-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CtzVJ8i51eDkubn7dzvjh+tl1ovdlsEwlyfjANMaXHVqrtbbD9vh0npnDOd0ahx/ aWp8K4zA15RLSF7mcVzQpg== 0000927016-97-002826.txt : 19971104 0000927016-97-002826.hdr.sgml : 19971104 ACCESSION NUMBER: 0000927016-97-002826 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971103 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OUTDOOR COMMUNICATIONS INC /DE/ CENTRAL INDEX KEY: 0001040332 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 383286430 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-22713 FILM NUMBER: 97706656 BUSINESS ADDRESS: STREET 1: 512 TAYLOR ST CITY: CORINTH STATE: MS ZIP: 38834 BUSINESS PHONE: 6012863334 MAIL ADDRESS: STREET 1: 512 TAYLOR ST CITY: CORINTH STATE: MS ZIP: 38834 FORMER COMPANY: FORMER CONFORMED NAME: OCI HOLDINGS CORP DATE OF NAME CHANGE: 19970602 10-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K SPECIAL FINANCIAL REPORT (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended June 30, 1997.________________________________________ [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission file number 333-28489 --------- OUTDOOR COMMUNICATIONS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 38-3286430 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 512 Taylor Street, Corinth, Mississippi 38834 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (601) 286-3334 ----------------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X (2) ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of October 30, 1997, all voting stock of the Registrant was held by affiliates of the Registrant. The number of shares of the Registrant's common stock outstanding as of October 30, 1997 was 12,075. Documents incorporated by reference: None Exhibit Index appears on page ___________ of __________ pages. - ------------------------ (1) This Special Financial Report on Form 10-K is being filed pursuant to Rule 15d-2 under the Securities Exchange Act of 1934. Pursuant to such rule, this report contains only the certified financial statements for the Registrant's fiscal year ended June 30, 1997. (2) The registrant has been subject to such filing requirements for less than 90 days. 1 PART I ITEM 1. BUSINESS Not applicable. ITEM 2. PROPERTIES Not applicable. ITEM 3. LEGAL PROCEEDINGS Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 2 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Not applicable. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA Not applicable. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OUTDOOR COMMUNICATIONS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (1) Independent Auditors' Report .................................................. Consolidated Balance Sheets ................................................... Consolidated Statements of Operations ......................................... Consolidated Statements of Stockholders' Deficit .............................. Consolidated Statements of Cash Flows ......................................... Notes to Consolidated Financial Statements ....................................
- ------------------------ (1) All schedules have been omitted because they are not required, not applicable or are included in Notes to Consolidated Financial Statements. 3 Independent Auditors' Report ---------------------------- The Board of Directors and Stockholders Outdoor Communications, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Outdoor Communications, Inc. (formerly known as OCI Holdings Corp.) and subsidiaries as of June 30, 1997 and 1996, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year ended June 30, 1997 and the period April 4, 1996 to June 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Outdoor Communications, Inc. as of June 30, 1997 and 1996, and the results of their operations and their cash flows for the year ended June 30, 1997 and the period April 4, 1996 to June 30, 1996, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP East Lansing, Michigan September 18, 1997 4 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Balance Sheets June 30, 1997 and 1996
1997 1996 ------------ ---------- Assets (notes 5 and 8) ------ Current assets: Cash and cash equivalents $ 1,712,827 1,259,441 Trade accounts receivable, less allowance for doubtful accounts of $317,914 in 1997 and $273,110 in 1996 7,253,391 5,050,490 Refundable income taxes 616,100 185,893 Prepaid rent expense 1,805,431 1,077,830 Other assets 978,023 771,979 Deferred income taxes (note 9) 438,967 276,703 ------------ ---------- Total current assets 12,804,739 8,622,336 ------------ ---------- Property and equipment, net (note 3) 55,786,503 37,765,591 Intangible assets, less accumulated amortization (note 4) 72,239,682 45,155,192 Deferred financing costs (note 5) 4,240,033 3,169,224 Other assets 605,899 116,638 ------------ ---------- Total assets $145,676,856 94,828,981 ============ ==========
(Continued) 5
1997 1996 -------------- ----------- Liabilities and Stockholders' Deficit ------------------------------------- Current liabilities: Current installments of long-term debt (notes 5 and 7) $ 5,876,875 4,750,000 Obligation under non-compete agreement - 100,000 Trade accounts payable 760,257 770,147 Income taxes payable 615,418 179,822 Accrued salaries, wages and benefits 1,187,104 708,252 Accrued interest 541,895 1,038,833 Other accrued expenses 491,848 620,318 Deferred advertising revenues and non-compete income 405,500 303,512 ------------ ---------- Total current liabilities 9,878,897 8,470,884 ------------ ---------- Long-term debt (note 19): Credit facility, excluding current installments (notes 5 and 18) 115,650,000 57,750,000 Subordinated debt (notes 6 and 11) 22,425,000 22,100,000 Notes payable--stockholders (note 7) - 5,876,875 ------------ ---------- Total long-term debt 138,075,000 85,726,875 Accrued interest (notes 6 and 11) 1,671,666 262,488 Deferred non-compete income, less current portion 26,667 106,667 Deferred income taxes (note 9) 4,070,180 5,163,547 ------------ ---------- 153,722,410 99,730,461 ------------ ---------- Stockholders' deficit (notes 10, 11 and 19): Class A common stock, $0.01 par value. Authorized 10,000 shares; issued and outstanding 8,385.72 in 1997 and 8,210.72 shares in 1996 84 82 Class B common stock, $.01 par value. Authorized 10,000 shares; issued and outstanding 3,689.28 shares 37 37 Additional paid-in capital 3,811,475 3,636,477 Accumulated deficit (11,857,150) (8,538,076) ------------ ---------- Total stockholders' deficit (8,045,554) (4,901,480) ------------ ---------- Commitments and contingencies (notes 10, 11, 12 and 13) Total liabilities and stockholders' deficit $145,676,856 94,828,981 ============ ==========
See accompanying notes to consolidated financial statements. 6 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Operations For the year ended June 30, 1997 and the period April 4, 1996 to June 30, 1996
1997 1996 ------------- ----------- Gross revenues $ 49,169,290 9,535,542 Less agency commissions 4,665,764 987,032 ------------ ---------- Net revenues 44,503,526 8,548,510 ------------ ---------- Operating expenses: Direct operating expenses (note 12) 15,106,559 2,753,970 Selling, general, and administrative 12,030,361 2,308,313 Depreciation and amortization 9,821,294 1,801,892 ------------ ---------- Total operating expenses 36,958,214 6,864,175 ------------ ---------- Operating income 7,545,312 1,684,335 Interest expense (11,623,563) (1,953,993) Loss on disposal of equipment (458,541) (67,328) Other income, net 194,306 64,494 ------------ ---------- Loss before income tax benefit (4,342,486) (272,492) Income tax benefit (note 9) (1,023,412) (10,814) ------------ ---------- Net loss $ (3,319,074) (261,678) ============ ==========
See accompanying notes to consolidated financial statements. 7 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Deficit For the year ended June 30, 1997 and the period April 4, 1996 to June 30, 1996
Series A Class A Class B Additional Total Preferred Common Common Paid-in Accumulated Stockholders' Stock Stock Stock Capital Deficit Deficit ---------- -------- ------- ----------- ------------ -------------- Balances at April 3, 1996 $ 90 10 - 1,235,326 (8,276,398) (7,040,972) Class A common shares issued for cash - 35 - 3,536,895 - 3,536,930 Class B common shares issued for cash - - 2 189,270 - 189,272 Merger with OCI of Michigan - 19 - (19) - - Redemption of OCI Michigan stock (90) (10) - (7,589,932) - (7,590,032) Class A common shares issued for MCC stock - 28 - 2,764,972 - 2,765,000 Class B common shares issued for cash - - 35 3,499,965 - 3,500,000 Net loss - - - - (261,678) (261,678) --------- --- ------- ---------- ----------- ---------- Balances at June 30, 1996 - 82 37 3,636,477 (8,538,076) (4,901,480) Class A common shares issued for cash - 2 - 174,998 - 175,000 Net loss - - - - (3,319,074) (3,319,074) --------- --- ------- ---------- ----------- ---------- Balances at June 30, 1997 $ - 84 37 3,811,475 (11,857,150) (8,045,554) ========= === ======= ========== =========== ==========
See accompanying notes to consolidated financial statements. 8 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the year ended June 30, 1997 and the period April 4, 1996 to June 30, 1996
1997 1996 ---- ---- Cash flows from operating activities: Net loss $ (3,319,074) (261,678) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Allowance for doubtful accounts 317,964 48,265 Depreciation of equipment 5,069,744 903,191 Amortization of intangible assets 5,441,136 1,026,557 Loss on disposal of equipment 458,541 67,328 Deferred income taxes (1,255,631) (112,776) Changes in assets and liabilities, net of effects from purchase of company, which increase (decrease) cash flows: Trade accounts receivable (1,083,210) (1,084,980) Refundable income taxes (430,207) (81,182) Prepaid rent expense (303,145) (116,876) Other assets (240,413) 394,681 Trade accounts payable (27,528) 79,701 Income taxes payable 435,596 179,822 Accrued expenses 1,112,794 (5,069,984) Deferred advertising revenues and non-compete income (78,828) (142,665) ------------ ----------- Net cash provided by (used in) operating activities 6,097,739 (4,170,596) ------------ ----------- Cash flows from investing activities: Purchase of AOA Holding, L.L.C. - (34,132,908) Purchase of Georgia Outdoor Advertising, Inc. - (11,650,000) Purchase of Mass Communications Corp. warrants, common and preferred stock - (767,850) Purchase of Skoglund Commun- ications, Inc. and Skoglund Communications of St. Cloud, Inc. (21,246,850) - Purchase of Outdoor West of Tennessee (11,802,444) - Purchase of Summey Outdoor Advertising, Inc. (5,145,000) - Purchase of other businesses (13,639,159) - Capital expenditures (4,338,483) (597,849) Proceeds from sale of property and equipment 36,617 2,625 Deferred acquisition costs (1,318,458) (452,814) ------------ ----------- Net cash used in investing activities (57,453,777) (47,598,796) ------------ ----------- Cash flows from financing activities: Proceeds from issuance of long- term debt 54,750,000 80,465,000 Repayment of long-term debt (1,600,000) (23,950,000) Deferred financing costs (1,740,576) (3,281,537) Proceeds from issuance of subordinated notes 325,000 - Proceeds from issuance of common stock 175,000 7,226,202 Redemption of OCI Corp. of Michigan common and preferred stock - (7,590,032) Payments on obligation under non-compete agreement (100,000) (100,000) ------------ ----------- Net cash provided by financing activities 51,809,424 52,769,633 ------------ ----------- Net increase in cash and cash equivalents 453,386 1,000,241 Cash and cash equivalents at beginning of the period 1,259,441 259,200 ------------ ----------- Cash and cash equivalents at end of the period $ 1,712,827 1,259,441 ============ ===========
See accompanying notes to consolidated financial statements. 9 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 1997 and 1996 (1) Organization and Acquisition of Assets -------------------------------------- After the close of business on April 3, 1996, the stockholders of OCI Corp. of Michigan (OCIM) and Mass Communications Corp. (MCC) (collectively, the companies) entered into a plan of reorganization (the Reorganization Plan) to restructure and merge the companies. Pursuant to the Reorganization Plan, the stockholders agreed to sell their entire interests in the common and preferred stock of the companies. In conjunction with the Reorganization Plan, OCI Holdings Corp. (Holdings) was incorporated for the purpose of effecting the reorganization and merger. Holdings is a holding company with no assets or operations other than its investment in its subsidiaries. Under the Reorganization Plan, a series of planned transactions were executed in the following order: (1) certain outside investors of OCIM (the Investors) purchased 24.67 shares and 60 shares of OCIM's common and preferred stock, respectively, from the minority shareholders of OCIM for $1,908,798; (2) the Investors then exchanged these same shares, together with $14,191,202 in cash, for 5,410.73 and 3,869.28 shares of Holdings' Class A and Class B common stock, respectively, and $10,465,000 of subordinated debt (see note 6); and (3) the remaining 75.33 shares and 840 shares of OCIM's common and preferred stock, respectively, were purchased by Holdings for $7,508,367, which resulted in Holdings being the sole stockholder in OCIM's common and preferred stock. As a result of the above transactions, OCIM became a wholly-owned subsidiary of Holdings. As such, the closing balance sheet of OCIM at April 3, 1996, adjusted to reflect the above transactions, became the opening balance sheet of Holdings. Immediately following the execution of the Reorganization Plan transactions listed above, the stockholders of MCC exchanged 7,731.01 shares of common stock and 308.78 shares of preferred stock and sold 5,128.99 shares of common stock and 691.22 shares of preferred stock for an aggregate value of $25,747,927. This transaction resulted in MCC becoming a wholly owned subsidiary of Holdings. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and liabilities assumed based upon the fair value at the date of acquisition as follows:
Adjusted working capital $ 1,450,063 Goodwill 8,741,590 Property and equipment 11,529,274 Customer list 4,027,000 ------------ $ 25,747,927 ============
10 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (1) Organization and Acquisition of Assets, Continued ------------------------------------------------- The details of the acquisition for the fair value of assets acquired and liabilities assumed are as follows: liabilities assumed of $10,750,000; subordinated debt issued to the MCC shareholders in the amount of $11,011,875; 2,764.99 shares of OCI Holdings Inc. common stock issued to MCC shareholders with a value of $2,765,000; and cash paid in the amount of $1,221,052 equaling the purchase price of $25,747,927. Georgia Acquisition ------------------- Simultaneous to the Reorganization Plan, Outdoor Communications, Inc., (since renamed OCI(S) Corp.) a subsidiary of MCC, completed the purchase of the business operations and certain assets of Georgia Outdoor Advertising, Inc. (GOA), pursuant to an Asset Purchase Agreement dated March 8, 1996, for cash of $11,650,000. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the net assets based upon their fair values at the date of acquisition as follows: Adjusted working capital $ 415,864 Goodwill 2,968,896 Property and equipment 2,282,240 Non-compete agreement 700,000 Customer list 5,283,000 ------------ Cash purchase price $ 11,650,000 ============
Effective June 30, 1997, OCI Holdings Corp. was renamed Outdoor Communications, Inc. (OCI). Simultaneously, New South Holdings Corp. and MCC were merged into OCI and MCC's subsidiary, Outdoor Communications, Inc. was renamed OCI (S) Corp. (OCIS). Also during 1997, OCI Corp. of Michigan was renamed OCI (N) Corp. (OCIN). As a result of these transactions, the Company now has two wholly owned subsidiaries, OCI (N) Corp. and OCI (S) Corp. Outdoor Communications, Inc. and subsidiaries (the Company) is a leading outdoor advertising company in the Midwest and Southeast Regions of the United States. The Company owns and operates outdoor advertising display faces in 12 states throughout these regions. The Company sells outdoor advertising space to national and local advertisers. 11 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Summary of Significant Accounting Policies ------------------------------------------ The accounting policies of the Company, as summarized below, conform with generally accepted accounting principles and reflect practices appropriate to the business in which it operates. (a) Principles of Consolidation --------------------------- The consolidated financial statements include the financial statements of Outdoor Communications, Inc. and its wholly owned subsidiaries, OCI (N) Corp. and OCI (S) Corp. All significant intercompany balances and transactions have been eliminated in consolidation. (b) Cash Equivalents ---------------- Cash equivalents consist of repurchase agreements and money market funds. For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments with maturities of three months or less at the time of purchase to be cash equivalents. (c) Property and Equipment ----------------------- Property and equipment are stated at cost. Depreciation on plant and equipment is computed using the straight-line method over the estimated useful lives of the assets. (d) Intangible Assets ----------------- Intangible assets include goodwill, non-compete agreements and customer lists. Goodwill, which represents the excess of purchase price over fair value of net assets acquired on their dates of acquisition, is amortized on a straight-line basis over the expected periods to be benefited, ranging from 20 to 25 years. The non-compete agreements are amortized over the terms of the respective agreements, which range from 4 to 10 years. Customer lists resulting from acquisitions are amortized on the straight-line method over 8 years. The Company assesses the recoverability of all long-lived intangible assets by determining whether the amortization of the intangible assets over their remaining lives can be recovered through undiscounted future operating cash flows of the acquired operation. The amount of impairment, if any, is measured based on projected discounted future operating cash flows using a discount rate reflecting the Company's average cost of funds. 12 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Summary of Significant Accounting Policies, Continued ----------------------------------------------------- (e) Deferred Financing Costs ------------------------ Financing costs incurred as a result of obtaining long-term debt are recorded as deferred financing costs and are amortized on a straight- line basis over the term of the related debt (see note 5) and reflected as interest expense in the accompanying consolidated statements of operations. (f) Employee Benefits ----------------- The Company is self-insured for its employee health care plan. The liability for self-insurance reflects the cost for the uninsured portion of unpaid claims at year end. The liability is based on estimates for claims reported prior to year end, using reported claim information, and estimates for incurred but not reported, based on historical results of the Company's plan, as well as certain industry information. (g) Retirement Program ------------------ OCIN provides a defined contribution 401(k) plan, which covers all of its full-time employees with one or more years of service. Eligible employees can contribute up to 12% of their compensation through payroll deductions. OCIN contributes an amount equal to 50% of each employee's contribution up to 3% of the employee's total compensation. (h) Revenue Recognition ------------------- The Company recognizes revenue from advertising contracts on an accrual basis ratably over the term of the contracts, which range from 1 to 12 months, as advertising services are provided. Advertising revenues from retail consumer products, hospitality, and automotive industry constitute approximately 34% of gross revenues. No other industry is the source of 10% or more of gross revenues. (i) Income Taxes ------------ Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 13 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Summary of Significant Accounting Policies, Continued ----------------------------------------------------- (j) Other Assets ------------ Other assets consist principally of inventory and the cash surrender value of officer life insurance. (k) Use of Estimates ---------------- Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (l) Financial Instruments --------------------- The Company utilizes hedged interest rate swap agreements. The interest rate swap agreements involves the exchange of fixed- and floating-rate interest payments periodically over the life of the agreement without the exchange of the underlying principal amounts. The differential to be paid or received, on a quarterly basis, is accrued as interest rates change and is recognized as an adjustment to interest expense. (m) Earnings Per Share ------------------ An earnings per share calculation has not been presented because the Company is closely held by a private investor group and, accordingly, earnings per share is not required or meaningful. (n) Reclassifications ----------------- Certain 1996 financial statement amounts have been reclassified to conform to the 1997 presentation. 14 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (3) Property and Equipment ---------------------- Major categories of property, plant, and equipment at June 30, 1997 and 1996 were as follows:
Estimated Life (Years) 1997 1996 ------------ ---- ---- Land -- $ 1,610,126 1,204,494 Building and improvements 10-25 1,469,852 564,274 Advertising structures 8-15 57,910,710 38,309,049 Leasehold improvements 2-20 872,674 832,203 Equipment 3-10 4,317,355 2,737,091 Construction in progress -- 102,666 41,256 ------------ ---------- 66,283,383 43,688,367 Less accumulated depreciation 10,496,880 5,922,776 ------------ ---------- Net property and equipment $ 55,786,503 37,765,591 ============ ==========
(4) Intangible Assets ----------------- Intangible assets at June 30, 1997 and 1996 consist of the following:
Estimated Life (Years) 1997 1996 ------------ ---- ---- Covenants not to compete 4-10 $ 8,495,667 3,935,667 Goodwill 20-25 46,619,981 29,756,723 Customer lists 8 26,833,154 16,386,000 ------------ ---------- 81,948,802 50,078,390 Less accumulated amortization 9,709,120 4,923,198 ------------ ---------- $ 72,239,682 45,155,192 ============ ==========
(5) Credit Facility --------------- The Company entered into a credit agreement (the "Credit Facility") with Chase Manhattan Bank, N.A. (Chase) and a syndicate consisting of various other financial institutions (collectively called the "Bank") on the close of business on April 3, 1996. The Credit Facility consists of a Term Loan A Commitment for $40 million, Term Loan B Commitment for $20 million, (the "Term Loans") and a Revolving Loan Commitment (the "Revolver") of $30 million (collectively the "Borrowings"). The Credit Facility was amended at October 31, 1996 and the term loan B commitment and Revolver were increased to $40 million and $60 million, respectively. The Term Loans are due June 30, 2003. Collateral includes a first lien on all tangible and intangible property of the Company, assignment of all leases, and a guaranty by OCI and all of its subsidiaries. 15 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (5) Credit Facility, Continued -------------------------- The Credit Facility enables the Company to borrow funds at a rate equal to 3% plus the London Interbank Offered Rate (LIBOR) or 1.75% over the Bank's prime lending rate. The Credit Facility also enables the Company to realize a lower interest rate if its leverage ratio meets certain levels as stipulated in the Credit Facility. At June 30, 1997, the interest rate was 8.5%. Accrued interest is payable in quarterly installments on March 31, June 30, September 30, and December 31. The Credit Facility also requires payment of a commitment fee of 1/2 of 1% per annum on the daily average aggregate unutilized commitment from the Bank. Accrued commitment fees are due quarterly on March 31, June 30, September 30, and December 31. Available borrowings under the Revolver are permanently reduced on the last day of each fiscal quarter beginning September 30, 1997 by $1,250,000, thereby reducing the availability to zero on June 30, 2003. At June 30, 1997, the Company had borrowed $35,650,000 and $17,473,125 of the Revolver was available for additional borrowings by the Company. The Credit Facility contains certain warranties and affirmative covenants that must be complied with on a continuing basis. In addition, the Credit Facility contains certain restrictive covenants which, among other things, restrict the Company from incurring additional debt and liens on assets, limits the amount of capital expenditures during any fiscal year, and prohibits the consolidation, merger or sale of assets, or issuance of common stock except as permitted by the Credit Facility. The Credit Facility also requires the Company to maintain certain financial ratios. At June 30, 1997 and 1996, the Company was in compliance with all such covenants. The Company has the right to prepay the Borrowings in whole or in part, without premium or penalty, as stipulated in the Credit Facility. In August, 1997, the Credit Facility was replaced with a New Credit Facility and Public Note Offering (see note 18). As such, the portion of long-term debt outstanding at June 30, 1997 under the Credit Facility has been classified as long-term in the accompanying consolidated balance sheet. Under the New Credit Facility and Public Note Offering, there are no principle payments due in the next five years. Additionally, the Company will recognize an extraordinary loss of approximately $4,200,000 in the first quarter of fiscal year 1998 as a result of the refinancing (note 19). 16 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (6) Subordinated Debt ------------------ The Company entered into a Securities Purchase Agreement (the "Agreement") after the close of business on April 3, 1996 with certain management investors and outside investors. In connection with the reorganization discussed in note 1, the Company issued its 10% subordinated notes ("notes") due December 31, 2003. The subordinated notes are comprised of two series; Series A 10% subordinated notes in the amount of $5,525,000 in 1997 and $5,200,000 in 1996, and Series B 10% subordinated notes in the amount of $16,900,000 in 1997 and 1996. Accrued interest on the outstanding principal balance of the notes is payable at a rate of 10% per annum, computed on the basis of a 365 day year, and is payable annually on March 31, commencing in 1997. The Agreement allows the Company to only pay 46% of the accrued and unpaid interest on an annual basis. The remaining 54% is deferred and bears interest at a rate of 10% per annum and is due in accordance with the terms of the Agreement, but in any event no later than December 31, 2003. Accrued interest at June 30, 1997 and 1996 amounted to $1,911,584 and $489,370, respectively. The Agreement contains certain warranties and affirmative covenants that must be complied with on a continuing basis. The Agreement also contains certain restrictive covenants which, among other things, restricts the Company from entering into transactions with affiliates outside the ordinary course of business, consummating a sale of the Company, or engaging in any new lines of business. At June 30, 1997 and 1996, the Company was in compliance with all such covenants. See note 11 regarding the exchange of subordinated debt and accrued interest for Series A Preferred Stock of the Company and preferred interests in a newly formed non-operating subsidiary, OCIH LLC (OCIH). See note 18 regarding the Company's Public Note Offering on August 12, 1997, and note 19 for pro forma effects of this transaction. (7) Notes Payable--Stockholders --------------------------- On the close of business on April 3, 1996, New South Holdings Corp., a wholly owned subsidiary of Holdings, entered into written agreements with the Company's chairman and president, borrowing in total $5,876,875. The entire principal balance is due in full on April 3, 1998. The notes bear interest at a rate which fluctuates quarterly based on the interest rate per the Credit Agreement less the sum of the applicable eurodollar margin (as defined in the Credit Agreement) and 1/8 of 1%. The interest rate at June 30, 1997 was 5.41%. Accrued interest on the outstanding principal balance of the notes is payable quarterly, commencing June 30, 1996. The notes are secured by a Letter of Credit issued by The Chase Manhattan Bank, N.A. 17 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (8) Fair Value of Financial Instruments ----------------------------------- The following disclosure of the estimated fair value of the Company's financial instruments is made in accordance with the requirements of FASB Statement No. 107, "Disclosure about Fair Value of Financial Instruments" ("Statement 107"). Statement 107 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying values of cash and cash equivalents, trade accounts receivable, due from affiliated entity, trade accounts payable, accrued expenses, and obligations under non-compete agreements approximate fair values due to the short-term maturities of these instruments. Interest rate swaps, long-term debt instruments and notes payable stockholders are estimated to approximate fair values as rates are tied to short-term indices. The subordinated debt bears interest at a rate which approximates market for unsecured debt. (9) Income Taxes ------------ Income tax expense (benefit) attributable to loss before income tax expense for the periods ended June 30 consists of:
Current Deferred Total ------- -------- ----- 1997 ---- Federal $ 92,805 (1,189,910) (1,097,105) State and local 139,414 (65,721) 73,693 -------- ---------- ---------- $232,219 (1,255,631) (1,023,412) ======== ========== ========== 1996 ---- Federal $ 81,962 (72,889) 9,073 State and local 20,000 (39,887) (19,887) -------- ---------- ---------- Total $101,962 (112,776) (10,814) ======== ========== ==========
18 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (9) Income Taxes, Continued ----------------------- Income tax expense differed from the amounts computed by applying the federal income tax rate of 34% for the periods ended June 30 to income before income tax expense as a result of the following:
1997 1996 ---- ---- Computed "expected" tax expense (benefit) $(1,476,446) (91,677) Increase (reduction) in income taxes resulting from: State and local income taxes, net of federal income tax expense (6,887) (15,891) Non-deductible expenses 29,467 6,599 Nondeductible goodwill 175,346 44,242 Adjustment of prior period accrual 121,833 74,292 Other, net 151,275 11,621 Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense (18,000) (40,000) ----------- --------- $(1,023,412) (10,814) =========== =========
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at each June 30, is presented below:
1997 1996 ---- ---- Deferred tax assets: Net operating loss carryforwards $ 283,268 320,576 Alternative minimum tax credit carryforwards 182,973 60,606 Investment tax credit carryforwards 12,949 12,949 Deferred revenue, principally related to advertising leases 72,787 72,944 Accrued expenses, principally related to compensated absences, health care claims and sales discounts 281,031 158,346 Deferred noncompete income 36,267 63,466 Other 119,707 45,413 ----------- ---------- Total gross deferred tax assets 988,982 734,300 Less valuation allowance (142,000) (160,000) ----------- ---------- Net deferred tax assets 846,982 574,300 ----------- ---------- Deferred tax liabilities: Property and equipment, principally due to differences in financial statement carrying amounts and tax basis (3,403,385) (3,952,655) Intangible assets, principally due to differences in length of amortization period (1,074,810) (1,508,489) ----------- ---------- Total gross deferred tax liabilities (4,478,195) (5,461,144) ----------- ---------- Net deferred tax liabilities $(3,631,213) (4,886,844) =========== ==========
19 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (9) Income Taxes, Continued ----------------------- The above deferred tax assets and liabilities are presented in the June 30, 1997 and 1996 balance sheets as follows:
1997 1996 ---- ---- Current assets $ 438,967 276,703 Non-current liabilities (4,070,180) (5,163,547) ----------- ---------- Net deferred tax liabilities $(3,631,213) (4,886,844) =========== ==========
The net change in the total valuation allowance for the year ended June 30, 1997 was a decrease of $18,000 and for the period ended June 30, 1996 was a decrease of $40,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred taxes, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income of approximately $833,000 for OCIN prior to the expiration of the net operating loss carryforwards in 2010. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowance at June 30, 1997 and 1996. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. At June 30, 1997, the Company had net operating loss carryforwards for federal income tax purposes of approximately $833,000, all of which were incurred prior to the restructuring of the ownership of OCIN, with Holdings becoming the common parent. As a result of the restructuring, future utilization of the net operating loss carryforwards is limited under Internal Revenue Code Section 382 to approximately $487,000 annually for OCIN. Additionally, these net operating loss carryforwards can only be utilized to offset future taxable income of OCIN, if any, through the year 2010. The Company also has an alternative minimum tax credit carryforward of $182,973, which is available to reduce future regular income taxes, if any, over an indefinite period. In addition, the Company has an investment tax credit carryforward of $12,949, which is available to reduce future regular income taxes, if any, through 2001. 20 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (10) Stockholders' Equity -------------------- All general voting power is vested in the holders of Class A common stock. The holders of Class B common stock are not entitled to vote at any stockholders' meetings. Any share of Class B common stock can be converted, at the option of the holder, into Class A common stock at the rate of one share of Class A common stock for each share of Class B common stock, subject to certain approvals. Also, any share of Class A common stock can be converted, at the option of the holder, into Class B common stock at the rate of one share of Class B common stock for each share of Class A common stock, subject to and upon compliance with the provisions of the Certificate of Incorporation of OCI Holdings Corp. Dividends or distributions of common stock shall be payable on shares of Class A and B common stock, share and share alike. In the event of liquidation, the holders of Class A and B common stock shall be entitled to share ratably in the net assets of the Company after payment of debts and other liabilities. The Corporation shall not take any action (e.g., redeem, purchase, or acquire) affecting outstanding shares of common stock if after giving effect to such action any one, as defined, stockholder would own more than 24.95% of Class A common stock. (11) Preferred Stock ---------------- In July 1997, the Company entered into an agreement, effective June 30, 1997, with the Series A and B subordinated debt holders to exchange the notes and accrued and unpaid interest through June 30, 1997 for Series A preferred stock (the Debt Conversion). The Board of Directors has authorized 5,000,000 shares of preferred stock, par value $.01 per share, of which 300,000 shares shall be designated Series A (Series A Preferred Stock) and 4,700,000 shares shall be undesignated (Undesignated Preferred Stock). Upon the closing of the Public Note Offering on August 12, 1997, approximately 240,967 shares of Series A Preferred Stock were issued in exchange for subordinated debt and the related unpaid and accrued interest through June 30, 1997 totaling $17,290,000 and $1,332,093, respectively, resulting in a corresponding increase in stockholders' equity of $18,622,093. Additionally, $5,135,000 of subordinated debt and $348,616 of unpaid and accrued interest through June 30, 1997 were assigned by the respective note holders to OCIH in exchange for all of the preferred interests of OCIH. See note 19 for pro forma effect of this transaction. As discussed in Note 10, all general voting power is vested in holders of Class A common stock. Shares of Series A Preferred Stock shall not be included in determining the number of shares entitled to vote. 21 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (11) Preferred Stock, Continued -------------------------- No dividends will be declared or paid on the common stock during any year unless the full amount of accrued dividends on the Series A Preferred Stock has been paid. Upon declaration, the holders of the Series A Preferred Stock are entitled to cumulative cash dividends of $10 per annum, per share. In the event of liquidation or dissolution of the Company, the holders of the preferred stock are entitled to receive a preferential amount equal to $100 per share of the issued and outstanding preferred stock and a further preferential amount equal to all declared and unpaid dividends thereon. This liquidation value will be paid before the payment or distribution of any assets of the Company to the holders of the common stock. (12) Leases ------- The Company leases substantially all of the land presently used as sites for advertising panels under various terms. The leases are classified as operating leases. These leases generally contain renewal options ranging from 1 to 15 years and require the Company to pay all executory costs, such as maintenance and insurance. Rental expense for operating leases amounted to approximately $5,825,000 for the year ended June 30, 1997 and $931,000 for the period April 4, 1996 to June 30, 1996. Future minimum lease payments under noncancelable operating leases with non-related parties (with initial or remaining lease terms in excess of one year) as of June 30, 1997 are:
Year ending June 30: 1998 $ 4,482,000 1999 3,425,000 2000 2,678,000 2001 1,954,000 2002 1,449,000 ----------- $13,988,000 ===========
(13) Employee Health Care Plan ------------------------- Under the Company's self insurance plan for employee health care, eligible participants receive payment or reimbursement of all or a portion of eligible participants medical expenses, after deductibles and co-payments, up to a lifetime aggregate benefit of $1 million. Eligible participants (and their dependents) include active full-time employees. The plan is primarily funded by the Company, with contributions from participants for a portion of dependent's coverage, as required under the health care plan. 22 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (13) Employee Health Care Plan, Continued ------------------------------------ The plan has obtained aggregate excess of loss coverage of $955,000 in excess of $45,000 per eligible participant. The Company incurred approximately $99,000 and $11,600 for such coverage for the year ended June 30, 1997 and for the period April 4, 1996 to June 30, 1996, respectively. Additionally, the Company incurred approximately $480,000 and $180,000 in expense for self insured health care claims for the years ended June 30, 1997 and for the period April 4, 1996 to June 30, 1996, respectively. (14) Retirement Program ------------------ Retirement program expense with respect to OCIN's defined contribution 401(k) plan approximated $62,000 and $11,000 for the year ended June 30, 1997 and for the period April 4, 1996 to June 30, 1996, respectively. (15) Supplemental Cash Flow Information ----------------------------------- Non cash investing and financing activities for the year ended June 30, 1997 and for the period April 4, 1996 to June 30, 1996:
1997 1996 ---- ---- Cash paid for income taxes $ 80,000 3,322 Cash paid for interest 11,846,217 6,881,000*
*$6,531,384 pertained to the interest paid on the junior and senior subordinated debt and senior debt existing prior to the close of business on April 3, 1996. Amortization of deferred financing fees in the amount of $667,838 and $127,856 in 1997 and 1996, respectively, has been classified as interest expense. On April 4, 1996, the Company issued 2,764.99 shares of its common stock valued at $2,765,000 and series A subordinated notes in the amount of $5,135,000 for the purchase of 7,371.01 common shares and 308.78 preferred shares of MCC. Also, the Company issued subordinated notes in the amount $5,876,875 for the purchase of 5,128.99 common shares and 562.5 preferred shares of Mass Communications Corp. Details of acquisition: Fair value of assets acquired $ 25,747,927 Liabilities assumed (10,750,000) Subordinated debt issued (11,011,875) Stock issued (2,765,000) ------------ Cash paid 1,221,052 Less cash acquired 453,202 ------------ Net cash paid for acquisition $ 767,850 ============
23 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (16) Financial Instruments --------------------- On May 30, 1996, the Company entered into three-year interest swap agreements, expiring on June 30, 1999, with First Union National Bank of North Carolina (First Union) and Chase to manage its interest rate exposure. Interest rate exchange transactions generally involve the exchange of fixed and floating-rate interest payment obligations without the exchange of the underlying principal amounts. Entering into interest rate exchange agreements involves the risk of dealing with counterparties and their ability to meet the terms of the contracts. Notional principal amounts are used to express the volume of these transactions. The floating interest rate on the interest swap agreement is based on three month U.S. dollar LIBOR. The Chase agreement was terminated on December 30, 1996 and replaced with a new three year swap agreement. The fixed-for-floating interest rate swap agreements as of June 30, 1997 are summarized as follows:
Chase First Union ----- ----------- Notional principal amount $25,395,825 $15,000,000 Fixed rate paid 6.25% 6.34% Floating rate 5.75% 5.76172%
Subsequent to June 30, 1997, the Company paid approximately $238,000 to buy out the swap agreements. (17) Acquisitions ------------ On April 30, 1996, Holdings completed the purchase of certain assets and assumed certain liabilities of AOA Acquisition, L.L.C. (AOA), pursuant to an Asset Sale Agreement dated March 19, 1996, for cash of $34,132,908. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the fair value at the date of acquisition. The excess of the purchase price over the fair values of the net assets acquired was $10,084,666 and has been recorded as goodwill. The net purchase price was allocated as follows: Adjusted working capital $ 1,959,432 Goodwill 10,084,666 Property and equipment 15,012,810 Customer list 7,076,000 ----------- Purchase price $34,132,908 ===========
24 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (17) Acquisitions, Continued ----------------------- On October 31, 1996, the Company acquired substantially all of the assets and business operations of Skoglund Communications, Inc. and Skoglund Communications of St. Cloud, Inc. for a cash payment of $21,246,850. As a result of this transaction, the Company acquired display faces in Minnesota and Wisconsin. This acquisition has been accounted for by the purchase method and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the fair value at the date of acquisition as follows:
Adjusted working capital $ 1,336,989 Goodwill 7,953,899 Property and equipment 7,537,470 Customer list 4,418,492 ----------- Cash purchase price $21,246,850 ===========
On March 31, 1997, the Company acquired substantially all of the assets and business operations of Outdoor West of Tennessee (Outdoor West) for a cash payment of $11,802,444. As a result of this acquisition, the Company acquired display faces in Tennessee and a right of first refusal to purchase Outdoor West, Inc. of Georgia, an affiliate of Outdoor West. This purchase has been accounted for by the purchase method and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the fair value at the date of acquisition as follows:
Adjusted working capital $ 475,564 Goodwill 1,545,334 Property and equipment 4,621,720 Non-compete agreement 2,600,000 Customer list 2,559,826 ----------- Cash purchase price $11,802,444 ===========
On May 1, 1997, the Company acquired substantially all of the assets and business operations of Summey Outdoor Advertising, Inc. for a cash payment of $5,145,000. As a result of this acquisition, the Company acquired display faces in North Carolina and South Carolina. This purchase has been accounted for by the purchase method and, accordingly, the purchase price has been allocated to the assets purchased and liabilities assumed based upon the fair value at the date of acquisition as follows:
Adjusted working capital $ 236,169 Goodwill 950,680 Property and equipment 2,168,760 Non-compete agreement 1,000,000 Customer list 789,391 ---------- Cash purchase price $5,145,000 ==========
25 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (17) Acquisitions, Continued ----------------------- In addition to the acquisitions described above, the Company has consummated numerous smaller acquisitions within the past twelve months for aggregate cash payments totaling $13,639,159. These purchases have been accounted for by the purchase method and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the fair value at the date of acquisition as follows: Goodwill $ 5,095,973 Property and equipment 4,919,380 Non-compete agreement 2,663,806 Customer list 960,000 ----------- Cash purchase price $13,639,159 ===========
The consolidated financial statements include the operating results of all of the above businesses from their respective dates of acquisition. (18) Initial Public Offering and New Credit Facility ----------------------------------------------- On August 12, 1997, the Company completed a Public Note Offering (the Offering) of $105 million aggregate principle amount of 9.25% subordinated notes due August 15, 2007 (the Notes). Net proceeds of the Offering, after deduction of associated expenses, were approximately $100.3 million. Accrued interest on the Notes is payable in semi-annual installments on each February 15 and August 15, commencing February 15, 1998. The Notes are redeemable at the Company's option, in whole or in part, at any time on or after August 15, 2002 in accordance with a prepayment premium as described in the note agreement. Other prepayments may occur prior to August 15, 2000 based on certain limitations as described in the note agreement. The Notes are fully and unconditionally guaranteed, on a senior subordinated basis, as to payment of principal, premium, if any, and interest, jointly and severally by all of the Company's direct and indirect subsidiaries. Separate financial statements of the Company's subsidiaries have not been presented because (a) such guarantor subsidiaries have jointly and severally guaranteed the notes on a full and unconditional basis, (b) the aggregate assets, liabilities, earnings and equity of the guarantor subsidiaries are substantially equivalent to the assets, liabilities, earnings and equity of the parent on a consolidated basis and (c) that the Company has not presented separate financial statements and other disclosures concerning the subsidiary guarantors because management has determined that such information is not material to investors. The Company abandoned plans for an initial public offering of its common stock during July 1997. As a result, the Company will recognize expense of approximately $268,000 in the first quarter of fiscal year 1998, due to the write off of costs incurred related to the abandoned offering. 26 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (18) Initial Public Offering and New Credit Facility, Continued ---------------------------------------------------------- Simultaneous to the Offering, the Company entered into a new $150 million senior credit facility (New Credit Facility) with The Chase Manhattan Bank and a syndicate consisting of various other financial institutions (collectively, the New Bank). The New Credit Facility consists of a Revolving Loan Commitment (the New Revolver) of $110 million and a Term Loan Commitment for $40 million (collectively the New Borrowings). The New Revolver matures on December 21, 2004 and the Term Loan Commitment matures on June 30, 2005. The New Credit Facility provides for annual reductions in the New Revolver and amortization of the term loan facility. Collateral includes a first lien on all tangible and intangible property of the Company, assignment of all leases, and a guaranty by OCI, OCIN, and OCIS. The New Credit Facility enables the Company to borrow funds at a rate equal to 2.25% plus LIBOR or 1.0% over the New Bank's base rate, as defined. The New Credit Facility also enables the Company to realize a lower interest rate if its leverage ratio meets certain levels as stipulated in the Credit Facility. At August 15, 1997, date of the initial borrowing, the interest rate was 9.5%. Accrued interest is payable in quarterly installments on March 31, June 30, September 30, and December 31. The Credit Facility also requires payment of a commitment fee of 0.375% per annum, which may be reduced based on the Company's leverage ratio, on the daily average aggregate unutilized commitment from the Bank. Accrued commitment fees are due quarterly on March 31, June 30, September 30, and December 31. The New Credit Facility contains certain warranties and affirmative covenants that must be complied with on a continuing basis. In addition, the New Credit Facility contains certain restrictive covenants which, among other things, restrict the Company from incurring additional debt and liens on assets, limits the amount of capital expenditures during any fiscal year, and prohibits the consolidation, merger or sale of assets, or issuance of common stock except as permitted by the New Credit Facility. The New Credit Facility also requires the Company to maintain certain financial ratios. Under the terms of the Credit Facility, the Subsidiary Guarantors are restricted in their ability to make distributions to the Company to distributions necessary to enable the Company to make interest payments due under the Credit Facility and make federal income tax payments. The Indenture provides that the Company will not, and will not permit any of the Subsidiary Guarantors to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of the Subsidiary Guarantors to make distributions to the Company with certain limited exceptions including the restrictions under the Credit Facility described in the preceding sentence. Initial borrowings under the New Credit Facility totaled $16.5 million, which were drawn from the New Revolver. The Company has the right to prepay the Borrowings in whole or in part, without premium or penalty, as stipulated in the New Credit Facility. See note 19 for proforma effects of the above transactions. 27 OUTDOOR COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (19) Pro Forma Effects of Subsequent Events -------------------------------------- The following table presents the capitalization of the Company as of June 30, 1997 as reported and on an unaudited pro forma basis giving effect to the Debt Conversion, Offering, New Credit Facility, and abandonment of the common stock offering as if the transactions had occurred on that date:
June 30, 1997 ----------------------------- As Reported Pro Forma ----------- --------- (unaudited) Long-term debt, including current installments: Credit facility $ 115,650,000 - New credit facility - 16,500,000 9.25% senior subordinated notes due August 15, 2007 - 105,000,000 Subordinated debt, including accrued interest 24,336,584 - Notes payable - stockholders 5,876,875 5,876,875 ------------- ----------- Total long-term debt 145,863,459 127,376,875 Preferred interests of a subsidiary - 5,483,615 ------------- ----------- Stockholders' equity (deficit): Class A preferred stock - 1,861 Class A common stock 84 84 Class B common stock 37 37 Additional paid-in capital 3,811,475 22,431,707 Accumulated deficit (11,857,150) (16,365,183) ------------- ----------- Total stockholders' equity (deficit) (8,045,554) 6,068,506 ------------- ----------- Total capitalization $ 137,817,905 138,928,996 ============= ===========
28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 29 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Not applicable. ITEM 11. EXECUTIVE COMPENSATION Not applicable. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Not applicable. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 30 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Index of Financial Statements. The following financial statements ----------------------------- appear in response to Item 8 of this Report: Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders' Deficit Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (a)(2) Index of Financial Statement Schedules. All financial statement -------------------------------------- schedules have been omitted because they are not required, not applicable or are included in Notes to Consolidated to Financial Statements. (b) Reports on Form 8-K. During the period from April 4, 1996 to June 30, ------------------- 1997 the Company filed no reports on Form 8-K with the Securities and Exchange Commission. (c) Exhibits. -------- The following exhibits are filed as a part of this report: 24.1 Powers of Attorney (included on the signature page hereto) 27.1 Financial Data Schedule 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OUTDOOR COMMUNICATIONS, INC. Dated: November 3, 1997 /s/ John C Stanley IV ------------------------------------ By: John C Stanley IV Chairman and Chief Executive Officer POWERS OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Outdoor Communications, Inc. hereby severally constitute John C Stanley IV, our true and lawful attorney with full power to him to sign for us and in our names in the capacities indicated below, the Special Financial Report under cover of Form 10-K filed herewith and any and all amendments to said Special Financial Report, and generally to do all such things in our names and in our capacities as officers and directors to enable Outdoor Communications, Inc. to comply with the provisions of the Securities Act of 1934, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney, to said Special Financial Report and any and all amendments thereto. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ John C Stanley IV Director, Chief Executive November 3, 1997 - --------------------------- Officer and Chairman (Principal John C Stanley IV Executive Officer) /s/ A.B. Isbell Director, Chief Operating November 3, 1997 - --------------------------- Officer and President A. B. Isbell /s/ Richard W. Ebersole Treasurer and Chief Financial November 3, 1997 - --------------------------- Officer (Principal Financial Richard W. Ebersole Officer and Principal Accounting Officer) /s/Douglas W. Ferris, Jr. Director November 3, 1997 - --------------------------- Douglas W. Ferris, Jr. /s/ Stephen F. Gormley Director November 3, 1997 - --------------------------- Stephen F. Gormley /s/ John G. Hayes Director November 3, 1997 - --------------------------- John G. Hayes /s/ Brian J. Richmand Director November 3, 1997 - --------------------------- Brian J. Richmand
32 EXHIBIT INDEX Exhibit No. Description 24.1 Powers of Attorney (included on the signature page hereto) 27.1 Financial Data Schedule 33 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED FINANCIALS INCLUDED IN THE REGISTRANT'S SPECIAL FINANCIAL REPORT UNDER COVER OF FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR 3-MOS JUN-30-1997 JUN-30-1996 JUL-01-1996 APR-04-1996 JUN-30-1997 JUN-30-1996 1,712,827 1,259,441 0 0 7,571,305 5,323,600 (317,914) (273,110) 437,112 389,458 12,804,739 8,622,336 66,283,383 43,688,367 (10,496,880) (5,922,776) 145,676,856 94,828,881 9,878,897 8,470,884 138,075,000 85,726,875 0 0 0 0 121 119 (8,045,675) (4,901,599) 145,676,856 94,828,981 49,169,290 9,535,542 49,169,290 9,535,542 0 0 (36,958,214) (6,864,175) 0 0 (317,964) (49,373) (11,623,563) (1,953,993) (4,342,486) (272,492) 1,023,412 10,814 (3,319,074) (261,678) 0 0 0 0 0 0 (3,319,074) (261,678) 0 0 0 0 Gross Gross Excluding current portion
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