<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 5, 1996
UNIVERSAL OUTDOOR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 33-72810 36-2827496
- --------------------------------- ----------- ---------------------------------
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION) FILE NO.)
321 NORTH CLARK STREET, SUITE 1010, CHICAGO, ILLINOIS 60610
REGISTRANT'S TELEPHONE NUMBER: (312) 644-8673
<PAGE>
Universal Outdoor, Inc., an Illinois corporation, hereby amends its report
on Form 8-K dated April 5, 1996. The item numbers and responses thereto below
are in accordance with the requirements of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
(b) Pro forma financial information.
(c) Exhibits.
27.1 Financial Data Schedule of AdSign, Inc.
27.2 Financial Data Schedule of NOA Holding Company
-2-
<PAGE>
SIGNATURE
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.
UNIVERSAL OUTDOOR, INC.
-----------------------
(Registrant)
June 17, 1996 /s/ Brian T. Clingen
----------------------------------
Brian T. Clingen
Vice President and Chief Financial
Officer
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
NOA Holding Company
We have audited the accompanying consolidated balance sheets of NOA Holding
Company as of May 31, 1994 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended May 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NOA Holding
Company as of May 31, 1994 and 1995 and the consolidated results of its
operations and cash flows for each of the three years in the period ended May
31, 1995 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
July 21, 1995
F-1
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................................... $ 1,619 $ 1,630
Accounts receivable, net of allowance for doubtful accounts of $346,000 in
1994 and $338,000 in 1995................................................ 4,384 4,517
Other receivables......................................................... 256 262
Inventories............................................................... 267 282
Current portion of prepaid leases......................................... 1,183 1,098
Prepaid expenses.......................................................... 390 274
Other assets.............................................................. 150 35
--------- ---------
Total current assets.................................................. 8,249 8,098
--------- ---------
Long-term portion of prepaid leases......................................... 312 509
Property and equipment, net (Note 3)........................................ 23,562 22,357
Intangibles, net (Note 4)................................................... 17,505 12,374
--------- ---------
Total assets.......................................................... $ 49,628 $ 43,338
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................................... $ 605 $ 650
Revolving credit.......................................................... 200 --
Accrued interest.......................................................... 598 191
Other accrued expenses.................................................... 1,626 1,800
Deferred revenue.......................................................... 100 66
Current portion of long-term debt......................................... 6,000 608
--------- ---------
Total current liabilities............................................. 9,129 3,315
--------- ---------
Long-term debt (Note 5)..................................................... 29,657 30,324
Other long-term liabilities................................................. 577 480
STOCKHOLDERS' EQUITY (NOTES 8 AND 9)
Preferred stock, par value $.10 per share:
Authorized shares -- 1,000
Issued shares -- 1,000.................................................... -- --
Class A common stock, par value $.01 per share:
Authorized shares -- 200,000
Issued shares -- 81,693.70 in 1994 and 72,919.94 in 1995.................. 1 1
Class B common stock, par value $.01 per share:
Authorized shares -- 25,000
Issued shares -- 13,199.82 in 1994 and 6,172.16 in 1995................... -- --
Additional paid-in capital.................................................. 19,524 18,857
Retained deficit............................................................ (9,260) (9,639)
--------- ---------
Total stockholders' equity............................................ 10,265 9,219
--------- ---------
Total liabilities and stockholders' equity............................ $ 49,628 $ 43,338
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues............................................... $ 33,503 $ 33,784 $ 37,054
Less agency commissions and discounts.................. 4,394 4,082 4,553
--------- --------- ---------
Net revenue............................................ 29,109 29,702 32,501
Operating expenses:
Production........................................... 6,876 6,466 6,472
Real estate rental................................... 6,763 7,143 7,556
Selling.............................................. 2,364 2,773 2,545
General and administrative........................... 4,951 5,294 5,388
Depreciation and amortization........................ 6,726 6,816 7,201
--------- --------- ---------
27,680 28,492 29,162
--------- --------- ---------
Operating profit....................................... 1,429 1,120 3,339
Interest............................................... 3,613 3,479 3,062
Gain on sale of assets................................. -- -- --
--------- --------- ---------
Net income (loss) before income taxes.................. (2,184) (2,269) 277
Income taxes........................................... -- -- --
--------- --------- ---------
Net income (loss)...................................... (2,184) (2,269) 277
Dividends on preferred stock........................... (594) -- --
--------- --------- ---------
Net income (loss) applicable to common shares.......... $ (2,778) $ (2,269) $ 277
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK CLASS A COMMON CLASS B COMMON
STOCK STOCK ADDITIONAL
--------------- ---------------- ------------------ PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------ ------ --------- ----- ---------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1992................. 1,000 $-- 81,693.70 $ 1 13,199.82 $-- $19,228 $ (3,612)
Dividends declared.................... -- -- -- -- -- -- -- (594)
Net loss.............................. -- -- -- -- -- -- -- (2,184)
------ ------ --------- ----- ---------- ------ --------- --------
Balance at May 31, 1993................. 1,000 -- 81,693.70 1 13,199.82 -- 19,228 (6,390)
Dividends declared.................... -- -- -- -- -- -- -- (305)
Dividends in-kind..................... -- -- -- -- -- -- 296 (296)
Net loss.............................. -- -- -- -- -- -- -- (2,269)
------ ------ --------- ----- ---------- ------ --------- --------
Balance at May 31, 1994................. 1,000 -- 81,693.70 1 13,199.82 -- 19,524 (9,260)
Dividends in-kind..................... -- -- -- -- -- -- 961 (656)
Proceeds from issuance of stock....... -- -- -- -- 3,852.63 -- -- --
Stock redemptions relative to the sale
of Pony Panels....................... -- -- (7,599.32) -- (9,754.26) -- (1,372) --
Repurchases of stock.................. -- -- (1,174.44) -- (1,126.03) -- (270) --
Compensation expense on stock
issuances............................ -- -- -- -- -- -- 14 --
Net income............................ -- -- -- -- -- -- -- 277
------ ------ --------- ----- ---------- ------ --------- --------
Balance at May 31, 1995................. 1,000 $-- 72,919.94 $ 1 6,172.16 $ -- $18,857 $ (9,639)
------ ------ --------- ----- ---------- ------ --------- --------
------ ------ --------- ----- ---------- ------ --------- --------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
NOA HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................ $ (2,184) $ (2,269) $ 277
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization.......................... 6,726 6,816 7,201
Gain on sale of assets................................. -- -- --
Deferred tax provision.................................
Barter revenue resulting from purchases of equipment... (108) -- --
Stock compensation expense............................. -- -- 14
Changes in operating assets and liabilities:
Accounts receivable.................................. (444) (57) (320)
Other current and noncurrent assets.................. (36) 628 98
Accounts payable..................................... 191 144 45
Accrued expenses, deferred revenue and other......... 5 (477) (59)
--------- --------- ---------
Net cash provided by operating activities................ 4,150 4,785 7,256
--------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures for signs........................... (928) (1,459) (1,636)
Proceeds from disposal of signs.......................... 150 301 51
Other capital expenditures............................... -- (242) (338)
Proceeds from the sale of assets......................... -- -- 542
--------- --------- ---------
Net cash used in investing activities.................... (778) (1,400) (1,381)
--------- --------- ---------
FINANCING ACTIVITIES
Net borrowings from bank................................. -- 200 --
Dividends paid........................................... (594) (296) --
Increase in preferred stock.............................. -- -- --
Principal payments of bank debt.......................... (3,100) (3,043) (5,157)
Payments to revise credit agreement...................... -- -- (669)
Principal payments on notes payable...................... -- -- (38)
--------- --------- ---------
Net cash used in financing activities.................... (3,694) (3,139) (5,864)
--------- --------- ---------
Net cash provided........................................ (322) 246 11
Cash at beginning at of period........................... 1,695 1,373 1,619
--------- --------- ---------
Cash at end of period.................................... $ 1,373 $ 1,619 $ 1,630
--------- --------- ---------
--------- --------- ---------
</TABLE>
Supplemental schedule of noncash operating and investing activities:
The Company sold the net assets of Pony Panels on August 31, 1994 as part
of a stock redemption. The book value of the net assets sold totaled
approximately $1,900,000.
The Company incurred long-term obligations of $270,000 for stock
redemptions made during the year ended May 31, 1995.
Purchases of equipment resulting from barter agreements totaled $108,000
for the year ended May 31, 1993. There were no such purchases in 1994 and
1995.
See notes to consolidated financial statements.
F-5
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements consolidate the accounts of NOA
Holding Company (formerly McCarty Holding Company, Inc.) and its wholly-owned
subsidiary, Naegele Outdoor Advertising Company. All intercompany transactions
have been eliminated in consolidation.
REVENUE RECOGNITION
Advertising revenue is recognized monthly over the period in which
advertisement displays are posted on the advertising structures. A full month's
revenue is recognized in the first month of posting. The direct costs incurred
to produce the related advertisements are expensed as incurred. Payments
received in advance of billings are recorded as deferred revenue.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance, repairs and
renewals, which neither materially add to the value of the property, nor
appreciably prolong its life, are charged to expense as incurred.
Depreciation of property and equipment is provided on declining balance and
straight-line methods over useful lives of 3 to 25 years.
INTANGIBLE ASSETS
Intangibles assets are carried and are amortized on the straight-line method
over useful lives of 5 to 40 years. Goodwill represents the cost of acquired
businesses in excess of amounts assigned to tangible and intangible assets at
the date of acquisition.
INVENTORIES
Inventories consist principally of supplies and are stated at lower of cost
or market as determined on a first-in, first-out basis.
INCOME TAXES
Income taxes are computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
BARTER TRANSACTIONS
The Company occasionally enters into agreements to trade advertising space
for goods or services. Prior to December 8, 1992, the Company did not record
such arrangements as revenue unless the items bartered for were capital items.
The impact on revenues and expense of barter transactions not recorded in fiscal
1993 was $164,000.
RECLASSIFICATION
Certain amounts previously reported in 1993 and 1994 have been reclassified
to conform to the 1995 presentation.
F-6
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
2. ACQUISITIONS
Effective January 19, 1994, the Company purchased Atlantic Outdoor
Advertising, Inc. for $1 million. The acquisition was recorded using the
purchase method of accounting for business combinations.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
1994 1995 USEFUL LIFE
--------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Land............................................................. $ 1,235 $ 1,294 --
Advertising structures........................................... 24,825 25,256 20 years
Buildings........................................................ 491 491 10-25 years
Machinery and equipment.......................................... 1,180 1,201 6 years
Office furniture and equipment................................... 1,896 1,865 5-10 years
Automobiles and trucks........................................... 1,045 1,124 5 years
Other............................................................ 384 370 3-10 years
--------- ---------
31,056 31,601
Less accumulated depreciation.................................... 7,494 9,244
--------- ---------
$ 23,562 $ 22,357
--------- ---------
--------- ---------
</TABLE>
4. INTANGIBLES
The intangibles consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
1994 1995 USEFUL LIFE
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Advertising site leases............................................. $ 22,760 $ 21,762 7 years
Covenant not to compete............................................. 3,118 3,129 5 years
Goodwill............................................................ 2,159 2,030 40 years
Loan costs.......................................................... 2,028 2,697 6 years
Organization costs.................................................. 506 503 5 years
--------- ---------
30,571 30,121
Less accumulated amortization....................................... 13,066 17,747
--------- ---------
$ 17,505 $ 12,374
--------- ---------
--------- ---------
</TABLE>
The advertising site leases and covenant not to compete were recorded as a
result of an acquisition in May 1991. Their cost represents management's best
estimate of the fair value at the date of acquisition. The loan costs represent
fees paid to obtain a bank term loan and line of credit in 1991 and to refinance
the term loan and line of credit in August 1994. In connection with the loan
refinancing, the Company wrote-off approximately $1 million of unamortized loan
costs. The organization costs are management's estimate of the portion of
various fees paid which are allocable to this asset.
F-7
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
5. DEBT
Long-term debt consists of the following at May 31:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revolving Credit Commitment under the Amended and Restated Credit
Agreement dated August 31, 1994....................................... $ -- $ 30,700
Term loans under the Credit Agreement dated as of May 22, 1991......... 35,657 --
Revolving Credit Loan under the Credit Agreement dated as of May 22,
1991.................................................................. 200 --
Subordinated note payable, annual installments of $52 through July
1997, plus quarterly interest payments at prime....................... -- 157
Subordinated notes payable, annual installments of $38 through March
1997, plus quarterly interest payments at prime....................... -- 75
--------- ---------
35,857 30,932
Less current portion................................................... 6,200 608
--------- ---------
$ 29,657 $ 30,324
--------- ---------
--------- ---------
</TABLE>
The Company amended and restated its bank Credit Agreement on August 31,
1994 and established a Revolving Credit Commitment of up to $38,000,000 and an
Acquisition Loan Commitment of up to $5,000,000. Both commitments decrease
quarterly each fiscal year and terminate on February 28, 2001. The available
Revolving Credit Commitment at May 31, 1995 was $32,800,000. At year end there
were no borrowings against the $5,000,000 Acquisition Loan Commitment. As part
of the Agreement, interest on the first $20,000,000 of debt is payable under an
Interest Rate Protect Plan ("IPP"). The IPP provides for a fixed rate of 6.28%
plus applicable margin (2.5% at May 31, 1995) for a period of three years and
began August 5, 1994. The Amended and Restated Credit Agreement also enables the
Company to borrow the remainder of the debt at a rate equal to either the Loan
Interbank Offered Rate (LIBOR) plus 3.0% or at the Lending Agent's base rate
plus 1.75%. In addition, the Company can realize lower borrowing rates if
certain financial results are achieved. At May 31, 1995, the interest rate in
effect was LIBOR plus 2.5%.
The Company is obligated to pay loan commitment fees to the banks equal to
one-half of 1% of the average daily unused portion of the commitments.
The bank has issued a letter of credit to the Company's insurance carrier
totaling $323,000 at the end of fiscal 1994 and 1995.
All common shares of the Company are pledged as collateral for the Credit
Agreement; accordingly, substantially all of the Company's assets are
effectively pledged as collateral.
The Credit Agreement contains certain restrictive covenants which the
Company must comply with on a continuing basis. The Company is restricted as to
borrowings, dividend payments, acquisitions, stock repurchases, sales of assets
and capital expenditures.
During fiscal 1995, the Company entered into certain stock redemption
agreements to repurchase 1,174.44 shares of Class A Common Stock and 1,126.03
shares of Class B Common Stock. As part of the agreements, the Company issued
subordinated promissory notes totaling approximately $270,000.
Total interest paid on all debt was $3,849,000, $3,528,000 and $3,468,000
for fiscal 1993, 1994 and 1995, respectively.
F-8
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
5. DEBT (CONTINUED)
Aggregate annual maturities of long-term debt during the five-year period
ending May 31, 2000 are (in thousands):
<TABLE>
<S> <C>
Year ending May 31:
1996............................................................. $ 608
1997............................................................. 4,365
1998............................................................. 6,227
1999............................................................. 7,600
2000............................................................. 7,600
</TABLE>
6. INCOME TAXES
At May 31, 1995, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $8.0 million. These carryforwards
expire between May 31, 2006 and 2010. During the current fiscal year, the
Company utilized approximately $625,000 of net operating loss carryforwards to
offset current year taxable income.
Components of deferred tax assets and liabilities are (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Loss carryforward...................................................... $ 3,403 $ 3,145
Accrued expenses....................................................... 249 207
Loan cost amortization................................................. -- 343
--------- ---------
3,652 3,695
Deferred tax liabilities:
Depreciation........................................................... 857 1,090
Bad debt allowance..................................................... 33 36
--------- ---------
890 1,126
--------- ---------
Net deferred tax assets before valuation allowance....................... 2,762 2,569
Less valuation allowance................................................. 2,762 2,569
--------- ---------
Net deferred tax assets.................................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>
7. EMPLOYEE BENEFIT PLAN
The Company has a voluntary defined contribution 401(k) savings and
retirement plan for the benefit of its nonunion employees who may contribute
from 3% to 10% of their compensation. The Company has no obligation to
contribute to the plan and made no contribution for fiscal 1993, 1994 and 1995.
8. REDEEMABLE PREFERRED STOCK
The preferred stock is redeemable, subject to certain restrictions, by the
Company at a price equal to its value as carried on the financial statements.
The Company also has the right to convert the preferred stock to debt at a rate
of $1,000 principal of debt to $1,000 liquidation value of the preferred stock.
The liquidation value of each of share of preferred stock is $7,699 and $8,660
at May 31, 1994 and 1995, respectively. After May 22, 2001, the preferred
shareholders have the right to control the Board of Directors for the purpose of
selling the Company.
F-9
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
8. REDEEMABLE PREFERRED STOCK (CONTINUED)
Subject to certain bank restrictions, dividends on the preferred shares are
payable semi-annually at the rate of 8% either in cash or in-kind payments which
increase the liquidation value of the preferred stock. Should operating profits
exceed certain targets, the dividend rate increases to 12%. The minimum targets
for fiscal 1996 are $9,259 for each six month period.
9. COMMON STOCK AND WARRANT
The Class B common stock is entirely owned by key employees and officers.
The ownership vests over a period of five years. In the event of a sale or
liquidation of the Company, the Class A common stock has a 10% return preference
over the Class B common stock.
During fiscal 1995, the Company implemented a stock purchase plan for its
key employees. Under the plan, 4,253 shares of Class B common stock will be
granted to the employees at a purchase price of $.10 per share. The shares will
vest over a five year period. Approximately 3,853 shares had been granted by May
31, 1995.
Additionally, a warrant to purchase 5,000 shares of Class A common stock at
$144.75 per share was outstanding at May 31, 1994 and 1995. The warrant expires
on May 22, 2006 and has no voting rights.
10. SALES OF PONY PANELS
Only July 22, 1994, the Company entered into an agreement with The McCarty
Company ("McCarty") under which McCarty acquired all of the assets of the Pony
Panels division (excluding cash) in exchange for McCarty's assumption of Pony
Panel's liabilities, delivery of 7,599.32 shares of Class A Common Stock and
9,754.26 shares of Class B Common Stock of NOA Holding Company, and cash in the
amount of $542.
11. COMMITMENTS AND CONTINGENCIES
The City of Jacksonville, Florida has enacted a number of ordinances which
would require the removal of outdoor advertising structures which are not
located on federal aid primary and/or interstate highways. Management has
vigorously contested the validity of these ordinances for the last four years.
In March 1995, the Company reached a settlement with the City of Jacksonville
and Capsigns, Inc. and has agreed to remove 711 billboards faces over a period
of 20 years.
The Company is also involved in litigation with various other municipalities
and regulatory agencies as the result of condemnation proceedings and licensing
and permit renewal disputes, which could result in the removal of advertising
structures.
Management believes, based upon the information currently available, that
the settlement with the City of Jacksonville and Capsigns, Inc., along with the
outcomes of the various actions described above, will not have a material
adverse effect on the consolidated financial condition or results of operations
of the Company.
During fiscal 1995, the Company became a party to certain material
litigation. The action alleges that a former billposting employee, while in the
process of posting a billboard, fell to the ground (because the platform on
which he was working gave way) and suffered significant injuries. It is alleged
that these injuries have precluded him from seeking any gainful employment. This
matter involves a significant level issue concerning the exclusive remedy
provision of workers' compensation law in Minnesota. Minnesota law provides that
an employer providing workers' compensation benefits is immune from tort
liability. It is the Company's contention that, because the Company provided
workers' compensation benefits to the former employee, the Company is entitled
to tort immunity.
F-10
<PAGE>
NOA HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Plaintiff disputes the Company's interpretation of the law and argues
that the tort suit can go forward. This matter was argued before a trial judge
on February 28, 1995, who ruled in favor of the Plaintiff. An appeal to the
Minnesota Court of Appeals is currently pending.
The Plaintiff has also made a demand of approximately $4.9 million for lost
wages and pain and suffering. An attempt to amend this complaint and state a
claim for punitive damages has also been made. The Court has not yet acted on
the amendment.
At this time it is not possible to estimate the probable outcome of these
actions and, accordingly, the Company has not established a reserve for the
outcome of this litigation.
The Company leases the facility in Minneapolis from the Company's preferred
stockholder with annual rents of $480,000, exclusive of operating costs, which
commenced May of 1993 and continues through May of 2001.
The Company is required to make the following minimum operating lease
payments for equipment and facilities under noncancelable lease agreements (in
thousands):
<TABLE>
<S> <C>
Year ending May 31:
1996............................................................. $ 552
1997............................................................. 552
1998............................................................. 552
1999............................................................. 557
2000............................................................. 557
Thereafter....................................................... 704
---------
$ 3,474
---------
---------
</TABLE>
Rent expense for operating leases for the years ended May 31, 1993, 1994 and
1995 totaled $6,950,000, $6,837,000 and $7,268,000, respectively.
F-11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors of
Universal Outdoor, Inc.
We have audited the accompanying statement of revenues and direct expenses of
Ad-Sign for the year ended December 31, 1995. This statement is the
responsibility of the company's management. Our responsibility is to express an
opinion on this statement based on our audit.
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 statement of revenues and direct expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of revenue and expenses.
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 statement of revenues and direct expenses audited by us
presents fairly, in all material respects, the revenues and direct expenses of
Ad-Sign for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
PRICE WATERHOUSE LLP
June 14, 1996
Chicago, Illinois
F-12
<PAGE>
AD-SIGN
STATEMENT OF REVENUES AND DIRECT EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands)
Gross revenues $2,804
Less agency commissions 224
------
Net revenues 2,580
------
------
Direct expenses:
Direct advertising expenses 338
General and administrative expenses 402
Depreciation and amortization 454
------
1,194
------
Operating income $1,386
------
------
See accompanying notes to the statement of revenues and direct expenses.
F-13
<PAGE>
AD-SIGN
NOTES TO THE STATEMENT OF REVENUES AND DIRECT EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
NOTE 1 - BASIS OF PRESENTATION AND DESCRIPTION OF THE BUSINESS:
The Statement of Revenues and Direct Expenses for the year ended December 31,
1995 presents revenues from contracts for the 160 advertising display faces
acquired from Ad-Sign, Inc. by Universal Outdoor Holdings, Inc. (Universal) in
the first quarter of 1996. This financial statement excludes operating expenses
which are not directly related to the assets acquired by Universal. Although
Universal only acquired certain assets of Ad-Sign, Inc., this acquisition meets
the criteria for a "business acquired" in accordance with Regulation S-X, Rule
3-05 of the Securities Exchange Act of 1934.
Ad-Sign is an outdoor advertising company which owns and operates outdoor
advertising display faces principally in Chicago, Illinois. Ad-Sign sells
outdoor advertising space to national, regional and local advertisers.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
The preparation of the statement of revenues and direct expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates. The significant accounting policies used in the preparation of these
financial statements are as follows.
REVENUES AND DIRECT EXPENSES
Advertising revenues are generated from contracts with advertisers generally
covering periods of one to twelve months. Ad-Sign recognizes revenues ratably
over the contract term and defers customer prepayment of advertising fees.
Costs incurred for the production of outdoor advertising displays are recognized
in the initial month of the contract or as incurred during the contract period.
PREPAID LAND RENTS
Most of Ad-Sign's outdoor advertising structures are located on leased land.
Land rents are typically paid in advance for periods ranging from one to twelve
months. Prepaid land rents are expenses ratably over the related rental term.
F-14
<PAGE>
NOTE 3 - SUBSEQUENT EVENT:
In the first quarter of 1996, Ad-Sign, Inc. entered into an asset purchase
agreement with Universal Outdoor Holdings, Inc. Under this agreement, Universal
purchased 160 advertising display faces in the Chicago market for $12.5 million.
F-15
<PAGE>
UNIVERSAL OUTDOOR, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
UNIVERSAL AD-SIGN, NOA ----------------------
OUTDOOR, INC. AND HOLDING ACQUISITION
INC. IMAGE MEDIA COMPANY ADJUSTMENTS COMBINED
--------- ------------ ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues...................................... $38,101 $3,616 $28,364 $ -- $70,081
Less -- commissions and discounts............. 3,953 249 3,516 -- 7,718
--------- ------------ ------- ----------- --------
34,148 3,367 24,848 -- 62,363
--------- ------------ ------- ----------- --------
Operating expenses:
Direct cost of revenue...................... 12,864 1,286 10,285 -- 24,435
General and administrative.................. 4,244 402 5,378 (2,500)(c) 7,524
Depreciation and amortization............... 7,402 640 4,341 3,260(a) 15,643
--------- ------------ ------- ----------- --------
24,510 2,328 20,004 760 47,602
--------- ------------ ------- ----------- --------
Operating income (loss)....................... 9,638 1,039 4,844 (760) 14,761
--------- ------------ ------- ----------- --------
Other expense:................................
Interest.................................... 8,627 -- 2,503 3,569(b) 14,699
Other....................................... 42 -- -- -- 42
--------- ------------ ------- ----------- --------
8,669 -- 2,503 3,569 14,741
--------- ------------ ------- ----------- --------
Net income (loss)............................. $ 969 $1,039 $2,341 $(4,329) $ 20
--------- ------------ ------- ----------- --------
--------- ------------ ------- ----------- --------
</TABLE>
See accompanying notes to pro forma combined statements of operations.
F-16
<PAGE>
UNIVERSAL OUTDOOR, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
UNIVERSAL AD-SIGN, NOA ----------------------
OUTDOOR INC. AND HOLDING ACQUISITION
INC. IMAGE MEDIA COMPANY ADJUSTMENTS COMBINED
--------- ------------ ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 9,332 $ 904 $6,633 $ -- $16,869
Less -- commissions and discounts............. 905 62 801 -- 1,768
--------- ----- ------- ----------- --------
8,427 842 5,832 -- 15,101
--------- ----- ------- ----------- --------
Operating expenses:
Direct cost of revenue...................... 3,571 322 2,616 -- 6,509
General and administrative.................. 1,227 100 1,459 (676)(c) 2,110
Depreciation and amortization............... 2,032 160 1,053 815(a) 4,060
--------- ----- ------- ----------- --------
6,830 582 5,128 139 12,679
--------- ----- ------- ----------- --------
Operating income (loss)....................... 1,597 260 704 (139) 2,422
--------- ----- ------- ----------- --------
Other expense:................................
Interest.................................... 2,416 -- 468 863(b) 3,747
Other....................................... 10 -- -- -- 10
--------- ----- ------- ----------- --------
2,526 -- 468 863 3,757
--------- ----- ------- ----------- --------
Net income (loss)............................. $ (829) $ 260 $ 236 $(1,002) $(1,335)
--------- ----- ------- ----------- --------
--------- ----- ------- ----------- --------
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
UNIVERSAL AD-SIGN, NOA ----------------------
OUTDOOR INC. AND HOLDING ACQUISITION
INC. IMAGE MEDIA COMPANY ADJUSTMENTS COMBINED
--------- ------------ ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 8,025 $ 904 $6,283 $ -- $15,212
Less -- commissions and discounts............. 789 62 790 -- 1,641
--------- ----- ------- ----------- --------
7,236 842 5,493 -- 13,571
--------- ----- ------- ----------- --------
Operating expenses:
Direct cost of revenue...................... 3,108 321 2,520 -- 5,949
General and administrative.................. 1,072 101 1,375 (625)(c) 1,923
Depreciation and amortization............... 1,737 160 1,009 815(a) 3,721
--------- ----- ------- ----------- --------
5,917 582 4,904 190 11,593
--------- ----- ------- ----------- --------
Operating income (loss)....................... 1,319 260 589 (190) 1,978
--------- ----- ------- ----------- --------
Other expense:................................
Interest.................................... 2,085 -- 707 811(b) 3,603
Other....................................... 10 -- -- -- 10
--------- ----- ------- ----------- --------
2,095 -- 707 811 3,613
--------- ----- ------- ----------- --------
Net income (loss)............................. $ (776) $ 260 $ (118 ) $(1,001) $(1,635)
--------- ----- ------- ----------- --------
--------- ----- ------- ----------- --------
</TABLE>
See accompanying notes to pro forma combined statements of operations.
F-17
<PAGE>
UNIVERSAL OUTDOOR, INC.
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NOTE 1 -- BASIS OF PRESENTATION
The unaudited pro forma combined statements of operations give effect to
the acquisition by Universal Outdoor, Inc. of the capital stock of NOA
Holding Company in a transaction to be accounted for as a purchase.
These statements are based on the individual statements of operations of
Universal Outdoor, Inc., NOA Holding Company, Ad-Sign, Inc. and Image Media
and combine their results of operations for the year ended December 31, 1995
and the three months ended March 31, 1996 and 1995 as if the acquisitions
occurred as of the beginning of the periods presented. The historical
statement of operations of NOA Holding Company excludes the results of
operations of the Memphis and Youngstown markets which were sold in
November of 1995, as well as the gain on the sale of those operations.
No income taxes have been reflected in the statements of operations
because (a) available net operating loss carryforwards of Universal
Outdoor, Inc. previously have been fully offset with a valuation allowance,
and (b) the income taxes recorded by NOA Holding Company have been
eliminated as they relate principally to the gain from the sale of the
Memphis and Youngstown operations.
NOTE 2 -- PRO FORMA ADJUSTMENTS
The pro forma combined statements of operations have been prepared
to reflect (a) the acquisition of NOA Holding Company by Universal
Outdoor, Inc. for an aggregate purchase price of $85 million plus
related acquisition fees of $5 million, (b) the financing of such
acquisition by bank borrowings of $60 million and the issuance of $30
million of common shares to an investor group, and (c) the utilization of
the proceeds to the Company of the public equity offering to redeem $10
million of 14% Senior Secured Discount Notes due 2004 and repay $35
million of 8.25% bank borrowings. Pro Forma adjustments have been made to
reflect:
(a) Additional annual depreciation of $3.9 million resulting from the
increased basis of $45 million and $13.6 million in property and
equipment acquired, based on estimated useful lives of 15 years from NOA
Holding Company and Ad-Sign, Inc. and Image Media, respectively.
(b) Annual interest charges of $4,950,000 on $60 million of 8.25% bank
borrowings issued in connection with the acquisition, less interest
eliminated on NOA Holding Company debt not assumed in the acquisition and
annual interest charges of $1,122,000 on $13.6 million of 8.25% bank
borrowings issued in connection with the acquisition of Ad-Sign, Inc. and
Image Media.
(c) Elimination of certain duplicate corporate expenses of NOA Holding
Company, principally relating to employee costs and costs relating to
other corporate activities. Such expenses were eliminated by the company
upon completion of the acquisition.
F-18
<PAGE>
UNIVERSAL OUTDOOR, INC.
PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
UNIVERSAL ----------------------------
OUTDOOR NOA HOLDING ACQUISITION
INC. COMPANY ADJUSTMENTS COMBINED
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Current assets................. $ 7,566 $ 6,830 $ -- $ 14,396
Property and equipment......... 69,266 14,421 45,000 (c) 128,687
Other assets................... 6,055 5,715 21,250 (c) 33,020
----------- ----------- --------------- -----------
Total assets............... $ 82,887 $ 26,966 $ 66,250 $ 176,103
----------- ----------- --------------- -----------
----------- ----------- --------------- -----------
Current liabilities............ $ 5,193 $ 2,694 $ $ 7,887
Long-term debt................. 88,873 5,163 60,000 (a) 148,873
(5,163)(b)
Other noncurrent liabilities... -- 521 -- 521
----------- ----------- --------------- -----------
Total liabilities.......... 94,066 8,378 54,837 157,281
Stockholders' equity
(deficit)..................... (11,179) 18,588 30,000 (a) 18,822
(18,587)(b)
----------- ----------- --------------- -----------
Total liabilities and
stockholders' equity.......... $ 82,887 $ 26,966 $ 66,250 $ 176,103
----------- ----------- --------------- -----------
----------- ----------- --------------- -----------
</TABLE>
See accompanying note to pro forma combined balance sheet.
F-19
<PAGE>
NOTE TO PRO FORMA COMBINED BALANCE SHEET
The pro forma combined balance sheet has been prepared to reflect (a)
the acquisition of NOA Holding Company by Universal Outdoor, Inc. for an
aggregate purchase price of $85 million plus related acquisition fees
and expenses of $5 million and (b) the repayment of debt related to the
financing of the acquisition from the proceeds of sale of common
shares. Pro forma adjustments have been made to reflect:
(a) Bank borrowings of $60 million at 8.25% and issuance of $30 million of
common stock,
(b) The elimination of the stockholders' equity accounts and debt of NOA
Holding Company, and
(c) The recording of the net assets of NOA Holding Company at estimated fair
value at the acquisition date.
F-20
<PAGE>
LIST OF EXHIBITS
Exhibit Page
- ------- ----
27.1 Financial Data Schedule of AdSign, Inc.
27.2 Financial Data Schedule of NOA Holding Company
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF REVENUES AND DIRECT EXPENSES OF ADSIGN, INC. FOR THE YEAR
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 2580
<TOTAL-REVENUES> 2580
<CGS> 0
<TOTAL-COSTS> 740
<OTHER-EXPENSES> 454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NOA HOLDING COMPANY FOR THE FISCAL YEAR ENDED MAY
31, 1994 AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> MAY-31-1995 MAY-31-1994
<PERIOD-START> JUN-01-1994 JUN-01-1993
<PERIOD-END> MAY-31-1995 MAY-31-1994
<CASH> 1630 1619
<SECURITIES> 0 0
<RECEIVABLES> 5117 4986
<ALLOWANCES> 338 346
<INVENTORY> 282 267
<CURRENT-ASSETS> 8098 8249
<PP&E> 31601 31056
<DEPRECIATION> 9244 7494
<TOTAL-ASSETS> 43338 49628
<CURRENT-LIABILITIES> 3315 9129
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 9218 10264
<TOTAL-LIABILITY-AND-EQUITY> 43338 49628
<SALES> 32501 29702
<TOTAL-REVENUES> 32501 29702
<CGS> 16573 16382
<TOTAL-COSTS> 29162 28492
<OTHER-EXPENSES> 7201 6816
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3062 3497
<INCOME-PRETAX> 277 (2184)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 277 (2778)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>