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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 September 30, 2002
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 0-30242
LAMAR ADVERTISING COMPANY
Commission File Number 1-12407
LAMAR MEDIA CORP.
(Exact name of registrants as specified in their charters)
Delaware 72-1449411
Delaware 72-1205791
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
5551 Corporate Blvd., Baton Rouge, LA 70808
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (225) 926-1000
Indicate by check mark whether each 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 ( )
The number of shares of Lamar Advertising Company's Class A common stock
outstanding as of November 5, 2002: 85,037,311
The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of November 5, 2002: 16,417,073
The number of shares of Lamar Media Corp. common stock outstanding as of
November 5, 2002: 100
THIS COMBINED FORM 10-Q IS SEPARATELY FILED BY (i) LAMAR ADVERTISING COMPANY AND
(ii) LAMAR MEDIA CORP. (WHICH IS A WHOLLY-OWNED SUBSIDIARY OF LAMAR ADVERTISING
COMPANY). LAMAR MEDIA CORP. MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H(1) (a) AND (b) OF FORM 10-Q AND IS, THEREFORE, FILING THIS FORM
WITH THE REDUCED DISCLOSURE FORMAT PERMITTED BY SUCH INSTRUCTION.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This combined Quarterly Report on Form 10-Q of Lamar Advertising Company and
Lamar Media Corp. contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These are statements that relate to future periods and
include statements regarding the Company's and Lamar Media's anticipated
performance in 2002. In addition, the outcome of pending motions or appeals, if
any, related to litigation discussed herein is unknown.
Generally, the words anticipates, believes, expects, intends, estimates,
projects, plans and similar expressions identify forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause the Company's and Lamar Media's
actual results, performance or achievements or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by these forward-looking statements. These risks, uncertainties and
other important factors include, among others:
o the performance of the U.S. economy generally and the level of
expenditures on outdoor advertising particularly;
o the Company's ability to renew expiring contracts at favorable rates;
o the integration of companies that the Company acquires and its ability
to recognize cost savings or operating efficiencies as a result of
these acquisitions;
o risks and uncertainties relating to the Company's significant
indebtedness;
o the Company's need for and ability to obtain additional funding for
acquisitions or operations; and
o the regulation of the outdoor advertising industry.
For a further description of these and other risks and uncertainties, the
Company encourages you to carefully read the portion of the combined Annual
Report on Form 10-K for the year ended December 31, 2001 of the Company and
Lamar Media (the "2001 Combined Form 10-K") under the caption "Factor Affecting
Future Operating Results" in Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations filed with the SEC on March 21,
2002.
The Company cautions investors not to place undue reliance on the
forward-looking statements contained in this document. These statements speak
only as of the date of this report, and Lamar Advertising Company and Lamar
Media undertake no obligation to update or revise the statements, except as may
be required by law.
CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 1
Condensed Consolidated Statements of Operations for the three months ended
September 30, 2002 and 2001 and nine months ended September 30, 2002 and 2001 2
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2002 and 2001 3
Notes to Condensed Consolidated Financial Statements 4 - 7
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 8
Condensed Consolidated Statements of Operations for the three months ended
September 30, 2002 and 2001 and nine months ended September 30, 2002 and 2001 9
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2002 and 2001 10
Notes to Condensed Consolidated Financial Statements 11
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 15
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks 16
ITEM 4. Controls and Procedures 16
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 17
Signatures 17
Certifications 18 - 19
Index to Exhibits 20
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)
September 30, December 31,
ASSETS 2002 2001
- ------ ------------ ------------
Current assets:
Cash and cash equivalents $ 58,646 $ 12,885
Receivables, net 102,877 95,135
Prepaid expenses 41,344 27,176
Other current assets 12,318 8,019
------------ ------------
Total current assets 215,185 143,215
------------ ------------
Property, plant and equipment 1,824,868 1,777,399
Less accumulated depreciation and amortization (522,405) (451,686)
------------ ------------
Net property plant and equipment 1,302,463 1,325,713
------------ ------------
Intangible assets 2,192,081 2,179,475
Other assets - non-current 18,797 17,304
------------ ------------
Total assets $ 3,728,526 $ 3,665,707
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 7,909 $ 10,048
Current maturities of long-term debt 114,244 66,559
Accrued expenses 32,480 33,674
Deferred income 15,360 11,618
------------ ------------
Total current liabilities 169,993 121,899
------------ ------------
Long-term debt 1,710,697 1,745,026
Deferred income taxes 118,229 118,837
Other liabilities 7,937 7,724
------------ ------------
Total liabilities 2,006,856 1,993,486
------------ ------------
Stockholders' equity:
Series AA preferred stock, par value $.001, $63.80 cumulative dividends, authorized
5,720 shares; 5,719 shares issued and outstanding at 2002 and 2001 -- --
Class A preferred stock, par value $638, $63.80 cumulative dividends, 10,000 shares
authorized; 0 shares issued and outstanding at 2002 and 2001 -- --
Class A common stock, par value $.001, 175,000,000 shares authorized, 85,020,286
and 82,899,800 shares issued and outstanding at 2002 and 2001, respectively 85 83
Class B common stock, par value $.001, 37,500,000 shares authorized, 16,417,073
and 16,611,835 shares issued and outstanding at 2002 and 2001, respectively 16 17
Additional paid-in capital 2,035,245 1,963,065
Accumulated deficit (313,676) (290,944)
------------ ------------
Stockholders' equity 1,721,670 1,672,221
------------ ------------
Total liabilities and stockholders' equity $ 3,728,526 $ 3,665,707
============ ============
See accompanying notes to condensed consolidated financial statements.
-1-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Net revenues $ 201,918 $ 188,267 $ 580,985 $ 550,440
------------- ------------- ------------- -------------
Operating expenses (income)
Direct advertising expenses 71,685 64,593 205,544 187,444
General and administrative expenses 42,325 37,552 122,948 111,684
Depreciation and amortization 70,268 89,399 206,769 263,629
(Gain) Loss on disposition of assets (33) 311 (203) (708)
------------- ------------- ------------- -------------
184,245 191,855 535,058 562,049
------------- ------------- ------------- -------------
Operating income (loss) 17,673 (3,588) 45,927 (11,609)
Other expense (income)
Interest income (387) (100) (774) (522)
Interest expense 27,182 30,409 81,199 99,161
------------- ------------- ------------- -------------
26,795 30,309 80,425 98,639
------------- ------------- ------------- -------------
Loss before income tax benefit (9,122) (33,897) (34,498) (110,248)
Income tax benefit (3,134) (9,536) (12,039) (31,197)
------------- ------------- ------------- -------------
Net loss (5,988) (24,361) (22,459) (79,051)
Preferred stock dividends 91 91 273 273
------------- ------------- ------------- -------------
Net loss applicable to common stock $ (6,079) $ (24,452) $ (22,732) $ (79,324)
============= ============= ============= =============
Loss per common share - basic and diluted: $ (.06) $ (.25) $ (.23) $ (.81)
============= ============= ============= =============
Weighted average common shares
outstanding 101,377,147 99,163,065 100,965,349 98,328,027
Incremental common shares from dilutive
stock options -- -- -- --
Incremental common shares from
convertible debt -- -- -- --
------------- ------------- ------------- -------------
Weighted average common shares
assuming dilution 101,377,147 99,163,065 100,965,349 98,328,027
============= ============= ============= =============
See accompanying notes to condensed consolidated financial statements.
-2-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
September 30,
2002 2001
--------- ---------
Cash flows from operating activities:
Net loss $ (22,459) $ (79,051)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 206,769 263,629
Gain on disposition of assets (203) (708)
Deferred tax benefit (7,661) (32,214)
Provision for doubtful accounts 6,378 5,495
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (12,208) (21,325)
Prepaid expenses (12,753) (11,139)
Other assets (4,559) 3,442
Increase (decrease) in:
Trade accounts payable (2,139) 3,210
Accrued expenses (1,150) (15,935)
Other liabilities (43) 178
Deferred income 3,524 2,426
--------- ---------
Net cash provided by operating activities 153,496 118,008
--------- ---------
Cash flows from investing activities:
Acquisition of new markets (74,041) (274,560)
Capital expenditures (56,938) (59,958)
Proceeds from disposition of assets 2,048 3,906
--------- ---------
Net cash used in investing activities (128,931) (330,612)
--------- ---------
Cash flows from financing activities:
Debt issuance costs (1,076) --
Net proceeds from issuance of common stock 12,697 51,711
Principal payments on long-term debt (50,192) (35,159)
Net borrowings under credit agreements 60,000 130,000
Increase in notes payable 40 --
Dividends (273) (273)
--------- ---------
Net cash provided by financing activities 21,196 146,279
--------- ---------
Net increase (decrease) in cash and cash equivalents 45,761 (66,325)
Cash and cash equivalents at beginning of period 12,885 72,340
--------- ---------
Cash and cash equivalents at end of period $ 58,646 $ 6,015
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 85,252 $ 104,151
========= =========
Cash paid for state and federal income taxes $ 481 $ 798
========= =========
Common stock issuance related to acquisitions $ 56,100 $ 29,000
========= =========
See accompanying notes to condensed consolidated financial statements.
-3-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
1. Significant 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 the Company's
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.
These condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included in the 2001 Combined Form 10-K.
Certain amounts in the prior year's consolidated financial statements have been
reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported net loss.
2. Acquisitions
On January 1, 2002, the Company purchased the stock of Delite Outdoor of Ohio
Holdings, Inc. for $38,000. The purchase price consisted of 963,488 shares of
Lamar Advertising Class A common stock.
On January 8, 2002, the Company purchased the assets of MC Partners for a cash
purchase price of approximately $15,313.
On May 31, 2002, the Company purchased the assets of American Outdoor
Advertising, Inc. for $15,725. The purchase price consisted of 349,376 shares of
Lamar Advertising Class A common stock as well as approximately $725 in cash.
During the nine months ended September 30, 2002, the Company completed 56
additional acquisitions of outdoor advertising assets for a cash purchase price
of approximately $58,003 and the issuance of 92,600 shares of Lamar Advertising
Class A common stock valued at $3,100.
Each of these acquisitions was accounted for under the purchase method of
accounting, and, accordingly, the accompanying financial statements include the
results of operations of each acquired entity from the date of acquisition. The
acquisition costs have been allocated to assets acquired and liabilities assumed
based on fair market value at the dates of acquisition. The following is a
summary of the preliminary allocation of the acquisition costs in the above
transactions.
Property,
Current Plant & Other Other Current Long-term
Assets Equipment Goodwill Intangibles Assets Liabilities Liabilities
------- --------- -------- ----------- ------ ----------- -----------
Delite Outdoor of Ohio Holdings 972 10,048 14,324 21,640 -- 742 8,242
MC Partners 245 2,563 5,523 9,363 -- 40 2,341
American 725 8,388 -- 6,612 -- -- --
Other 790 11,949 22,718 26,701 1,769 469 2,355
----- ------ ------ ------ ----- ----- ------
2,732 32,948 42,565 64,316 1,769 1,251 12,938
===== ====== ====== ====== ===== ===== ======
-4-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
Summarized below are certain unaudited pro forma statements of operations data
for the three months and nine months ended September 30, 2002 and September 30,
2001 as if each of the above acquisitions and the acquisitions occurring in
2001, which were fully described in the 2001 Combined Form 10-K, had been
consummated as of January 1, 2001. This pro forma information does not purport
to represent what the Company's results of operations actually would have been
had such transactions occurred on the date specified or to project the Company's
results of operations for any future periods.
Three Months ended Nine Months ended
September 30, September 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Net revenues $ 202,042 $ 194,090 $ 583,860 $ 573,327
========= ========= ========= =========
Net loss applicable to common stock $ (6,140) $ (25,042) $ (23,312) $ (83,525)
========= ========= ========= =========
Net loss per share applicable to common stock $ (.06) $ (.25) $ (.23) $ (.84)
========= ========= ========= =========
3. Goodwill and Other Intangible Assets - Adoption of Statement 142
The following is a summary of intangible assets at September 30, 2002 and
December 31, 2001.
Estimated Life
Amortizable Intangible Assets: (Years) 2002 2001
- ----------------------------- -------------- ----------- -----------
Debt issuance costs and fees 7 - 10 $ 48,455 $ 47,379
Customer lists and contracts 7 - 10 370,718 359,154
Non-compete agreements 3 - 15 56,943 56,419
Site locations and other 5 - 15 949,701 897,450
----------- -----------
1,425,817 1,360,402
Accumulated Amortization (411,061) (315,687)
----------- -----------
Net Amortizable Intangibles $ 1,014,756 $ 1,044,715
=========== ===========
Unamortizable Intangible Assets: 2002 2001
- ------------------------------- ----------- -----------
Goodwill $ 1,430,960 $ 1,388,395
Accumulated Amortization (253,635) (253,635)
----------- -----------
Net Unamortizable Intangibles $ 1,177,325 $ 1,134,760
=========== ===========
The changes in the carrying amount of goodwill for the nine months ended
September 30, 2002 are as follows:
Balance as of December 31, 2001 $1,388,395
Goodwill acquired during the year 42,565
Impairment losses --
----------
Balance as of September 30, 2002 $1,430,960
==========
-5-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
The following table illustrates the effect of the adoption of SFAS 142 on prior
periods and its effect on the Company's earnings per share.
Three Months ended Nine Months ended
September 30, September 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Reported net loss applicable to common stock $ (6,079) $ (24,452) $ (22,732) $ (79,324)
Add: goodwill amortization, net of tax -- 17,838 -- 52,615
---------- ---------- ---------- ----------
Adjusted net loss applicable to common stock $ (6,079) $ (6,614) $ (22,732) $ (26,709)
========== ========== ========== ==========
Earnings per common share--basic and diluted
Reported net loss per common share $ (.06) $ (.25) $ (.23) $ (.81)
Add: goodwill amortization per share -- .18 -- .54
---------- ---------- ---------- ----------
Adjusted net loss per common share $ (.06) $ (.07) $ (.23) $ (.27)
========== ========== ========== ==========
In accordance with SFAS No. 142 "Goodwill and Other Intangible Assets", which
the Company adopted on January 1, 2002, the Company has conducted an impairment
review of goodwill. Based upon the review, no impairment charge was required.
4. Long-term Debt
On January 11, 2002, the Company activated $200,000 in new borrowings under the
incremental facility of its bank credit agreement. The proceeds were used to
reduce the outstanding balance of the revolving bank credit facility by $160,000
and approximately $10,000 was used for operations resulting in excess cash on
hand of $30,000. Also, on January 30, 2002, JPMorgan Chase Bank issued a standby
letter of credit of approximately $3,203 to benefit American Casualty Insurance
Company, the provider of the Company's general liability and workman's
compensation coverage. This issuance reduces the Company's availability under
its revolving credit facility. Effective March 31, 2002, in accordance with the
Company's bank credit agreement, the Company began to make its scheduled
quarterly principal payments of $15,750 and commitments under the revolving
facility of the bank credit agreement began reducing by $8,750 quarterly. On
September 30, 2002, the Company had $319,058 available under the revolving
credit facility.
On September 25, 2002, the Company called for full redemption on October 25,
2002 of its outstanding 9.25% Senior Subordinated Notes due 2007 in aggregate
principal amount of approximately $74,073 for a redemption price equal to
104.625% of the principal amount of the Notes plus accrued interest to the
redemption date of approximately $1,332. The Notes were called pursuant to the
optional redemption provisions of the Notes and the related indenture applicable
to optional redemptions. The Company used cash on hand to redeem the Notes. In
the fourth quarter of 2002, the Company will record approximately $2,090, net of
tax, as an expense related to the prepayment penalty of the Notes.
5. Summarized Financial Information of Subsidiaries
Separate financial statements of each of the Company's direct or indirect wholly
owned subsidiaries that have guaranteed Lamar Media's obligations with respect
to its publicly issued notes (collectively, the "Guarantors") are not included
herein because the guarantees are full and unconditional, joint and several, and
the only subsidiary that is not a guarantor is considered minor. Lamar Media's
ability to make distributions to Lamar Advertising is restricted under the terms
of its bank credit facility and the indenture relating to Lamar Media's
outstanding notes.
6. Earnings Per Share
Earnings per share are computed in accordance with SFAS No. 128, "Earnings Per
Share." The calculations of basic earnings per share exclude any dilutive effect
of stock options and convertible debt while diluted earning per share includes
the dilutive effect of stock options and convertible debt. The number of
potentially dilutive shares excluded from the calculation because of their
anti-dilutive effect are 331,402 and 418,585 for three months ended September
30, 2002 and 2001, and 595,728 and 469,059 for the nine months ended September
30, 2002 and 2001, respectively.
-6-
LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
7. New Accounting Pronouncements
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 also requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and subsequently SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets", after its adoption.
In August, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the asset. SFAS
No. 144 requires companies to separately report discontinued operations and
extends that reporting to a component of an entity that either has been disposed
of (by sale, abandonment, or in a distribution to owners) or is classified as
held for sale. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell. The Company adopted SFAS No.
144 on January 1, 2002.
In April 2002, the FASB issued Statement 145, Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections
("Statement 145"). This statement rescinds SFAS No. 4, Reporting Gains and
Losses from Extinguishments of Debt, and requires that all gains and losses from
extinguishments of debt should be classified as extraordinary items only if they
meet the criteria in APB No. 30. Applying APB No. 30 will distinguish
transactions that are part of an entity's recurring operations from those that
are unusual or infrequent or that meet the criteria for classification as to an
extraordinary item. Any gain or loss on extinguishment of debt that was
classified as an extraordinary item in prior periods presented that does not
meet the criteria in APB No. 30 for classification as an extraordinary item must
be reclassified. The Company will adopt the provisions related to the rescission
of SFAS No. 4 in the fourth quarter of 2002.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", ("Statement 146") which addresses financial
accounting and reporting for costs associated with exit or disposal activities.
It nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The principal difference between Statement
146 and Issue 94-3 relates to the recognition of a liability for a cost
associated with an exit or disposal activity. Statement 146 requires that a
liability be recognized for those costs only when the liability is incurred,
that is, when it meets the definition of a liability in the FASB's conceptual
framework. In contrast, under Issue 94-3, a company recognized a liability for
an exit cost when it committed to an exit plan. Statement 146 also establishes
fair value as the objective for initial measurement of liabilities related to
exit or disposal activities. The Statement is effective for exit or disposal
activities that are initiated after December 31, 2002. The Company will adopt
the provisions related to Statement No. 146 as of January 1, 2003.
8. Commitments and Contingent Liabilities
In August 2002, a jury verdict was rendered in a lawsuit filed against the
Company in the amount of $32 in compensatory damages and $2,245 in punitive
damages. In October 2002, the Company filed a motion seeking the elimination or
reduction of the punitive damages portion of the award. As of the date of this
report, the court has not ruled on the Company's motion. If the ruling is
adverse to the Company, the Company intends to appeal. As a result of the
verdict, the Company recorded a $2,277 charge in its operating expenses during
the quarter ended September 30, 2002.
-7-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
September 30, December 31,
ASSETS 2002 2001
- ------ ------------- ------------
Current assets:
Cash and cash equivalents $ 58,646 $ 12,885
Receivables, net 102,477 93,043
Prepaid expenses 41,344 27,176
Other current assets 17,778 17,688
------------ ------------
Total current assets 220,245 150,792
------------ ------------
Property, plant and equipment 1,824,868 1,777,399
Less accumulated depreciation and amortization (522,405) (451,686)
------------ ------------
Net property plant and equipment 1,302,463 1,325,713
------------ ------------
Intangible assets 2,171,699 2,156,079
Other assets - non-current 18,255 16,580
------------ ------------
Total assets $ 3,712,662 $ 3,649,164
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ 7,909 $ 10,048
Current maturities of long-term debt 114,244 66,559
Accrued expenses 23,685 22,362
Deferred income 15,360 11,618
------------ ------------
Total current liabilities 161,198 110,587
------------ ------------
Long-term debt 1,423,197 1,457,526
Deferred income taxes 128,692 127,241
Other liabilities 7,937 7,724
------------ ------------
Total liabilities 1,721,024 1,703,078
------------ ------------
Stockholder's equity:
Common stock, $0.01 par value, authorized 3,000 shares; 100 shares issued and
outstanding at September 30, 2002 and December 31, 2001 -- --
Additional paid-in capital 2,281,803 2,222,317
Accumulated deficit (290,165) (276,231)
------------ ------------
Stockholder's equity 1,991,638 1,946,086
------------ ------------
Total liabilities and stockholder's equity $ 3,712,662 $ 3,649,164
============ ============
See accompanying notes to condensed consolidated financial statements.
-8-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
Three Months ended Nine Months ended
September 30, September 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Net revenues $ 201,918 $ 188,267 $ 580,985 $ 550,440
--------- --------- --------- ---------
Operating expenses (income)
Direct advertising expenses 71,685 64,593 205,544 187,444
General and administrative expenses 42,253 37,481 122,738 111,502
Depreciation and amortization 69,455 88,501 204,332 260,920
(Gain) loss on disposition of assets (33) 311 (203) (708)
--------- --------- --------- ---------
183,360 190,886 532,411 559,158
--------- --------- --------- ---------
Operating income (loss) 18,558 (2,619) 48,574 (8,718)
Other expense (income)
Interest income (387) (100) (774) (522)
Interest expense 23,408 26,635 69,878 89,098
--------- --------- --------- ---------
23,021 26,535 69,104 88,576
--------- --------- --------- ---------
Loss before income tax benefit (4,463) (29,154) (20,530) (97,294)
Income tax benefit (1,318) (7,720) (6,596) (26,238)
--------- --------- --------- ---------
Net loss $ (3,145) $ (21,434) $ (13,934) $ (71,056)
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
-9-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
September 30,
2002 2001
--------- ---------
Cash flows from operating activities:
Net loss $ (13,934) $ (71,056)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 204,332 260,920
Gain on disposition of assets (203) (708)
Deferred tax benefit (2,218) (27,256)
Provision for doubtful accounts 6,378 5,495
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (13,652) (21,369)
Prepaid expenses (12,753) (11,139)
Other assets (4,740) (3,100)
Increase (decrease) in:
Trade accounts payable (2,139) 3,210
Accrued expenses 1,368 (18,279)
Other liabilities (43) 178
Deferred income 3,524 2,426
--------- ---------
Net cash provided by operating activities 165,920 119,322
--------- ---------
Cash flows from investing activities:
Acquisition of new markets (74,041) (272,436)
Capital expenditures (56,938) (59,958)
Proceeds from disposition of assets 2,048 3,906
--------- ---------
Net cash used in investing activities (128,931) (328,488)
--------- ---------
Cash flows from financing activities:
Debt issuance costs (1,076) --
Contribution from parent -- 48,000
Principal payments on long-term debt (50,192) (35,159)
Increase in notes payable 40 --
Net borrowings under credit agreements 60,000 130,000
--------- ---------
Net cash provided by financing activities 8,772 142,841
--------- ---------
Net increase (decrease) in cash and cash equivalents 45,761 (66,325)
Cash and cash equivalents at beginning of period 12,885 72,340
--------- ---------
Cash and cash equivalents at end of period $ 58,646 $ 6,015
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 70,159 $ 94,717
========= =========
Cash paid for state and federal income taxes $ 481 $ 798
========= =========
Parent company stock contributed for acquisitions $ 56,100 $ 29,000
========= =========
Noncash Financing Activity:
Note payable converted to contributed capital $ -- $ 287,500
========= =========
See accompanying notes to condensed consolidated financial statements.
-10-
LAMAR MEDIA CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
1. Significant 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 Lamar Media's
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.
These condensed consolidated financial statements should be read in conjunction
with Lamar Media's consolidated financial statements and the notes thereto
included in the 2001 Combined Form 10-K.
Certain amounts in the prior year's condensed consolidated financial statements
have been reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported results of operations.
Certain footnotes are not provided for the accompanying financial statements as
the information in notes 2, 3, 4, 5, 7 and 8 to the condensed consolidated
financial statements of Lamar Advertising Company included elsewhere in this
report is substantially equivalent to that required for the condensed
consolidated financial statements of Lamar Media Corp. Earnings per share data
is not provided for the operating results of Lamar Media Corp. as it is a
wholly-owned subsidiary of Lamar Advertising Company.
-11-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements. Actual results could differ
materially from those anticipated by the forward-looking statements due to the
risks and uncertainties described in the section of this report on Form 10-Q
entitled "Note Regarding Forward-Looking Statements" and described in the 2001
Combined 10-K under the caption "Factors Affecting Future Operating Results."
You should consider carefully each of these risks and uncertainties in
evaluating the Company's and Lamar Media's financial condition and results of
operations.
LAMAR ADVERTISING COMPANY
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Advertising Company for the nine months and three
months ended September 30, 2002 and 2001. This discussion should be read in
conjunction with the consolidated financial statements of the Company and the
related notes.
RESULTS OF OPERATIONS
We use EBITDA (earnings before interest, taxes, depreciation and amortization)
as one measure to evaluate the operating performance of our business. EBITDA is
not a measure of performance under generally accepted accounting principles and
should be considered in addition to, but not as an alternative to or superior to
other measures of financial performance prepared in accordance with generally
accepted accounting principles.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2001
Net revenues increased $30.6 million or 5.5% to $581.0 million for the nine
months ended September 30, 2002 as compared to the same period in 2001. This
increase was attributable to an increase in billboard net revenues of $24.8
million or 4.8% and a $2.1 million increase in logo sign revenue or 8.1%, and a
$2.7 million increase in transit revenue, which represents a 78.4% increase over
the prior year.
Operating expenses, exclusive of depreciation and amortization and gain or loss
on sale of assets, increased $29.4 million or 9.8% for the nine months ended
September 30, 2002 as compared to the same period in 2001. This was primarily
the result of additional operating expenses related to the operations of
acquired outdoor advertising assets. Included in operating expenses for the nine
months ended September 30, 2002 is a charge of $2.3 million related to a jury
verdict rendered in August 2002 against the Company for compensatory and
punitive damages. In October 2002, the Company filed a motion seeking the
elimination or reduction of the punitive damages portion of the award, which was
$2.2 million. As of the date of this report, the court has not ruled on the
Company's motion. If the ruling is adverse to the Company, the Company intends
to appeal.
EBITDA increased $1.2 million to $252.5 million for the nine months ended
September 30, 2002 from $251.3 million for the same period in 2001.
Depreciation and amortization expense decreased $56.8 million or 21.5% from
$263.6 million for the nine months ended September 30, 2001 to $206.8 million
for the nine months ended September 30, 2002 as a result of the Company's
adoption of SFAS No. 142 "Goodwill and Other Intangible Assets", which
eliminated the amortization expense for goodwill.
Due to the above factors, operating income increased $57.5 million to $45.9
million for nine months ended September 30, 2002 compared to an operating loss
of $11.6 million for the same period in 2001.
Interest expense decreased $18.0 million from $99.2 million for the nine months
ended September 30, 2001 to $81.2 million for the same period in 2002 as a
result of lower interest rates for the nine months ended September 30, 2002 as
compared to the same period in 2001.
There was an income tax benefit of $12.0 million for the nine months ended
September 30, 2002 as compared to an income tax benefit of $31.2 million for the
same period in 2001. The decrease in income tax benefit of $19.2 million is
primarily due to the increase in income before income taxes as a result of the
Company's adoption of SFAS No. 142. The effective tax rate for the nine months
ended September 30, 2002 was approximately 34.9%.
As a result of the above factors, the Company recognized a net loss for the nine
months ended September 30, 2002 of $22.5 million, as compared to a net loss of
$79.1 million for the same period in 2001.
-12-
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2001
Net revenues increased $13.7 million or 7.3% to $201.9 million for the three
months ended September 30, 2002 as compared to the same period in 2001.
Operating expenses, exclusive of depreciation and amortization and gain or loss
on sale of assets, increased $11.9 million or 11.6% for the three months ended
September 30, 2002 as compared to the same period in 2001, which includes a
charge of $2.3 million related to a jury verdict rendered in August 2002 against
the Company for compensatory and punitive damages. In October 2002, the Company
filed a motion seeking the elimination or reduction of the punitive damages
portion of the award, which was $2.2 million. As of the date of this report, the
court has not ruled on the Company's motion. If the ruling is adverse to the
Company, the Company intends to appeal.
EBITDA increased $1.8 million or 2.1% to $87.9 million for the three months
ended September 30, 2002 from $86.1 million for the same period in 2001.
For the three months ended September 30, 2002 same store net revenue increased
3.5% and same store billboard cash flow increased 1% as compared to the same
period in 2001. Same store is defined by the Company as results of markets owned
and operated for a period of more than 12 months.
Depreciation and amortization expense decreased $19.1 million or 21.4% from
$89.4 million for the three months ended September 30, 2001 to $70.3 million for
the three months ended September 30, 2002 as a result of the Company's adoption
of SFAS No. 142 "Goodwill and Other Intangible Assets", which eliminated the
amortization expense for goodwill.
Due to the above factors, operating income increased $21.3 million to $17.7
million for three months ended September 30, 2002 from a $3.6 million loss for
the same period in 2001.
Interest expense decreased $3.2 million from $30.4 million for the three months
ended September 30, 2001 to $27.2 million for the same period in 2002 as a
result of lower interest rates for the three months ended September 30, 2002 as
compared to the same period in 2001.
There was an income tax benefit of $3.1 million for the three months ended
September 30, 2002 as compared to an income tax benefit of $9.5 million for the
same period in 2001. This change is primarily due to the increase in income
before income taxes as a result of the Company's adoption of SFAS No. 142.
The Company recognized a net loss for the three months ended September 30, 2002
of $6.0 million, as compared to a net loss of $24.4 million for the same period
in 2001.
The results for the three months ended September 30, 2002 were affected by the
same factors as the nine months ended September 30, 2002. Reference is made to
the discussion of the nine month results.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements with
cash from operations and revolving credit borrowings. Its acquisitions have been
financed primarily with borrowed funds and the issuance of Class A common stock.
During the nine months ended September 30, 2002, the Company financed the cash
portion of its acquisition activity of approximately $74.0 million with excess
cash on hand. On January 11, 2002 the Company activated $200 million in new
borrowings under the incremental facility of its bank credit agreement. The
proceeds were used to reduce the balance of the revolving bank credit facility
balance by $160 million and approximately $10 million was used for operations
resulting in excess cash on hand of $30 million. Also on January 30, 2002,
JPMorgan Chase issued a standby letter of credit of approximately $3.2 million
to benefit American Casualty Insurance Company, the provider of the Company's
general liability and workman's compensation coverage. This issuance reduces the
Company's availability under its revolving bank credit facility. On March 31,
2002, in accordance with the Company's bank credit agreement, required quarterly
principal payments of $15.75 million were made and commitments under the
revolving facility of the bank credit agreement were reduced by $8.75 million
per quarter. As of September 30, 2002 the Company had $319.1 million available
under the revolving credit facility.
On September 25, 2002, the Company called for full redemption on October 25,
2002 of its outstanding 9.25% Senior Subordinated Notes due 2007 in aggregate
principal amount of approximately $74.1 million for a redemption price equal to
104.625% of the principal amount of the Notes plus accrued interest to the
redemption date of approximately $1.3 million. The Notes were called pursuant to
the optional redemption provisions of the Notes and the related indenture
applicable to optional redemptions. The Company used cash on hand to redeem the
Notes. In the fourth quarter of 2002, the Company will record approximately $2.1
million, net of tax, as an expense related to the prepayment penalty of the
Notes.
-13-
The Company's net cash provided by operating activities increased $35.5 million
for the nine months ended September 30, 2002 due primarily to a decrease in net
loss of $56.6 million, an increase in cash provided from accounts receivable of
$9.1 million and accrued expenses of $14.8 million. These changes were offset
primarily by an increase in other assets of $8.0 million, an increase in prepaid
expenses of $1.6 million, a decrease in accounts payable of $5.3 million and a
decrease in noncash items of $30.9 million. The decrease in non cash items
includes a decrease in depreciation and amortization of $56.9 million, offset by
a decrease in the deferred income tax benefit of $24.6 million and an increase
in the provision for doubtful accounts of $0.9 million. Net cash used in
investing activities decreased $201.7 million from $330.6 million for the nine
months ended September 30, 2001 to $128.9 million for the same period in 2002.
This decrease was due to a $200.5 million decrease in acquisitions of new
markets. Net cash provided by financing activities for the nine months ended
September 30, 2002 is $21.2 million primarily due to $60.0 million in net
borrowings under credit agreements and $12.7 million in proceeds from the
issuance of common stock, offset by $50.2 million in scheduled principal
payments of the Company's debt.
In the future the Company has principal reduction obligations and revolver
commitment reductions under its bank credit agreement. In addition it has fixed
commercial commitments which consists of various operating leases for production
facilities and sites upon which advertising structures are built. The leases
expire at various dates and have varying options to renew and to cancel. These
commitments are detailed as follows:
Payments Due by Period
(in millions)
Total Less
Contractual Obligations at than 1 1 - 3 4 - 5 After 5
Obligations September 30, 2002 Year Years Years Years
----------- ------------------ ------ ----- ------- -------
Long-Term debt $1,824.9 114.2 325.2 1,384.4 1.1
Billboard site and building leases 809.5 95.1 168.7 126.5 419.2
-------- ------ ----- ------- -------
Total Payments due $2,634.4 209.3 493.9 1,510.9 420.3
======== ====== ===== ======= =======
Amount of Commitment
Expiration per Period
(in millions)
Total Amount Less
Other Commercial Committed at than 1 1 - 3 4 - 5 After 5
Commitments September 30, 2002 Year Years Years Years
---------------- ------------------ ------ ----- ----- -------
Revolving credit facility (1) $ 323.8 35.0 205.7 83.1 0.0
======= ------ ----- ----- -------
Standby Letter of Credit $ 4.7 0.3 0.0 4.4 0.0
======= ====== ===== ===== =======
(1) The Company had no outstanding balance at September 30, 2002.
The Company believes that its current level of cash on hand, availability under
its bank credit agreement and future cash flows from operations are sufficient
to meet its operating needs through the year 2002. All debt obligations are on
the Company's balance sheet.
LAMAR MEDIA CORP.
The following is a discussion of the consolidated financial condition and
results of operations of Lamar Media for the nine months and three months ended
September 30, 2002 and 2001. This discussion should be read in conjunction with
the consolidated financial statements of Lamar Media and the related notes.
RESULTS OF OPERATIONS
We use EBITDA (earnings before interest, taxes, depreciation and amortization)
as one measure to evaluate the operating performance of our business. EBITDA is
not a measure of performance under generally accepted accounting principles and
should be considered in addition to, but not as an alternative to or superior to
other measures of financial performance prepared in accordance with generally
accepted accounting principles.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2001
Net revenues increased $30.6 million or 5.5% to $581.0 million for the nine
months ended September 30, 2002 as compared to the same period in 2001. This
increase was attributable to an increase in billboard net revenues of $24.8
million or 4.8%, a $2.1 million increase in logo sign revenue or 8.1% and a $2.7
million increase in transit revenue, which represents a 78.4% increase over the
prior year.
-14-
Operating expenses, exclusive of depreciation and amortization and gain or loss
on sale of assets, increased $29.3 million or 9.8% for the nine months ended
September 30, 2002 as compared to the same period in 2001. This was primarily
the result of additional operating expenses related to the operations of
acquired outdoor advertising assets. Included in operating expenses for the nine
months ended September 30, 2002 is a charge of $2.3 million related to a jury
verdict rendered in August 2002 against the Company for compensatory and
punitive damages. In October 2002, the Company filed a motion seeking the
elimination or reduction of the punitive damages portion of the award, which was
$2.2 million. As of the date of this report, the court has not ruled on the
Company's motion. If the ruling is adverse to the Company, the Company intends
to appeal.
EBITDA increased $1.2 million to $252.7 million for the nine months ended
September 30, 2002 from $251.5 million for the same period in 2001.
Depreciation and amortization expense decreased $56.6 million or 21.7% from
$260.9 million for the nine months ended September 30, 2001 to $204.3 million
for the nine months ended September 30, 2002 as a result of Lamar Media's
adoption of SFAS No. 142 "Goodwill and Other Intangible Assets", which
eliminated the amortization expense for goodwill.
Due to the above factors, operating income increased $57.3 million to $48.6
million for nine months ended September 30, 2002 compared to an operating loss
of $8.7 million for the same period in 2001.
Interest expense decreased $19.2 million from $89.1 million for the nine months
ended September 30, 2001 to $69.9 million for the same period in 2002 as a
result of lower interest rates for the nine months ended September 30, 2002 as
compared to the same period in 2001.
There was an income tax benefit of $6.6 million for the nine months ended
September 30, 2002 as compared to an income tax benefit of $26.2 million for the
same period in 2001. This change is primarily due to the increase in income
before income taxes as a result of Lamar Media's adoption of SFAS No. 142. The
effective tax rate for the nine months ended September 30, 2002 was
approximately 32.1%.
As a result of the above factors, Lamar Media recognized a net loss for the nine
months ended September 30, 2002 of $13.9 million, as compared to a net loss of
$71.1 million for the same period in 2001.
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2001
Net revenues increased $13.7 million or 7.3% to $201.9 million for the three
months ended September 30, 2002 as compared to the same period in 2001.
Operating expenses, exclusive of depreciation and amortization and gain or loss
on sale of assets, increased $11.9 million or 11.6% for the three months ended
September 30, 2002 as compared to the same period in 2001, which includes a
charge of $2.3 million related to a jury verdict rendered in August 2002 against
the Company for compensatory and punitive damages. In October 2002, the Company
filed a motion seeking the elimination or reduction of the punitive damages
portion of the award, which was $2.2 million. As of the date of this report, the
court has not ruled on the Company's motion. If the ruling is adverse to the
Company, the Company intends to appeal.
EBITDA increased $1.8 million or 2.1% to $88.0 million for the three months
ended September 30, 2002 from $86.2 million for the same period in 2001.
Depreciation and amortization expense decreased $19.0 million or 21.5% from
$88.5 million for the three months ended September 30, 2001 to $69.5 million for
the three months ended September 30, 2002 as a result of Lamar Media's adoption
of SFAS No. 142 "Goodwill and Other Intangible Assets", which eliminated the
amortization expense for goodwill.
Due to the above factors, operating income increased $21.2 million to $18.6
million for three months ended September 30, 2002 compared to an operating loss
of $2.6 million for the same period in 2001.
Interest expense decreased $3.2 million from $26.6 million for the three months
ended September 30, 2001 to $23.4 million for the same period in 2002 as a
result of lower interest rates for the three months ended September 30, 2002 as
compared to the same period in 2001.
There was a income tax benefit of $1.3 million for the three months ended
September 30, 2002 as compared to an income tax benefit of $7.7 million for the
same period in 2001. This change is primarily due to the increase in income
before income taxes as a result of Lamar Media's adoption of SFAS No. 142.
As a result of the above factors, Lamar Media a recognized a net loss for the
three months ended September 30, 2002 of $3.1 million, as compared to a net loss
of $21.4 million for the same period in 2001.
-15-
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
LAMAR ADVERTISING COMPANY AND LAMAR MEDIA CORP.
Lamar Advertising Company is exposed to interest rate risk in connection with
variable rate debt instruments issued by its wholly-owned subsidiary, Lamar
Media Corp. The Company does not enter into market risk sensitive instruments
for trading purposes. The information below summarizes the Company's interest
rate risk associated with its principal variable rate debt instruments
outstanding at September 30, 2002.
Loans under Lamar Media's bank credit agreement bear interest at variable rates
equal to the JPMorgan Chase Prime Rate or LIBOR plus the applicable margin.
Because the JPMorgan Chase Prime Rate or LIBOR may increase or decrease at any
time, the Company and Lamar Media are exposed to market risk as a result of the
impact that changes in these base rates may have on the interest rate applicable
to borrowings under the bank credit agreement. Increases in the interest rates
applicable to borrowings under the bank credit agreement would result in
increased interest expense and a reduction in the Company's and Lamar Media's
net income and total free cash flow.
At September 30, 2002, there was approximately $991 million of aggregate
indebtedness outstanding under the bank credit agreement, or approximately 58%
of the Company's and 70% of Lamar Media's outstanding long-term debt on that
date, bearing interest at variable rates. The aggregate interest expense for the
nine months ended September 30, 2002 with respect to borrowings under the bank
credit agreement was approximately $32 million, and the weighted average
interest rate applicable to borrowings under these credit facilities during the
nine months ended September 30, 2002 was 3.97%. Assuming that the weighted
average interest rate was 200-basis points higher (that is 5.97% rather than
3.97%), then the Company's and Lamar Media's September 30, 2002 interest expense
would have been approximately $15 million higher resulting in a $9 million
decrease in the Company's and Lamar Media's nine months ended September 30, 2002
net income and total free cash flow.
The Company attempts to mitigate the interest rate risk resulting from its
variable interest rate long-term debt instruments by also issuing fixed rate
long-term debt instruments and maintaining a balance over time between the
amount of the Company's variable rate and fixed rate indebtedness. In addition,
the Company has the capability under the bank credit agreement to fix the
interest rates applicable to its borrowings at an amount equal to LIBOR plus the
applicable margin for periods of up to twelve months, which would allow the
Company to mitigate the impact of short-term fluctuations in market interest
rates. In the event of an increase in interest rates, the Company may take
further actions to mitigate its exposure. The Company cannot guarantee, however,
that the actions that it may take to mitigate this risk will be feasible or
that, if these actions are taken, that they will be effective.
ITEM 4.
CONTROLS AND PROCEDURES.
a) Evaluation of disclosure controls and procedures. The Company's and Lamar
Media's chief executive officer and chief financial officer, after evaluating
the effectiveness of the Company's and Media's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)
and 15-d-14(c)) as of a date (the "Evaluation Date") within 90 days before the
filing date of this combined quarterly report, have concluded that, as of the
Evaluation Date, the Company's and Lamar Media's disclosure controls and
procedures were adequate and designed to ensure that the information required to
be disclosed in the reports filed or submitted by the Company and Lamar Media
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the requisite time periods.
b) Changes in internal controls. There were no significant changes in the
internal controls of the Company or Lamar Media or in other factors that could
significantly affect the Company's or Lamar Media's internal controls subsequent
to the Evaluation Date.
-16-
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Exhibits filed as part of this report are listed on the Exhibit Index
immediately following the signature page hereto, which Exhibit Index is
incorporated herein by reference.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAMAR ADVERTISING COMPANY
DATED: November 12, 2002 BY: /s/ Keith A. Istre
----------------------
Chief Financial and Accounting Officer,
Treasurer and Director
LAMAR MEDIA CORP.
DATED: November 12, 2002 BY: /s/ Keith A. Istre
----------------------
Chief Financial and Accounting Officer,
Treasurer and Director
-17-
CERTIFICATIONS
I, Kevin P. Reilly, Jr., certify that:
1. I have reviewed this combined quarterly report on Form 10-Q of Lamar
Advertising Company and Lamar Media Corp.;
2. Based on my knowledge, this combined quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this combined quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this combined quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrants as of, and for, the periods presented
in this combined quarterly report;
4. The registrants' other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrants
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrants,
including their consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this combined quarterly report is being
prepared;
b) evaluated the effectiveness of the registrants' disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this combined quarterly report (the
"Evaluation Date"); and
c) presented in this combined quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrants' other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants' auditors and the
audit committee of registrants' board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrants' ability to record, process, summarize and report
financial data and have identified for the registrants'
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrants' internal controls; and
6. The registrants' other certifying officer and I have indicated in this
combined quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
DATED: November 12, 2002 BY: /s/ Kevin P. Reilly, Jr.
----------------------------
Kevin P. Reilly, Jr.
Chief Executive Officer, Lamar Advertising Company
Chief Executive Officer, Lamar Media Corp.
-18-
I, Keith A. Istre, certify that:
1. I have reviewed this combined quarterly report on Form 10-Q of Lamar
Advertising Company and Lamar Media Corp.;
2. Based on my knowledge, this combined quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this combined quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this combined quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrants as of, and for, the periods presented
in this combined quarterly report;
4. The registrants' other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrants
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrants,
including their consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this combined quarterly report is being
prepared;
b) evaluated the effectiveness of the registrants' disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this combined quarterly report (the
"Evaluation Date"); and
c) presented in this combined quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrants' other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants' auditors and the
audit committee of registrants' board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrants' ability to record, process, summarize and report
financial data and have identified for the registrants'
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrants' internal controls; and
6. The registrants' other certifying officer and I have indicated in this
combined quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
DATED: November 12, 2002 BY: /s/ Keith A. Istre
-----------------------
Keith A. Istre
Chief Financial Officer, Lamar Advertising Company
Chief Financial Officer, Lamar Media Corp.
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Merger dated as of July 20, 1999 among
Lamar Media Corp., Lamar New Holding Co., and Lamar Holdings
Merge Co. Previously filed as exhibit 2.1 to the Company's
Current Report on Form 8-K filed on July 22, 1999 (File No.
0-30242) and incorporated herein by reference.
3.1 Certificate of Incorporation of Lamar New Holding Co.
Previously filed as exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1999 (File
No. 0-20833) filed on August 16, 1999 and incorporated herein
by reference.
3.2 Certificate of Amendment of Certificate of Incorporation of
Lamar New Holding Co. (whereby the name of Lamar New Holding
Co. was changed to Lamar Advertising Company). Previously
filed as exhibit 3.2 to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1999 (File No. 0-20833)
filed on August 16, 1999 and incorporated herein by reference.
3.3 Certificate of Amendment of Certificate of Incorporation of
Lamar Advertising Company. Previously filed as Exhibit 3.3 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2000 (File No. 0-30242) filed on August 11,
2000 and incorporated herein by reference.
3.4 Certificate of Correction of Certificate of Incorporation of
Lamar Advertising Company. Previously filed as Exhibit 3.4 to
the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 2000 (File No. 0-30242) filed on November
14, 2000 and incorporated herein by reference.
3.5 Bylaws of the Lamar Advertising Company. Previously filed as
Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1999 (File No. 0-20833) filed on
August 16, 1999 and incorporated herein by reference.
3.6 Amended and Restated Bylaws of Lamar Media Corp. Previously
filed as Exhibit 3.1 to Lamar Media's Quarterly Report on Form
10-Q for the period ended September 30, 1999 (File No.
1-12407) filed on November 12, 1999 and incorporated herein by
reference.
4.1 Supplemental Indenture to the Indenture dated November 15,
1996 among Lamar Media Corp., certain of its subsidiaries and
State Street Bank and Trust Company, as Trustee, dated August
16, 2002 delivered by Washington Logos, L.L.C. Filed herewith.
4.2 Supplemental Indenture to the Indenture dated August 15, 1997
among Outdoor Communications, Inc., certain of its
subsidiaries and First Union National Bank, as Trustee, dated
August 16, 2002 delivered by Washington Logos, L.L.C. Filed
herewith.
4.3 Supplemental Indenture to the Indenture dated September 25,
1997 among Lamar Media Corp., certain of its subsidiaries and
State Street Bank and Trust Company, as Trustee, dated August
16, 2002 delivered by Washington Logos, L.L.C. Filed herewith.
10.1 Joinder Agreement dated November 12, 2001 to the Lamar Media
Corp. Credit Agreement dated August 16, 2002 by Washington
Logos L.L.C. Filed herewith.
10.2 Amendment No. 4 dated as of October 23, 2002 in respect of the
Credit Agreement dated as of August 13, 1999 between Lamar
Media Corp., the Subsidiary Guarantors party thereto, the
Lenders party thereto, and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Administrative Agent. Filed
herewith.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
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