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 period ended July 31, 1996
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 0-20833
LAMAR ADVERTISING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 72-1205791
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
5551 Corporate Blvd.,
Baton Rouge, LA 70808 70806
(Address of principal (Zip Code)
executive officers)
Registrant's telephone number, including area code (504) 926-1000
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 No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class September 14, 1996
Class A Common Stock,$ .001 par value 14,953,426
Class B Common Stock,$ .001 par value 13,822,639
CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
July 31, 1996 (unaudited) and October
31, 1995 1 - 2
Condensed Consolidated Statements of Earnings
Three Months ending July 31, 1996 and 1995
and Nine Months ending July 31, 1996 and
1995 (unaudited) 3
Condensed Consolidated Statements of Cash Flows
Nine Months ending July 31, 1996 and 1995
(unaudited) 4 - 5
Notes to Condensed Consolidated Financial
Statements 6 - 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 11
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 12
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<CAPTION>
July 31, October 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,965 5,886
Receivables
Trade accounts 15,573 11,292
Affiliates, related parties
and employees 531 583
Other 433 109
Less allowance for doubtful accounts ( 1,046) ( 551)
Net receivables 15,491 11,433
Prepaid expenses 1,112 1,247
Other current assets 1,793 1,266
Total current assets 20,361 19,832
Property, plant and equipment 189,115 168,402
Less accumulated depreciation
and amortization ( 83,930) ( 77,524)
Net property, plant and equipment 105,185 90,878
Intangible assets 16,891 13,406
Receivables 751 918
Deferred taxes 3,680 5,951
Other assets 3,399 2,900
$150,267 133,885
======= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable $ 3,115 2,435
Accrued expenses 5,575 9,733
Current maturities of long-term
debt 5,326 3,479
Deferred income 4,866 2,448
Total current liabilities 18,882 18,095
Long-term debt 154,681 142,572
Deferred income 779 749
Other liabilities 1,214 623
Total liabilities 175,556 162,039
-1-
</TABLE>
<TABLE>
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<CAPTION>
July 31, October 31,
1996 1995
STOCKHOLDERS' DEFICIT (Note 3)
<S> <C> <C>
Class A preferred stock, par
value $638, $63.80 cumulative,
authorized 10,000 shares; issued
and outstanding, 5,719.49 shares
and 0 shares at July 31, 1996
and October 31, 1995, respectively 3,649 0
Class A common stock, $.001 par value.
Authorized 50,000,000 shares;
issued and outstanding 10,180,483
shares and 15,657,623 shares
at July 31, 1996 and October 31,
1995, respectively 10 16
Class B common stock, $.001 par value.
Authorized 25,000,000 shares;
issued and outstanding 14,301,537
shares and 16,897,379 shares at
July 31, 1996 and October 31, 1995,
respectively 14 17
Accumulated deficit ( 28,962) ( 28,187)
Stockholders' Deficit ( 25,289) ( 28,154)
Total liabilities and
stockholders' deficit $ 150,267 133,885
======= =======
- 2 -
</TABLE>
<TABLE>
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<CAPTION>
Three Months Nine Months
Ending July 31, Ended July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues
Outdoor advertising, net $31,386 26,609 87,647 76,295
Rental income 119 110 473 408
Management fees from related
and affiliated parties 15 8 45 23
31,520 26,727 88,165 76,726
Operating expenses
Direct advertising
expenses 10,076 8,380 30,969 26,564
General and administrative
expenses 8,147 7,393 22,842 20,636
Depreciation and
amortization 3,540 3,186 10,568 9,954
21,763 18,959 64,379 57,154
Operating income 9,757 7,768 23,786 19,572
Other expense (income):
Interest income ( 39) ( 52) ( 140)( 133)
Interest expense 4,105 4,091 11,957 11,948
Loss on disposition
of assets 237 188 818 1,004
Other expenses 8 274 254 684
4,311 4,501 12,889 13,503
Earnings before
income taxes 5,446 3,267 10,897 6,069
Income tax expense (benefit) 2,230 ( 713) 4,420 ( 2,480)
Net earnings $ 3,216 3,980 6,477 8,549
Preferred stock dividends ( 91) 0 ( 274) 0
Net earnings applicable to
common stock 3,125 3,980 6,203 8,549
======= ======= ======= =======
Net earnings per common
share $ .13 $ .12 $ .23 $ .26
======= ======= ======= =======
Weighted average common
shares outstanding 24,482,020 33,775,222 27,068,544 33,775,222
========== ========== ========== ==========
- 3 -
</TABLE>
<TABLE>
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
Nine Months Ending
July 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 6,477 8,549
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 10,568 9,954
Loss on disposition of assets 818 1,004
Deferred taxes 2,271 ( 3,312)
Provision for doubtful accounts 550 330
Changes in operating assets and
liabilities:
Increase in receivables ( 3,988) ( 2,062)
(Increase) Decrease in prepaid
expenses 97 ( 198)
Increase in other assets ( 282) ( 965)
Increase in trade accounts payable 680 384
Decrease in accrued expenses ( 4,157) ( 3,475)
Increase in other liabilities 113 26
Increase in deferred income 2,448 517
Net cash provided by operating
activities 15,595 10,752
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable ( 675) 0
Acquisitions of new markets ( 9,445) ( 2,353)
Capital expenditures ( 17,653) ( 8,780)
Proceeds from disposition of assets 500 629
Purchase of intangible assets ( 1,525) ( 545)
Net cash used in investing
activities ($28,798) ($11,049)
- 4 -
</TABLE>
<TABLE>
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
Nine Months Ending
July 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt ($ 2,605) ( 5,376)
Proceeds from issuance of notes
payable to banks 27,000 4,000
Principal payments on notes payable to
banks ( 11,500) ( 4,000)
Stock redemption ( 2,964) 0
Dividends ( 649) ( 375)
Net cash provided by (used in)
financing activities 9,282 ( 5,751)
Net decrease in cash and cash
equivalents ( 3,921) ( 6,048)
Cash and cash equivalents at beginning
of year 5,886 8,016
Cash and cash equivalents at end of
period $ 1,965 1,968
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 14,744 14,728
======== =======
Cash paid for state and
federal income taxes $ 1,991 803
======== =======
- 5 -
</TABLE>
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The information included in the foregoing interim financial statements
is unaudited. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of financial
position and results of operations for the interim periods presented have
been reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the entire year.
Certain amounts in the prior periods consolidated financial statements
have been reclassified to conform with the current year presentation.
These reclassifications had no effect on previously reported net earnings.
2. INCOME TAXES
Lamar Advertising Company files a consolidated Federal income tax return
which includes all of its qualifying subsidiaries. Income tax expense for
the period is based on the estimates of the Company's annual effective tax
rate.
3. STOCK TRANSACTIONS
On December 30, 1995, the Certificate of Incorporation of the Company
was amended to authorize 10,000 shares of Class A preferred stock with a par
value of $638 and no voting rights. The Class A preferred stock dividends
are cumulative and are prior to Class A and Class B common stock dividends
at the rate of $15.95 per share per quarter.
As of December 30, 1995, 4,454,779 shares of Class A common stock with
a $.001 per share par value were converted into 5,719.49 shares of Class A
preferred stock with a $638 per share par value. This conversion resulted
in a $3.6 million charge to accumulated deficit.
On March 1, 1996, 3,463,985 shares of Class A common stock and 154,218
shares of then authorized Class B common stock, $.001 par value, were
redeemed at a price of $.82 per share. This redemption resulted in a $3.0
million charge to accumulated deficit.
In July 1996, the Board of Directors of the Company authorized the
issuance of up to 5,445,250 shares of Class A common stock, $.001 par value
per share, to be registered under the Securities Act of 1933 (the
"Offering"). In connection with the Offering, the Company effected a
recapitalization consisting of an approximate 778.9-for-1 stock split and an
exchange of common stock for new Class A and Class B common stock which is
equal in all respects, except holders of Class B common stock have ten votes
per share and holders of Class A common stock have one vote per share. Class B
common stock converts automatically into Class A common stock upon the sale or
tranfer to persons other than permitted transferees. All share information
has been adjusted to reflect the recapitalization.
- 6 -
4. SUBSEQUENT EVENTS
On August 7, 1996, the Company consummated an initial public offering
(the Offering) in which 4,735,000 shares of its Class A common stock were
sold at a price of $16.00 per share, of which 4,000,000 shares were sold by
the Company and 735,000 shares were sold by selling stockholders.
On August 15, 1996, the Underwriters exercised their 30 day over-
allotment option to purchase 710,250 shares at the $16.00 per share Offering
price. Of such 710,250 shares sold, 294,041 were sold by the Company and
416,209 were sold by selling stockholders.
In connection with the Offering the Company paid additional
consideration of $1.38 per share in cash and $5.52 per share in ten-year
subordinated notes to stockholders whose shares were redeemed in October 1995
and March 1996 in satisfaction of their right to an additional payment.
This additional consideration resulted in an additional charge to
stockholders' equity of $25 million in the fourth quarter of fiscal 1996.
Also in connection with the offering, the Company adopted the 1996
Equity Incentive Plan (the "1996 Plan"). The purpose of the 1996 Plan is to
attract and retain key employees and consultants of the Company. The 1996
Plan authorizes the granting of stock options, stock appreciation rights and
restricted stock to employees and consultants of the Company capable of
contributing to the Company's performance. The Company has reserved an
aggregate of 2,000,000 shares of Class A Common Stock for awards under the 1996
Plan, of which options for 1,181,500 shares were granted in August, 1996 at an
exercise price of $16.00 per share.
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine Months Ended July 31, 1996 Compared to Nine Months Ended July 31, 1995
Net revenues increased $11.4 million or 14.9% to $88.2 million for the
nine months ended July 31, 1996. This increase was the result of a $6.8
million increase in outdoor advertising net revenues principally
attributable to a net increase in number of displays of approximately 600
and advertising rates at an average of 6%, with occupancy percentages
remaining relatively steady, and a $4.5 million increase in logo revenue due
to the continued development of that program. Net outdoor revenue for the
period was $77.5 million and logo revenue was $9.0 million.
Operating expenses, exclusive of depreciation and amortization,
increased $6.6 million or 14.0% for the nine months ended July 31, 1996 as
compared to the same period in 1995. This increase was the result of an
increase in health insurance rates, increases in personnel costs, sign site
rent, graphics expense, other costs related to the increase in revenue and
additional operating expenses related to outdoor asset acquisitions and the
continued development of the logo sign business.
Depreciation and amortization expense increased $0.6 or 6.2% from $10.0
million for the nine months ended July 31, 1995 to $10.6 for nine months
ended July 31, 1996.
Due to the above factors, operating income increased $4.2 million or
21.5% to $23.8 million for nine months ended July 31, 1996 from $19.6
million for the same period in 1995.
Interest expense remained relatively consistent for both periods.
Income tax expense for the nine months ended July 31, 1996 increased
$6.9 million over the same period in 1995. For the past several years the
Company has had a substantial net operating loss carryforward. The benefit
of the Company's net operating loss carryforward was fully recognized as of
October 31, 1995.
As a result primarily of the increase in income tax expense, net
earnings for the nine months ended July 31, 1996 decreased $2.1 million as
compared to the same period in 1995.
- 8 -
Third Quarter Ended July 31, 1996 Compared to Third Quarter Ended July 31, 1995
Net revenues for the third quarter ended July 31, 1996 increased $4.8
million or 17.9% to $31.5 million from $26.7 million for the same period in
1995.
Operating expenses, exclusive of depreciation and amortization, for the
third quarter ended July 31, 1996 increased $2.5 million or 15.5% over the
same period in 1995.
Depreciation and amortization expense increased $0.4 million or 11.1%
from $3.2 million for the third quarter ended July 31, 1995 to $3.5 million
for the third quarter ended July 31, 1996.
Due to the above factors, operating income increased $2.0 million or
25.6% to $9.8 million compared to $7.8 million for the third quarter ended
July 31, 1996 as compared to the same period in 1995.
Interest expense remained constant for both periods.
Income tax expense for the period increased $2.9 million over the same
period in 1995.
As a result of the foregoing factors, net earnings for the third quarter
ended July 31, 1996 decreased $0.8 million as compared to the same period in
1995.
The results for the three months ended July 31, 1996 were affected by
the same factors as the nine months ended July 31, 1996. Reference is made
to the discussion of the nine month results.
-9-
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended July 31, 1996, net cash provided by operating
activities was $15.6 million, a $4.8 million increase from $10.8 million in
the corresponding period of 1995. The increase occurred, despite a $2.1
million decrease in net earnings, due primarily to a $5.6 million increase
in deferred taxes due to the benefit of the Company's net operating loss
carryforward having been fully recognized at year end October 31, 1995, and
a $1.9 million increase in deferred income generated by the additional logo
sign franchises offset by a $1.9 million increase in receivables. Net cash
used in investing activities increased $17.7 million for the nine months
ended July 31, 1996 as compared to the same period in 1995 due to an $8.9
million increase in capital expenditures primarily due to the build out of
the new logo awards, a $7.1 million increase in purchase of new markets, a
$1.0 million increase in purchase of intangible assets and a $0.7 million
increase in notes receivable. Net cash provided by financing activities
increased $15.0 million for the nine months ended July 31, 1996
as compared to the same period in 1995. The increase was due to the increase
in borrowings of $15.5 million under revovling credit facilities to finance
capital expenditures, primarily logo related and purchase new markets. A
$2.8 million decrease in principal payments on long-term debt was offset by
a $3.0 million stock redemption.
During fiscal year 1995, the Company was awarded new state logo
franchises in the following four states: Georgia, Minnesota, South Carolina
and Virginia. During fiscal 1996, the Company was awarded new contracts in
New Jersey and Michigan as well as the expansion of the existing Texas
program which it currently operates. It also acquired the Kansas and
Tennessee franchises from one of its competitors. Due to the capital needed
to fund these new franchises, the Company amended its existing bank credit
agreement effecctive October 1995, partially deferring short-term principal
payments. In December 1995,the Company entered into a $15 million reducing
credit line with its bank group. This line may only be used to finance the
cost of new logo franchises awarded to the Company. As of July 31, 1996, the
Company had borrowed approximately $9.5 million to finance the cost of these
logo sign franchises.
On August 1, 1996, the Company completed an initial public offering (the
Offering) whereby the Company sold 4,000,000 shares of its Class A common
stock and selling stockholders sold 735,000 shares at a price of $16.00 per
share. The net proceeds to the Company from the sale of the 4,000,000 shares
was approximately $58.8 million after deducting estimated expenses and
underwriting discounts.
-10-
The Company used a portion of the net proceeds from the Offering to
repay existing indebtedness in the aggregate principal amount of
approximately $43.8 million, consisting of (i) bank term loans, of $37.8 million
and (ii) $6.0 million of outstanding loans under a revolving credit facility.
The Company used approximately $5.0 million of the net proceeds from the
Offering to pay a portion of the contingent consideration payable to
stockholders whose shares of common stock were repurchased by the Company in
October 1995 and March 1996. The Company issued to such stockholders $20.0
million aggregate principal amount of ten-year subordinated notes as the
balance of the contingent consideration.
In addition, on August 15, 1996, the Underwriters over-allotment option
to purchase an additional 294,041 shares from the Company was exercised
yielding net proceeds of approximately $4.4 million.
The remaining net proceeds from the Offering are available for general
corporate purposes, including possible acquisitions and repayment of
indebtedness. In August 1996, the Company used net proceeds from the
Offering to purchase certain outdoor advertising properties for an aggregate
cash price of $11.2 million.
The Company did not receive any proceeds from the sale of Class A Common
Stock by the Selling Stockholders.
REGULATION OF TOBACCO ADVERTISING
In August, 1996, President Clinton signed an executive order adopting
rules proposed by the U.S. Food and Drug Administration regulating the
advertising of certain tobacco products. These rules, which will become
effective on August 22, 1997, prohibit the placement of tobacco products
advertising within 1,000 feet of playgrounds and primary and secondary
schools and limit such advertising to a format consisting of black text on a
white background.
Certain advertising industry and tobacco industry organizations have
filed lawsuits challenging these regulations seeking an injunction to keep
them from going into effect. In addition, some members of Congress have
indicated that they may sponsor legislation to prevent the regulations from
going into effect. If these regulations are not modified or nullified by
legislative or judicial action, the Company's outdoor advertising revenues
could be adversely affected.
The Company's revenues from tobacco products advertising, as a
percentage of total net revenues, has declined from 17% in fiscal 1991 to 9%
in fiscal 1995. During this period, the Company has replaced tobacco
advertising by diversifying its customer base and increasing sales to local
advertisers. In addition, the Company has maintained for many years a policy
prohibiting placement of billboards containing tobacco product advertising
within 500 feet of schools and playgrounds.
-11-
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted the following proposals to the stockholders of the
Company in an action by written consent in lieu of a special meeting, each of
which was unanimously adopted as of July 31, 1996:
VOTED: To adopt the Amended and Restated Certificate of Incorporation
of the Company.
VOTED: To approve the Company's 1996 Equity Incentive Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
______________________
(a) Exhibits: 27.1 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the period ended July 31, 1996.
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.
LAMAR ADVERTISING COMPANY
DATED: September 12, 1996 BY s/Keith Istre
Keith A. Istre
Vice President and Chief
Financial Officer, Treasurer
and Assistant Secretary
(Principal Financial Officer)
- 12 -
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 1965
<SECURITIES> 0
<RECEIVABLES> 16537
<ALLOWANCES> 1046
<INVENTORY> 0
<CURRENT-ASSETS> 20361
<PP&E> 189115
<DEPRECIATION> 83930
<TOTAL-ASSETS> 150267
<CURRENT-LIABILITIES> 18882
<BONDS> 154681
0
3649
<COMMON> 24
<OTHER-SE> (28962)
<TOTAL-LIABILITY-AND-EQUITY> 150267
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<TOTAL-REVENUES> 88165
<CGS> 0
<TOTAL-COSTS> 30969
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<INCOME-TAX> 4420
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</TABLE>
