring 1999).
(2) A proposal to amend the Certificate of Incorporation of the Company
to increase the number of authorized shares of Common Stock from
60,000,000 to 200,000,000 shares. The results of the voting on this
matter were as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
29,581,648 5,968,865 24,615 None
</TABLE>
(3) A proposal to approve the Incentive Bonus Plan for the Chief
Executive Officer. The results of the voting on this matter were as
follows:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
35,433,656 81,395 20,550 39,527
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit No. Document
----------- --------
27 Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K filed June 18, 1997 reporting the private placement of $500
million aggregate principal amount of 87/8% Senior Subordinated Notes
due 2007.
Form 8-K filed June 4, 1997 reporting an amendment to the Company's
Certificate of Incorporation to increase the number of authorized
shares of Common Stock and an amendment to the underwriting agreement
entered into in connection with the Company's public offering of Common
Stock.
Form 8-K filed May 27, 1997 reporting the completion of the acquisition
of Van Wagner Communications, Inc.
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTDOOR SYSTEMS, INC.
<TABLE>
<S> <C>
DATED: August 13, 1997 By /S/ Bill Beverage
---------------------------------------------------------------
Bill Beverage, Chief Financial Officer, Secretary and Treasurer
(Principal Accounting Officer)
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 318,430
<SECURITIES> 0
<RECEIVABLES> 67,168
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 415,673
<PP&E> 1,005,458
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,559,210
<CURRENT-LIABILITIES> 41,437
<BONDS> 0
0
0
<COMMON> 807
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,559,210
<SALES> 0
<TOTAL-REVENUES> 99,564
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 72,967
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,106
<INCOME-PRETAX> 10,861
<INCOME-TAX> 4,501
<INCOME-CONTINUING> 6,360
<DISCONTINUED> 0
<EXTRAORDINARY> 6,773
<CHANGES> 0
<NET-INCOME> (413)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
