-----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, WpOjKpV0vqPY4+w2O0/X3EULoJSlfaJMQEgL0F1IX0yjHT19Vknhqd67V8Wq8ej5 TeI4Nm+eA2dhfVuI9mH0Sg== 0000950134-99-009877.txt : 19991115 0000950134-99-009877.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950134-99-009877 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAMAR MEDIA CORP/DE CENTRAL INDEX KEY: 0000899045 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 721205791 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12407 FILM NUMBER: 99748411 BUSINESS ADDRESS: STREET 1: 5551 CORPORATE BLVD CITY: BATON ROUGE STATE: LA ZIP: 70808 BUSINESS PHONE: 5049261000 MAIL ADDRESS: STREET 1: 5551 CORPORATE BOULEVARD CITY: BATON ROUGE STATE: LA ZIP: 70808 FORMER COMPANY: FORMER CONFORMED NAME: LAMAR ADVERTISING CO /DE/ DATE OF NAME CHANGE: 19990714 FORMER COMPANY: FORMER CONFORMED NAME: LAMAR MEDIA CORP DATE OF NAME CHANGE: 19990713 FORMER COMPANY: FORMER CONFORMED NAME: LAMAR ADVERTISING CO DATE OF NAME CHANGE: 19930319 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended September 30, 1999 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from Commission file number 001-12407 LAMAR MEDIA CORP. (Exact name of registrant as specified in its charter) DELAWARE 72-1205791 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 5551 Corporate Blvd., Baton Rouge, LA 70808 (Address of principal (Zip Code) executive officers) Registrant's telephone number, including area code (225) 926-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ---
Outstanding as of Class November, 10, 1999 ------------ ------------------ Common Stock, par value $ .01 per share 100
LAMAR MEDIA CORP. MEETS THE CONDITIONS OF GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT AS PERMITTED BY SUCH INSTRUCTION. 2 EXPLANATORY NOTE REGARDING CORPORATE REORGANIZATION OF LAMAR ADVERTISING COMPANY On July 20, 1999, Lamar Advertising Company completed a corporate reorganization to create a new holding company structure. The reorganization was accomplished through a merger under section 251(g) of the Delaware General Corporation Law. At the effective time of the merger, all stockholders of Lamar Advertising Company became stockholders in a new holding company and Lamar Advertising Company became a wholly-owned subsidiary of the new holding company. The new holding company took the Lamar Advertising Company name and the old Lamar Advertising Company was renamed Lamar Media Corp. In the merger, all outstanding shares of old Lamar Advertising Company's capital stock were converted into shares of the new holding company with the same voting powers, designations, preferences and rights, and the same qualifications, restrictions and limitations, as the shares of old Lamar Advertising Company. In this quarterly report, "Lamar," the "company," "we," "us" and "our" refer to Lamar Media Corp. and its consolidated subsidiaries with respect to periods following the reorganization and to old Lamar Advertising Company with respect to periods prior to the reorganization, except where we make it clear that we are only referring to Lamar Media Corp. or a particular subsidiary. 3 CONTENTS
Page ---- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998........................................................1 Condensed Consolidated Statements of Operations for the three months ended September 30, 1999 and September 30, 1998 and nine months ended September 30, 1999 and September 30, 1998.....................................2 Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 1999 and September 30, 1998 and nine months ended September 30, 1999 and September 30, 1998.................................................................3 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and September 30, 1998..........................................................................4 - 5 Notes to Condensed Consolidated Financial Statements..................................................................................6 - 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................10 - 13 ITEM 3. Quantitative and Qualitative Disclosures About Market Risks..............................................................................13 - 14 PART II - OTHER INFORMATION ITEM 2. Changes in Securities and Use of Proceeds......................................................14 ITEM 6. Exhibits and Reports on Form 8-K..........................................................14 - 17 Signatures.....................................................................................17
4 PART I - FINANCIAL INFORMATION ITEM 1.- FINANCIAL STATEMENTS LAMAR MEDIA CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
September 30, December 31, 1999 1998 ------------- ------------ ASSETS Cash and cash equivalents $ 10,778 $ 128,597 Receivables, net 83,636 40,380 Prepaid expenses 22,235 12,346 Other current assets 18,295 1,736 ------------ ------------ Total current assets 134,944 183,059 ------------ ------------ Property, plant and equipment 1,410,561 661,324 Less accumulated depreciation and amortization (215,240) (153,972) ------------ ------------ Net property, plant and equipment 1,195,321 507,352 ------------ ------------ Intangible assets 1,872,295 705,934 Other assets - non-current 24,634 17,032 ------------ ------------ Total assets 3,227,194 1,413,377 ============ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 9,806 $ 4,258 Accrued expenses 67,713 25,912 Current maturities of long-term debt 4,670 49,079 Deferred income 13,178 9,589 ------------ ------------ Total current liabilities 95,367 88,838 Long-term debt 1,593,690 827,453 Deferred tax liability 124,329 25,613 Deferred income 1,224 1,293 Other liabilities 4,732 3,401 ------------ ------------ Total liabilities 1,819,342 946,598 ------------ ------------ Common stock, $.01 par value, authorized 3,000 shares; issued and outstanding 100 shares at September 30, 1999 -- -- Class A preferred stock, par value $638, $63.80 cumulative dividends, authorized 10,000 shares; 5,719.49 shares issued and outstanding at December 31, 1998 -- 3,649 Class A common stock, $.001 par value, authorized 125,000,000 shares; issued and outstanding 43,392,876 shares at December 31, 1998 -- 43 Class B common stock, $.001 par value, authorized 37,500,000 shares; issued and outstanding 17,699,997 shares at December 31, 1998 -- 18 Additional paid-in capital 1,469,606 505,644 Accumulated deficit (61,754) (42,575) ------------ ------------ Stockholders' equity 1,407,852 466,779 ------------ ------------ Total liabilities and stockholders' equity $ 3,227,194 $ 1,413,377 ============ ============
See accompanying notes to condensed consolidated financial statements -1- 5 LAMAR MEDIA CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS)
Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net revenues $ 111,039 $ 73,528 $ 294,614 $ 201,600 ---------- ---------- ---------- ---------- Operating expenses Direct advertising expenses 33,236 22,257 93,481 64,696 Selling, general and administrative expenses 23,113 14,954 63,966 43,178 Depreciation and amortization 40,434 20,375 104,647 57,471 ---------- ---------- ---------- ---------- 96,783 57,586 262,094 165,345 ---------- ---------- ---------- ---------- Operating income 14,256 15,942 32,520 36,255 ---------- ---------- ---------- ---------- Other expense (income) Interest income (112) (123) (1,067) (359) Interest expense 21,092 12,116 57,471 39,357 (Gain) loss on disposition of assets (5,189) 81 (5,666) 473 ---------- ---------- ---------- ---------- 15,791 12,074 50,738 39,471 ---------- ---------- ---------- ---------- Earnings (loss) before income taxes extraordinary item and cumulative effect of a change in accounting principle (1,535) 3,868 (18,218) (3,216) Income tax expense 1,504 2,239 (262) 816 ---------- ---------- ---------- ---------- Earnings (loss) before extraordinary item and cumulative effect of a change in accounting principle (3,039) 1,629 (17,956) (4,032) ---------- ---------- ---------- ---------- Extraordinary item - loss on debt extinguishment net of tax benefit of $117 (182) -- (182) -- ---------- ---------- ---------- ---------- Earnings (loss) before cumulative effect of a change in accounting principle (3,221) 1,629 (18,138) (4,032) ---------- ---------- ---------- ---------- Cumulative effect of a change in accounting principle -- -- (767) -- ---------- ---------- ---------- ---------- Net earnings (loss) (3,221) 1,629 (18,905) (4,032) Preferred stock dividends -- 91 274 365 ---------- ---------- ---------- ---------- Net earnings (loss) applicable to common stock $ (3,221) $ 1,538 $ (19,179) $ (4,397) ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements -2- 6 LAMAR MEDIA CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (IN THOUSANDS)
Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net earnings (loss) applicable to common stock $ (3,221) $ 1,538 $ (19,179) $ (4,397) Other comprehensive income (loss) unrealized loss on investment securities (net of deferred tax benefit of $217 for the nine months ended September 30, 1998) -- -- -- 354 ---------- ---------- ---------- ---------- Comprehensive income (loss) $ (3,221) $ 1,538 $ (19,179) $ (4,043) ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements -3- 7 LAMAR MEDIA CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Nine Months Ended September 30, 1999 1998 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (18,905) $ (4,032) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 104,647 57,471 Cumulative effect of a change in accounting principle 767 -- (Gain) loss on disposition of assets (5,666) 473 Deferred taxes (9,800) (2,548) Provision for doubtful accounts 2,114 1,265 Changes in operating assets and liabilities: Decrease (Increase) in: Receivables (8,866) (1,520) Prepaid expenses 445 (714) Other assets (1,303) 978 Increase (Decrease) in: Trade accounts payable 2,022 770 Accrued expenses (2,746) 1,288 Other liabilities 18 (144) Deferred income (5,248) 2,252 ---------- ---------- Net cash provided by operating activities 57,479 55,539 CASH FLOWS FROM INVESTING ACTIVITIES: Increase in notes receivable (1,587) (280) Acquisition of new markets (830,428) (220,780) Capital expenditures (53,435) (40,420) Proceeds from disposition of assets 3,943 1,419 ---------- ---------- Net cash used in investing activities (881,507) (260,061)
(continued) -4- 8 LAMAR MEDIA CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Nine Months Ended September 30, 1999 1998 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Debt issuance costs (12,207) (2,503) Net proceeds from issuance of common stock 2,230 181,450 Principal payments on long-term debt (78,040) (4,152) Proceeds from issuance of notes payable 287,500 70 Net borrowings under credit agreements 507,000 29,000 Dividends (274) (365) ---------- ---------- Net cash provided by financing activities 706,209 203,500 Net decrease in cash and cash equivalents (117,819) (1,022) Cash and cash equivalents at beginning of period 128,597 7,246 ---------- ---------- Cash and cash equivalents at end of period $ 10,778 $ 6,224 ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 56,183 $ 37,328 ========== ========== Cash paid for state and federal income taxes $ 6,500 $ 6,129 ========== ========== Non-cash Contribution from parent $ 952,255 $ 2,505 ========== ==========
See accompanying notes to condensed consolidated financial statements -5- 9 LAMAR MEDIA CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. Significant Accounting Policies Organization On July 20, 1999, Lamar Advertising Company reorganized into a new holding company structure. As a result of this reorganization (1) the former Lamar Advertising Company became a wholly owned subsidiary of a newly formed holding company, (2) the name of the former Lamar Advertising Company was changed to Lamar Media Corp., (3) the name of the new holding company became Lamar Advertising Company, (4) the outstanding shares of capital stock of the former Lamar Advertising Company, including the Class A common stock, were automatically converted, on a share for share basis, into identical shares of capital stock of the new holding company and (5) the Class A common stock of the new holding company commenced trading on the Nasdaq National Market under the symbol "LAMR" instead of the Class A common stock of the former Lamar Advertising Company. In addition, following the holding company reorganization, substantially all of the former Lamar Advertising Company's debt obligations, including the bank credit facility and other long-term debt remained the obligations of the Company. Under Delaware law, the reorganization did not require the approval of the stockholders of the former Lamar Advertising Company. The purpose of the reorganization was to provide Lamar Advertising Company with a more flexible capital structure and to enhance its financing options. The business operations of the former Lamar Advertising Company and its subsidiaries, including the Company, will not change as a result of the reorganization. New Accounting Pronouncements In April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 is effective for financial statements for fiscal years beginning after December 15, 1998, and requires that the costs of start-up activities, including organizational costs, be expensed as incurred. The effect of SOP 98-5 is recorded as a cumulative effect of a change in accounting principle as described in Accounting Principles Board Opinion No. 20 "Accounting Changes". 2. Acquisitions On January 5, 1999, the Company purchased all of the outdoor advertising assets of American Displays, Inc. for a cash purchase price of approximately $14,500. On February 1, 1999, the Company purchased all of the outdoor advertising assets of KJS, LLC for a cash purchase price of $40,500. On April 1, 1999, the Company purchased all of the assets of Frank Hardie, Inc. for a cash purchase price of approximately $20,300. On June 1, 1999, the Company purchased the assets of Vivid, Inc. for a cash purchase price of approximately $22,100. -6- 10 LAMAR MEDIA CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) On September 15, 1999, the Company purchased the capital stock of Chancellor Media Outdoor Corporation and Chancellor Media Whiteco Outdoor Corporation ("Chancellor Outdoor") for a combination of approximately $700,000 in cash and 26,227,273 shares of Lamar Advertising Company Class A common stock valued at approximately $947,000. The stock purchase agreement also contains a post closing adjustment in the event that the net working capital of Chancellor Outdoor as shown on the closing balance sheet is greater or less than $12,000. As of September 30, 1999, the estimated working capital adjustment to be paid by the Company is $33,053. During the nine months ended September 30, 1999, the Company completed 45 additional acquisitions of outdoor advertising and transit assets for an aggregate cash purchase price of approximately $61,000 and the issuance of 135,734 shares of Lamar Advertising Company Class A common stock valued at approximately $5,300. Each of these acquisitions were 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 purchase price has 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 allocation of the purchase price in the above transactions.
Property Current Plant & Other Other Current Long-term Assets Equipment Goodwill Intangibles Assets Liabilities Liabilities -------- --------- -------- ----------- -------- ----------- ----------- American Displays 87 899 10,532 3,277 -- (284) -- KJS, LLC 46 9,468 30,543 4,489 -- (2,079) (1,921) Frank Hardie 187 6,595 10,451 3,630 -- (525) -- Vivid, Inc. 357 8,402 9,830 4,085 -- (593) -- Chancellor 55,997 642,210 784,513 293,748 169 (19,829) (106,102) Other 265 16,098 46,835 6,472 -- (1,271) (1,880) -------- --------- -------- --------- -------- --------- --------- 56,939 683,672 892,704 315,701 169 (24,581) (109,903) ======== ========= ======== ========= ======== ========= =========
Summarized below are certain unaudited pro forma statements of operations data as if each of the above acquisitions and the acquisitions occurring in 1998, which were fully described in the Company's December 31, 1998 Annual Report on Form 10-K, had been consummated as of January 1, 1998. 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, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Revenues, net $ 156,025 $ 146,722 $ 452,063 $ 429,994 ========== ========== ========== ========== Loss before extraordinary item $ (17,218) $ (21,683) $ (67,339) $ (70,580) ========== ========== ========== ========== Net loss applicable to common stock $ (17,400) $ (21,774) $ (68,562) $ (70,945) ========== ========== ========== ==========
-7- 11 LAMAR MEDIA CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 3. Long-term debt On August 13, 1999, the Company replaced its existing bank credit facility with a new bank credit facility under which The Chase Manhattan Bank will serve as administrative agent. The new $1,000,000 bank credit facility consists of (1) a $350,000 revolving bank credit facility and (2) a $650,000 term facility with two tranches, a $450,000 Term A facility and a $200,000 Term B facility. As of September 30, 1999, the Company had borrowings under this agreement of $757,000. In connection with the reorganization of Lamar Advertising Company into a new holding company structure, the Company made a change of control tender offer to the holders of its 9 1/4% Senior Subordinated Notes due 2007 in aggregate principal amount of approximately $103,900. Pursuant to the change of control tender offer and in accordance with the Indenture, the Company offered to repurchase the Notes for 101% of the principal amount plus accrued interest. A total of $29,876 aggregate principal amount of Notes were tendered for payment on August 19, 1999, and the related 1% prepayment penalty is reflected as an extraordinary item in the Company's income statement, net of tax. 4. Summarized Financial Information of Subsidiaries Separate financial statements of each of the Company's direct or indirect wholly-owned subsidiaries that have guaranteed the Company's obligations with respect to its publicly issued notes (collectively, the "Guarantors") are not included herein because the Guarantors are jointly and severally liable under the guarantees, and the aggregate assets, liabilities, earnings and equity of the Guarantors are substantially equivalent to the assets, liabilities, earnings and equity of the Company on a consolidated basis. Summarized financial information for Missouri Logos, a Partnership, a 66 2/3% owned subsidiary of the Company and the only subsidiary of the Company that is not a Guarantor, is set forth below:
Balance Sheet Information: September 30, 1999 December 31, 1998 ------------------ ----------------- Current assets 293 248 Total assets 340 297 Total liabilities 10 7 Venturers' equity 330 290
Income Statement Information: Three months ended Nine months ended September 30 September 30 1999 1998 1999 1998 ---- ---- ---- ---- Revenues 339 247 871 748 Net income 226 117 546 416
-8- 12 5. Related Party Transactions The Company has a related party note payable to its parent corporation, Lamar Advertising Company, in the amount of $287,500, at 5 1/4% interest. The note payable is due September 15, 2006, with the related interest expense due semi-annually. At September 30, 1999, the company had accrued interest payable of $620 reflected in accrued expenses related to this note. The Company also has an inter-company receivable at September 30, 1999 from its parent corporation in the amount of $6,600 as a result of normal operating activity. This receivable is non-interest bearing with no scheduled maturity and is reflected in other assets at September 30, 1999. -9- 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of the consolidated financial condition and results of operations of the Company for the nine month and three month periods ended September 30, 1999 and 1998. This discussion should be read in conjunction with the consolidated financial statements of the Company and the related notes. The following discussion is a summary of the key factors management considers necessary in reviewing the Company's results of operations, liquidity and capital resources. The future operating results of the Company may differ materially from the results described below. For a discussion of certain factors which may affect the Company's future operating performance, please refer to Exhibit 99.1 hereto entitled "Factors Affecting Future Operating Results". In this quarterly report, "Lamar," the "company," "we," "us" and "our" refer to Lamar Media Corp. and its consolidated subsidiaries with respect to periods following the reorganization and to old Lamar Advertising Company and its consolidated subsidiaries with respect to period prior to the reorganization, except where we make it clear that we are only referring to Lamar Media Corp., old Lamar Advertising Company or a particular subsidiary. See explanatory note regarding Lamar Advertising Company reorganization and footnote 1 in Item 1 of the Financial Statements. RESULTS OF OPERATIONS Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30, 1998 Net revenues increased $93.0 million or 46.1% to $294.6 million for the nine months ended September 30, 1999 as compared to the same period in 1998. This increase was attributable to the Company's acquisitions during 1998 and 1999 and internal growth within the Company's existing markets. Operating expenses, exclusive of depreciation and amortization, increased $49.6 million or 46.0% for the nine months ended September 30, 1999 as compared to the same period in 1998. This was primarily the result of the additional operating expenses related to acquired outdoor advertising assets and the newly developed logo sign contracts. Depreciation and amortization expense increased $47.2 million or 82.1% from $57.5 million for the nine months ended September 30, 1998 to $104.7 million for the nine months ended September 30, 1999 as a result of an increase in capitalized assets resulting from the Company's recent acquisition activity. Due to the above factors, operating income decreased $3.8 million or 10.3% to $32.5 million for nine months ended September 30, 1999 from $36.3 million for the same period in 1998. Interest income increased $.7 million as a result of earnings on excess cash investments made during the nine months ended September 30, 1999 as compared to the same period in 1998 due to proceeds from a public offering of Lamar Advertising Company's Class A common stock in December, 1998. Interest expense increased $18.1 million from $39.4 million for the nine months ended September 30, 1998 to $57.5 million for the same period in 1999 as a result of additional borrowings under the Company's bank credit facility to fund increased acquisition activity. -10- 14 There was an income tax benefit of $.3 million for the nine months ended September 30, 1999 as compared to an income tax expense of $.8 million for the same period in 1998. The effective tax rate for the nine months ended September 30, 1999 is less than statutory rates due to permanent differences resulting from non-deductible amortization of goodwill. An extraordinary loss on debt extinguishment of $.2 million net of income tax benefit of $.1 million, was incurred during the nine months ended September 30, 1999, as a result of the extinguishment of a portion of the Company's 9 1/4% Senior Subordinated Notes due 2007 in connection with a change of control tender offer in July, 1999. Due to the adoption of SOP 98-5 "Reporting on the Costs of Start-Up Activities" which requires costs of start-up activities and organization costs to be expensed as incurred, the Company recognized an expense of $.8 million as a cumulative effect of a change in accounting principle. This expense is a one time adjustment to recognize start-up activities and organization costs that were capitalized in prior periods. As a result of the above factors, the Company recognized a net loss for the nine months ended September 30, 1999 of $18.9 million, as compared to a net loss of $4.0 million for the same period in 1998. Three Months Ended September 30, 1999 Compared to Three Months Ended September 30, 1998 Revenues for the three months ended September 30, 1999 increased $37.5 million or 51.0% to $111.0 million from $73.5 million for the same period in 1998. Operating expenses, exclusive of depreciation and amortization, for the three months ended September 30, 1999 increased $19.1 million or 51.4% over the same period in 1998. Depreciation and amortization expense increased $20.0 million or 98.4% from $20.4 million for three months ended September 30, 1998 to $40.4 million for the three months ended September 30, 1999. Operating income decreased $1.6 million or 10.6% to $14.3 million for the three months ended September 30, 1999 as compared to $15.9 million for the same period in 1998. Interest expense increased $9.0 million from $12.1 million for the three months ended September 30, 1998 to $21.1 million for the same period in 1999. The Company recognized a net loss for the three months ended September 30, 1999 of $3.2 million. The results for the three months ended September 30, 1999 were affected by the same factors as the nine months ended September 30, 1999. 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 debt and equity securities. -11- 15 During the nine months ended September 30, 1999, the Company financed its acquisition activity of approximately $1.8 billion with remaining proceeds from the December, 1998 offering of the Lamar Advertising Company's Class A common stock, borrowings under the Company's bank credit facility and the issuance of Lamar Advertising Company's Class A Common Stock. At September 30, 1999, following these acquisitions, the Company had $243 million available under the revolving bank credit facility. The Company's net cash provided by operating activities increased $2.0 million from $55.5 million for the nine months ended September 30, 1998 to $57.5 million for the nine months ended September 30, 1999 due primarily to an increase in noncash items of $35.4 million, which includes an increase in depreciation and amortization of $47.2 million offset by an increase in gain on disposition of assets of $6.1 million and a decrease in deferred taxes of $7.3 million. The increase in noncash items was offset by a decrease in net earnings of $14.9 million, an increase in receivables of $7.3 million and a decrease in deferred income of $7.5 million. Net cash used in investing activities increased $621.4 million from $260.1 million for the nine months ended September 30, 1998 to $881.5 million for the same period in 1999. This increase was due to a $609.6 million increase in acquisition of outdoor advertising assets and an increase in capital expenditures of $13.0 million. Net cash provided by financing activities for the nine months ended September 30, 1999 is $706.2 million due to $507.0 million in net borrowings under credit agreements which was used primarily to finance acquisitions, $287.5 million from the issuance of notes payable, and $2.2 million in net proceeds from issuance of common stock under the Company's 1996 Equity Incentive Plan offset by $78.0 million in principal payments on long-term debt which primarily consists of the payment of approximately $45.0 million in notes to the three principal shareholders of Outdoor Communications, Inc. which was purchased by the Company in October, 1998. In August 1999, the Company entered into a new bank credit agreement, replacing its existing bank credit facility, with The Chase Manhattan Bank serving as administrative agent. The new $1 billion bank credit facility consists of (1) a $350 million revolving bank credit facility, (2) a $650 million term facility with two tranches, a $450 million Term A facility and a $200 million Term B facility. In addition, the new bank credit facility provides for an uncommitted $400 million incremental facility available at the discretion of the lenders. As a result of the holding company reorganization completed on July 20, 1999 and explained in footnote 1, the new bank credit facility is an obligation of Lamar Media Corp. and not Lamar Advertising Company. On September 15, 1999, the Company financed the cash portion of the purchase price for the acquisition of Chancellor Outdoor with a $50.0 million draw under the revolving credit facility and a $650.0 million draw under the term facility. Lamar Advertising Company also issued 26,227,273 shares of its Class A common stock. Elimination of Tobacco Advertising By the end of April, 1999, the Company had removed all of its outdoor advertising of tobacco products in connection with settlements the states had reached with the U.S. tobacco companies. Because of these settlements, the Company's tobacco revenues as a percentage of consolidated net revenue have declined from 7% for the 12 months ended December 31, 1998 to 3% for the nine months ended September 30, 1999. When displays formerly occupied by tobacco advertisers have become available in the recent past, the Company has been able to attract substitute advertising for the unoccupied space on comparable or more favorable terms. While both of these trends are positive, the Company cannot guarantee that it will be able to attract substitute advertising to occupy the displays which will become unoccupied, or that -12- 16 substitute advertisers will pay rates as favorable to the Company as those paid by tobacco advertisers. If the Company is unable to continue to replace tobacco advertising, the resulting increase in available inventory could cause the Company to reduce its rates or limit the Company's ability to raise rates. In addition, the Company cannot guarantee that substitute advertisers will pay rates as favorable to the Company as those paid by tobacco advertisers. Impact of Year 2000 The year 2000 issue is the result of the development of computer programs and systems using two digits rather than four digits to define the applicable year. Computer programs and equipment with time-sensitive software may recognize the date using "00" as the year 1900 rather than the year 2000. The year 2000 date recognition problem could cause the Company's computer systems to fail, resulting in miscalculations and incorrect data causing disruption to business operations. The Company has conducted an assessment of its software and related systems and believes they are year 2000 compliant. The Company's year 2000 effort also included communication with significant third party vendors and customers to determine the extent to which the Company's systems are vulnerable to those parties' failure to reach year 2000 compliance. The Company cannot assure you that the Company's customers, suppliers and other third parties that the Company deals with are or will be year 2000 compliant in a timely manner. Interruptions in services provided to the Company or in the purchases made by these third parties could also disrupt the Company's operations. Parties affected by a disruption in the Company's operations and services could make claims or bring lawsuits against the Company. Depending upon the extent and duration of any disruptions caused by the year 2000 problem and the specific services affected, these disruptions could have an adverse affect on the Company's business. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company is exposed to interest rate risk in connection with variable rate debt instruments issued by the Company. 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, 1999. Loans under the Company's bank credit facility bear interest at variable rates equal to the Chase Prime Rate or LIBOR plus the applicable margin. Because the Chase Prime Rate or LIBOR may increase or decrease at any time, the Company is 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 facility. Increases in the interest rates applicable to borrowings under the bank credit facility would result in increased interest expense and a reduction in the Company's net income and after tax cash flow. At September 30, 1999, there was approximately $757 million of aggregate indebtedness outstanding under the bank credit facility, or approximately 47.5% of the Company's outstanding long-term debt on that date, bearing interest at variable rates. The aggregate interest expense for the nine months ended September 30, 1999 with respect to borrowings under the bank credit facility was $14.5 million, and the -13- 17 weighted average interest rate applicable to borrowings under these credit facilities during the nine months ended September 30, 1999 was 6.9%. Assuming that the weighted average interest rate was 200-basis points higher (that is 8.9% rather than 6.9%), then the Company's 1999 interest expense would have been approximately $4.2 million higher resulting in a $2.5 million decrease in the Company's nine months ended September 30, 1999 net income and after tax 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 facility 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. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS See Item 1, Financial Statements Note 1, which is incorporated herein by reference. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit 2.1 Agreement and Plan of Merger dated as of July 20, 1999 among the Company, 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. Exhibit 3.1 Amended and Restated Bylaws. Filed herewith. Exhibit 4.1 Supplemental Indenture to the Indenture dated November 15, 1996 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated July 20, 1999. Previously filed as Exhibit 4.1 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.2 Supplemental Indenture to the Indenture dated September 25, 1997 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated September 15, 1999. Previously filed as Exhibit 4.2 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.3 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 September 15, 1999. Previously filed as Exhibit 4.3 to Lamar -14- 18 Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.4 Supplemental Indenture to the Indenture dated September 25, 1997 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated July 20, 1999. Previously filed as Exhibit 4.4 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.5 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 July 20, 1999. Previously filed as Exhibit 4.5 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.6 Supplemental Indenture to the Indenture dated November 15, 1996 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated September 15, 1999. Previously filed as Exhibit 4.6 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.7 Supplemental Indentures to the Indenture dated September 25, 1997 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee. Previously filed as Exhibit 4.7 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.8 Supplemental Indentures to the Indenture dated November 15, 1996 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee. Previously filed as Exhibit 4.8 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.9 Supplemental Indentures to the Indenture dated August 15, 1997 among Outdoor Communications, Inc., certain of its subsidiaries and First Union National Bank, as Trustee. Previously filed as Exhibit 4.9 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 10.1 Bank Credit Agreement dated August 13, 1999, between the Company, certain of its subsidiaries, the lenders party thereto and The Chase Manhattan Bank, as administrative agent. Previously filed as Exhibit 10.1 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. -15- 19 Exhibit 10.2 Stockholders Agreement dated as of September 15, 1999 by and among Lamar Advertising Company, Chancellor Media Corporation of Los Angeles, Chancellor Mezzanine Holdings Corporation and the Reilly Family Limited Partnership. Previously filed as Exhibit 10.2 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-030242) and incorporated herein by reference. Exhibit 10.3 Registration Rights Agreement dated as of September 15, 1999 among Lamar Advertising Company, Chancellor Media Corporation of Los Angeles and Chancellor Mezzanine Holdings Corporation. Previously filed as Exhibit 10.3 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-030242) and incorporated herein by reference. Exhibit 10.4 Assumption Agreement dated as of July 20, 1999 is by and among Lamar Advertising Company, Lamar Media Corp., and the direct and indirect subsidiaries of such corporations. Previously filed as Exhibit 10.4 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-030242) and incorporated herein by reference. Exhibit 27.1 Financial Data Schedule. Filed herewith. Exhibit 99.1 Factors Affecting Future Operating Results. Filed herewith. (b) Reports on Form 8-K Reports on Form 8-K were filed with the Commission during the third quarter of 1999 to report the following items as of the dates indicated: On July 7, 1999, the Company filed a report on Form 8-K to furnish Financial Statements and Pro Forma Financial Statements for Chancellor Media Outdoor Corporation ("Chancellor Outdoor") and its predecessor companies, the outdoor advertising division of Whiteco Industries, Inc. ("Whiteco"), Martin Media L.P. ("Martin Media") and Martin & MacFarlane, Inc. ("Martin & MacFarlane"), which the Company acquired as of September 15, 1999. The Company filed as exhibits (1) the consolidated balance sheets of Chancellor Outdoor as of December 31, 1998 and March 31, 1999 and consolidated statements of operations, equity and cash flows for the period from July 22, 1998 to December 31, 1998 and the three months ended March 31, 1999 (2) the statements of income, divisional equity and cash flows of Whiteco for the eleven months ended November 30, 1998; balance sheets of Whiteco as of December 31, 1996 and 1997; and statements of income and cash flows for the years ended December 31, 1995, 1996, and 1997 (3) the statements of operations, partners' capital and cash flows of Martin Media for the seven months ended July 31, 1998; balance sheets of Martin Media as of December 31, 1996 and 1997; and statements of operations, partners' capital (deficit) and cash flows of Martin Media for -16- 20 each of the years ended December 31, 1995, 1996 and 1997 (4) the statements of operations, retained earnings and cash flows of Martin & MacFarlane for the seven months ended July 31, 1998; balance sheets of Martin & MacFarlane as of December 31, 1996 and 1997; statements of income, retained earnings and cash flows for the six-month period ended December 31, 1995 and each of the years ended December 31,1996 and 1997; balance sheet of Martin & MacFarlane as of June 30, 1995; and statements of income, retained earnings and cash flows of Martin & MacFarlane for the year ended June 30, 1995. The Company also filed as exhibits unaudited pro forma condensed consolidated statements of operations of the Company for the year ended December 31, 1998 and the three months ended March 31, 1999; and unaudited pro forma condensed consolidated balance sheet of the Company as of March 31, 1999. On July 22, 1999, the Company filed a report on Form 8-K in order to furnish certain exhibits related to the Company's reorganization. The Company filed an Agreement and Plan of Merger dated as of July 20, 1999 among the Company, Lamar New Holding Co., and Lamar Holdings Merge Co. as exhibit 2.1, and a press release issued by the registrant on July 21, 1999 as exhibit 99.1. On July 26, 1999, the Company filed a report on Form 8-K/A to correct a typographical error in "Item 5. Other Events" in the 8K originally filed on July 22, 1999. On July 28, 1999, the Company filed a report on Form 8-K announcing that Lamar Advertising Company had commenced a public offering of $250,000,000 of convertible notes and filed the related press release as exhibit 99.1 On August 25, 1999, the Company filed a report on Form 8-K announcing that in connection with the reorganization of Lamar Advertising Company into a new holding company structure, Lamar Media Corp. (formerly known as Lamar Advertising Company) made a change of control tender offer to the holders of its 9 1/4% Senior Subordinated Notes due 2007 in aggregate principal amount of approximately $103,900,000 issued pursuant to an Indenture dated August 15, 1997, by and among Outdoor Communications, Inc., a company acquired by Lamar whose obligations under the Notes were assumed, certain guarantors under the Indenture and the First Union National Bank as Trustee. Pursuant to the change of control tender offer and in accordance with the Indenture, Lamar Media Corp. offered to repurchase the Notes for 101% of the principal amount plus accrued interest up to but excluding the payment date of August 19, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LAMAR MEDIA CORP. DATED: November 12, 1999 BY: /s/ Keith Istre ------------------------------------ Keith A. Istre Chief Financial and Accounting Officer and Director -17- 21 INDEX TO EXHIBITS
Exhibit No. Description ----------- ----------- Exhibit 2.1 Agreement and Plan of Merger dated as of July 20, 1999 among the Company, 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. Exhibit 3.1 Amended and Restated Bylaws. Filed herewith. Exhibit 4.1 Supplemental Indenture to the Indenture dated November 15, 1996 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated July 20, 1999. Previously filed as Exhibit 4.1 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.2 Supplemental Indenture to the Indenture dated September 25, 1997 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated September 15, 1999. Previously filed as Exhibit 4.2 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.3 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 September 15, 1999. Previously filed as Exhibit 4.3 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.4 Supplemental Indenture to the Indenture dated September 25, 1997 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated July 20, 1999. Previously filed as Exhibit 4.4 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.5 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 July 20, 1999. Previously filed as Exhibit 4.5 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.6 Supplemental Indenture to the Indenture dated November 15, 1996 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee, dated September 15, 1999. Previously filed as Exhibit 4.6 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.7 Supplemental Indentures to the Indenture dated September 25, 1997 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee. Previously filed as Exhibit 4.7 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.8 Supplemental Indentures to the Indenture dated November 15, 1996 among the Company, certain of its subsidiaries and State Street Bank and Trust Company, as Trustee. Previously filed as Exhibit 4.8 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 4.9 Supplemental Indentures to the Indenture dated August 15, 1997 among Outdoor Communications, Inc., certain of its subsidiaries and First Union National Bank, as Trustee. Previously filed as Exhibit 4.9 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 10.1 Bank Credit Agreement dated August 13, 1999, between the Company, certain of its subsidiaries, the lenders party thereto and The Chase Manhattan Bank, as administrative agent. Previously filed as Exhibit 10.1 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-30242) and incorporated herein by reference. Exhibit 10.2 Stockholders Agreement dated as of September 15, 1999 by and among Lamar Advertising Company, Chancellor Media Corporation of Los Angeles, Chancellor Mezzanine Holdings Corporation and the Reilly Family Limited Partnership. Previously filed as Exhibit 10.2 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-030242) and incorporated herein by reference. Exhibit 10.3 Registration Rights Agreement dated as of September 15, 1999 among Lamar Advertising Company, Chancellor Media Corporation of Los Angeles and Chancellor Mezzanine Holdings Corporation. Previously filed as Exhibit 10.3 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-030242) and incorporated herein by reference. Exhibit 10.4 Assumption Agreement dated as of July 20, 1999 is by and among Lamar Advertising Company, Lamar Media Corp., and the direct and indirect subsidiaries of such corporations. Previously filed as Exhibit 10.4 to Lamar Advertising Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 0-030242) and incorporated herein by reference. Exhibit 27.1 Financial Data Schedule. Filed herewith. Exhibit 99.1 Factors Affecting Future Operating Results. Filed herewith.
EX-3.1 2 AMENDED/RESTATED BYLAWS 1 EXHIBIT 3.1 AMENDED AND RESTATED BYLAWS OF LAMAR MEDIA CORP. ARTICLE I STOCKHOLDERS SECTION 1. Place of Meetings. All meetings of stockholders shall be held at the principal office of the corporation or at such other place as may be named in the notice. SECTION 2. Annual Meeting. The annual meeting of stockholders for the election of directors and the transaction of such other business as may properly come before the meeting shall be held on such date and at such hour and place as the directors or an officer designated by the directors may determine. If the annual meeting is not held on the date designated therefor, the directors shall cause the meeting to be held as soon thereafter as convenient. SECTION 3. Special Meetings. Special meetings of the stockholders may be called at any time by the chief executive officer or a majority of the Board of Directors. SECTION 4. Notice of Meetings. Except where some other notice is required by law, written notice of each meeting of stockholders, stating the place, date and hour thereof and the purposes for which the meeting is called, shall be given by the Secretary under the direction of the Board of Directors or the chief executive officer, not less than ten nor more than sixty days before the date fixed for such meeting, to each stockholder of record entitled to vote at such meeting. Notice shall be given personally to each stockholder or left at his or her residence or usual place of business or mailed postage prepaid and addressed to the stockholder at his or her address as it appears upon the records of the corporation. In case of the death, absence, incapacity or refusal of the Secretary, such notice may be given by a person designated either by the Secretary or by the person or persons calling the meeting or by the Board of Directors. A waiver of such notice in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Except as required by statute, notice of any adjourned meeting of the stockholders shall not be required. SECTION 5. Record Date. The Board of Directors may fix in advance a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 1 2 nor less than 10 days before the date of such meeting, nor more than 60 days before any other action to which such record date relates. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held, and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors at any annual or special meeting of stockholders. Nominations of persons for election as directors may be made only by or at the direction of the Board of Directors, or by any stockholder entitled to vote for the election of directors at the meeting in compliance with the notice procedures set forth in this Section 6. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Chairman of the Board, if any, the President or the Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation the earlier of: (a) in the case of an annual meeting only, not less than 75 days before the anniversary of the prior year's meeting; provided, however, that this subsection (a) shall not apply if (i) there was no annual meeting in the prior year or (ii) the date of the current year's annual meeting is more than 30 days from the date of the prior year's annual meeting; or (b) 45 days prior to the current year's annual meeting or a special meeting; provided, however, that if less than 60 days' notice or prior public disclosure of the date of the annual meeting or the special meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting or the special meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the corporation that are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, or any successor provision thereto; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder and (ii) the class and number of shares of capital stock of the corporation that are beneficially owned by such stockholder. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if the chairman should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. SECTION 7. Advance Notice of Business at Annual Meetings and Special Meetings. At any annual meeting or special meeting of the stockholders, only such business 2 3 shall be conducted as shall have been properly brought before the meeting. To be brought properly before an annual meeting or a special meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the chief executive officer or the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be brought properly before an annual meeting or a special meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Chairman of the Board, if any, the President or the Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation the earlier of: (a) in the case of an annual meeting only, not less than 75 days before the anniversary of the prior year's meeting; provided, however, that this subsection (a) shall not apply if (i) there was no annual meeting in the prior year or (ii) the date of the current year's annual meeting is more than 30 days from the date of the prior year's annual meeting; or (b) 45 days prior to the current year's annual meeting or a special meeting; provided, however, that if less than 60 days' notice or prior public disclosure of the date of the annual meeting or the special meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting or the special meeting was mailed or such public disclosure was made. A stockholder's notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting or the special meeting (a) a brief description of the business desired to be brought before the annual meeting or the special meeting and the reasons for conducting such business at the annual meeting or the special meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of the corporation that are beneficially owned by the stockholder and (d) any material interest of the stockholder in such business. Notwithstanding anything in these by-laws to the contrary, no business shall be conducted at the annual meeting or a special meeting except in accordance with the procedures set forth in this Section 7, provided, however, that nothing in this Section 7 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting or a special meeting in accordance with said procedure. The chairman of an annual meeting or a special meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the foregoing procedure, and if the chairman should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 8. Voting List. The officer who has charge of the stock ledger of the corporation shall make or have made, at least 10 days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days before the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the 3 4 meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders. SECTION 9. Quorum of Stockholders. At any meeting of the stockholders, the holders of one-third of all issued and outstanding shares of stock entitled to vote at any meeting of stockholders, present in person or represented by proxy, shall constitute a quorum for the transaction of any business at such meeting, but in the absence of a quorum a smaller group may adjourn any meeting from time to time. When a quorum is present at any meeting, a majority of the votes properly cast shall, except where a different vote is required by law, by the Certificate of Incorporation or by these by-laws, decide any question brought before such meeting. Any election by stockholders shall be determined by a plurality of the vote cast by the stockholders entitled to vote at the election. SECTION 10. Proxies and Voting. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock held of record by such stockholder, but no proxy shall be voted or acted upon after three years from its date, unless said proxy provides for a longer period. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held, and persons whose stock is pledged shall be entitled to vote unless in the transfer by the pledgor on the books of the corporation the pledgee shall have been expressly empowered to vote thereon, in which case only the pledgee or the pledgee's proxy may represent said stock and vote thereon. Shares of the capital stock of the corporation belonging to the corporation or to another corporation, a majority of whose shares entitled to vote in the election of directors is owned by the corporation, shall neither be entitled to vote nor be counted for quorum purposes. SECTION 11. Conduct of Meeting. Meetings of the stockholders shall be presided over by one of the following officers in the order specified and if present and acting: the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President (and, in the event there be more than one person in any such office, in the order of their seniority), or, if none of the foregoing is in office and present and acting, a chairman designated by the Board of Directors or, in the absence of such designation, a chairman chosen by the stockholders at the meeting. The Secretary of the corporation, if present, or an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman of the meeting shall appoint a secretary of the meeting. The Board of Directors may adopt such rules, regulations and procedures for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgement of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, (i) the establishment of an agenda or order of business for the meeting, (ii) rules and procedures for 4 5 maintaining order at the meeting and the safety of those present, (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine, (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof, and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. SECTION 12. Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders or by proxy for the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II DIRECTORS SECTION 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation that are not by law required to be exercised by the stockholders. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. SECTION 2. Number; Election; Tenure and Qualification. Subject to any restrictions contained in the Certificate of Incorporation, the number of directors that shall constitute the whole Board shall be fixed by resolution of the Board of Directors but in no event shall be less than one. The directors shall be elected in the manner provided in the Certificate of Incorporation, by such stockholders as have the right to vote thereon. The number of directors may be increased or decreased by action of the Board of Directors. Directors need not be stockholders of the corporation. SECTION 3. Enlargement of the Board. Subject to any restrictions contained in the Certificate of Incorporation, the number of the Board of Directors may be increased at any time, such increase to be effective immediately unless otherwise specified in the resolution, by vote of a majority of the directors then in office. SECTION 4. Vacancies. Unless and until filled by the stockholders and except as otherwise determined by the Board of Directors in establishing a series of Preferred Stock as to directors elected by the holders of such series, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board and an unfilled vacancy resulting from the removal of any director, may be filled by vote of a majority of the 5 6 directors then in office although less than a quorum, or by the sole remaining director. Each director so chosen to fill a vacancy shall serve for a term determined in the manner provided in the Certificate of Incorporation. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. If at any time there are no directors in office, then an election of directors may be held in accordance with the General Corporation Law of the State of Delaware. SECTION 5. Resignation. Any director may resign at any time upon written notice to the corporation. Such resignation shall take effect at the time specified therein, or if no time is specified, at the time of its receipt by the Chairman of the Board, if any, the President or the Secretary. SECTION 6. Removal. Directors may be removed from office only as provided in the Certificate of Incorporation. The vacancy or vacancies created by the removal of a director may be filled by the stockholders at the meeting held for the purpose of removal or, if not so filled, by the directors in the manner provided in Section 4 of this Article II. SECTION 7. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. The Board of Directors shall have the power to change the members of any such committee at any time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors or in these by-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it. A majority of all the members of any such committee may fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board of Directors shall otherwise by resolution provide. Each committee shall keep regular minutes of its meetings and make such reports as the Board of Directors may from time to time request. SECTION 8. Meetings of the Board of Directors. Regular meetings of the Board of Directors may be held without call or formal notice at such places either within or without the State of Delaware and at such times as the Board may by vote from time to time determine. A regular meeting of the Board of Directors may be held without call or formal notice immediately 6 7 after and at the same place as the annual meeting of the stockholders, or any special meeting of the stockholders at which a Board of Directors is elected. Special meetings of the Board of Directors may be held at any place either within or without the State of Delaware at any time when called by the Chairman of the Board, if any, the President, the Secretary or two or more directors. Reasonable notice of the time and place of a special meeting shall be given to each director unless such notice is waived by attendance or by written waiver in the manner provided in these by-laws for waiver of notice by stockholders. Notice may be given by, or by a person designated by, the Secretary, the person or persons calling the meeting, or the Board of Directors. No notice of any adjourned meeting of the Board of Directors shall be required. In any case it shall be deemed sufficient notice to a director to send notice by mail at least seventy-two hours, or by telegram or fax at least forty-eight hours, before the meeting, addressed to such director at his or her usual or last known business or home address. Directors or members of any committee may participate in a meeting of the Board of Directors or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. SECTION 9. Quorum and Voting. A majority of the total number of directors shall constitute a quorum, except that when a vacancy or vacancies exist in the Board, a majority of the directors then in office (but not less than one-third of the total number of the directors) shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting from time to time. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except where a different vote is required by law, by the Certificate of Incorporation or by these by-laws. SECTION 10. Compensation. The Board of Directors may fix fees for their services and for their membership on committees, and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity, as an officer, agent or otherwise, and receiving compensation therefor. SECTION 11. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting and without notice if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or of such committee. ARTICLE III OFFICERS 7 8 SECTION 1. Titles. The officers of the corporation shall consist of a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, who may include without limitation a Chairman of the Board, a Vice-Chairman of the Board and one or more Vice-Presidents, Assistant Treasurers or Assistant Secretaries. SECTION 2. Election and Term of Office. The officers of the corporation shall be elected annually by the Board of Directors at its first meeting following the annual meeting of the stockholders. Each officer shall hold office until his or her successor is elected and qualified, unless a different term is specified in the vote electing such officer, or until his or her earlier death, resignation or removal. SECTION 3. Qualification. Unless otherwise provided by resolution of the Board of Directors, no officer, other than the Chairman or Vice-Chairman of the Board, need be a director. No officer need be a stockholder. Any number of offices may be held by the same person, as the directors shall determine. SECTION 4. Removal. Any officer may be removed, with or without cause, at any time, by resolution adopted by the Board of Directors. SECTION 5. Resignation. Any officer may resign by delivering a written resignation to the corporation at its principal office or to the Chairman of the Board, if any, the President or the Secretary. Such resignation shall be effective upon receipt or at such later time as may be specified therein. SECTION 6. Vacancies. The Board of Directors may at any time fill any vacancy occurring in any office for the unexpired portion of the term and may leave unfilled for such period as it may determine any office other than those of President, Treasurer and Secretary. SECTION 7. Powers and Duties. The officers of the corporation shall have such powers and perform such duties as are specified herein and as may be conferred upon or assigned to them by the Board of Directors and shall have such additional powers and duties as are incident to their office except to the extent that resolutions of the Board of Directors are inconsistent therewith. SECTION 8. President and Vice-Presidents. Except to the extent that such duties are assigned by the Board of Directors to the Chairman of the Board, or in the absence of the Chairman or in the event of his or her inability or refusal to act, the President shall be the chief executive officer of the corporation and shall have general and active management of the business of the corporation and general supervision of its officers, agents and employees, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall preside at each meeting of the stockholders and the Board of Directors unless a Chairman or Vice-Chairman of the Board is elected by the Board and is present at such meeting. The Board of Directors may assign to any Vice-President the title of Executive Vice-President, Senior Vice-President or any other title selected by the Board of Directors. In the absence of the President or in the event of his or her inability or refusal to act, the duties of 8 9 the President shall be performed by the Executive Vice-President, if any, Senior Vice President, if any, or Vice President, if any, in that order (and, in the event there be more than one person in any such office, in the order of their seniority), and when so acting, such officer shall have all the powers of and be subject to all the restrictions upon the President. SECTION 9. Secretary and Assistant Secretaries. The Secretary shall attend all meetings of the Board of Directors and of the stockholders and record all the proceedings of such meetings in a book to be kept for that purpose, shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, shall maintain a stock ledger and prepare lists of stockholders and their addresses as required and shall have custody of the corporate seal, which the Secretary or any Assistant Secretary shall have authority to affix to any instrument requiring it and attest by any of their signatures. The Board of Directors may give general authority to any other officer to affix and attest the seal of the corporation. Any Assistant Secretary may, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary. SECTION 10. Treasurer and Assistant Treasurers. The Treasurer shall have the custody of the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by or pursuant to resolution of the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, the Chairman of the Board, if any, or the President, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and the Board of Directors, at its regular meetings or whenever they may require it, an account of all transactions and of the financial condition of the corporation. Any Assistant Treasurer may, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer. SECTION 11. Bonded Officers. The Board of Directors may require any officer to give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors upon such terms and conditions as the Board of Directors may specify, including without limitation a bond for the faithful performance of the duties of such officer and for the restoration to the corporation of all property in his or her possession or control belonging to the corporation. SECTION 12. Salaries. Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors or any committee thereof appointed for the purpose. 9 10 ARTICLE IV STOCK SECTION 1. Certificates of Stock. One or more stock certificates, signed by the Chairman or Vice-Chairman of the Board of Directors or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by the stockholder in the corporation. Any or all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature shall have been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. Each certificate for shares of stock that are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the by-laws, applicable securities laws, or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. SECTION 2. Transfers of Shares of Stock. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. The corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to that stock, regardless of any transfer, pledge or other disposition of that stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these by-laws. SECTION 3. Lost Certificates. A new stock certificate may be issued in the place of any certificate theretofore issued by the corporation and alleged to have been lost, stolen, destroyed or mutilated, upon such terms in conformity with law as the Board of Directors shall prescribe. The directors may, in their discretion, require the owner of the lost, stolen, destroyed or mutilated certificate, or the owner's legal representatives, to give the corporation a bond, in such sum as they may direct, to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, destruction or mutilation of any such certificate, or the issuance of any such new certificate. SECTION 4. Fractional Share Interests. The corporation may, but shall not be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (i) arrange for the disposition of fractional interests by those entitled thereto, (ii) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (iii) issue scrip or warrants in registered or bearer form, which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not 10 11 unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions that the Board of Directors may impose. SECTION 5. Dividends. Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor, at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. ARTICLE V INDEMNIFICATION AND INSURANCE SECTION 1. Indemnification. The corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Delaware, as amended from time to time, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was, or has agreed to become, a director or officer of the corporation, or is or was serving, or has agreed to serve, at the request of the corporation, as a director, officer, trustee, employee or agent of, or in a similar capacity with, another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, provided that in the case of a settlement the payment and indemnification thereof have been approved by the corporation, which approval shall not unreasonably be withheld, or by a court of competent jurisdiction. Such indemnification shall, subject to the conditions imposed by law, include payment by the corporation of expenses in defending an action or proceeding in advance of the final disposition of such action or proceeding upon receipt of any undertaking by the person indemnified to repay such payment if it is ultimately determined that such person is not entitled to indemnification under this Section, which undertaking may be accepted without reference to the financial ability of such person to make such repayments. The corporation shall not indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person unless the initiation thereof was approved by the Board of Directors of the corporation. The indemnification rights provided in this Section (i) shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, (ii) shall be a contract right inuring to the benefit of the directors, officers and other persons entitled to be indemnified hereunder and no amendment or repeal of this Section shall adversely affect any right of such director, officer or 11 12 other person existing at the time of such amendment or repeal, and (iii) shall inure to the benefit of the heirs, executors and administrators of such persons. Nothing contained in this Section shall affect any rights to indemnification to which corporation employees or agents other than directors and officers and other persons entitled to indemnification hereunder may be entitled by contract or otherwise under law. SECTION 2. Insurance. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the General Corporation Law of the State of Delaware. 12 13 ARTICLE VI GENERAL PROVISIONS SECTION 1. Fiscal Year. Except as otherwise designated from time to time by the Board of Directors, the fiscal year of the corporation shall begin on the first day of January and end on the last day of December. SECTION 2. Corporate Seal. The corporate seal shall be in such form as shall be approved by the Board of Directors. The Secretary shall be the custodian of the seal, and a duplicate seal may be kept and used by each Assistant Secretary and by any other officer the Board of Directors may authorize. SECTION 3. Certificate of Incorporation. All references in these by-laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as in effect from time to time. SECTION 4. Execution of Instruments. The Chairman and Vice-Chairman of the Board of Directors, if any, the President and the Treasurer shall have power to execute and deliver on behalf and in the name of the corporation any instrument requiring the signature of an officer of the corporation, including deeds, contracts, mortgages, bonds, notes, debentures, checks, drafts and other orders for the payment of money. In addition, the Board of Directors, the Chairman and Vice Chairman of the Board of Directors, if any, the President and the Treasurer may expressly delegate such powers to any other officer or agent of the corporation. SECTION 5. Voting of Securities. The Chairman and Vice-Chairman of the Board of Directors, if any, the President, the Treasurer, and each other person authorized by the Board of Directors, each acting singly, may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or owners of other interests of any other corporation or organization the securities of which may be held by this corporation. In addition, the Board of Directors, the Chairman and Vice Chairman of the Board of Directors, if any, the President and the Treasurer may expressly delegate such powers to any other officer or agent of the corporation. SECTION 6. Evidence of Authority. A certificate by the Secretary, an Assistant Secretary or a temporary secretary as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall, as to all persons who rely on the certificate in good faith, be conclusive evidence of that action. SECTION 7. Transactions with Interested Parties. No contract or transaction between the corporation and one or more of the directors or officers, or between the corporation and any other corporation, partnership, association or other organization in which one or more of the directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for that reason or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors that authorizes the contract or transaction or solely because the vote of any such director is counted for such purpose, if: 13 14 (1) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or such committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair to the corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee of the Board of Directors or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction. SECTION 8. Books and Records. The books and records of the corporation shall be kept at such places within or without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE VII AMENDMENTS SECTION 1. By the Board of Directors. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. SECTION 2. By the Stockholders. These by-laws may be altered, amended or repealed or new by-laws may be adopted by vote of the stockholders, at any regular meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting. 14 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 10,778 0 92,246 8,610 0 134,944 1,410,561 215,240 3,227,194 95,367 1,593,690 0 0 0 1,407,852 3,227,194 294,102 294,614 0 93,481 0 2,114 57,471 (18,218) (262) (17,956) 0 (182) (767) (18,905) 0 0 EARNINGS PER SHARE INFORMATION DOES NOT APPLY TO LAMAR MEDIA CORP. BECAUSE THEY ARE A WHOLLY-OWNED SUBSIDIARY OF LAMAR ADVERTISING.
EX-99.1 4 FACTORS AFFECTING FUTURE OPERATING RESULTS 1 Exhibit 99.1 FACTORS AFFECTING FUTURE OPERATING RESULTS OUR DEBT AGREEMENTS CONTAIN COVENANTS AND RESTRICTIONS THAT CREATE THE POTENTIAL FOR DEFAULTS The terms of Lamar Media's bank credit facility and the indentures relating to our outstanding notes restrict, among other things, Lamar Media's ability to: o make distributions to Lamar Advertising; o dispose of assets; o incur or repay debt; o create liens; and o make investments. Under our bank credit facility we must maintain specified financial ratios and levels including: o interest coverage; o fixed charges ratio; o senior debt ratios; and o total debt ratios. If we fail to comply with these tests, the lenders have the right to cause all amounts outstanding under the bank credit facility to become immediately due. If this were to occur and the lenders decide to exercise their right to accelerate the indebtedness, it would create serious financial problems for us. Our ability to comply with these restrictions, and any similar restrictions in future agreements, depends on our operating performance. Because our performance is subject to prevailing economic, financial and business conditions and other factors that are beyond our control, we may be unable to comply with these restrictions in the future. BECAUSE WE HAVE SIGNIFICANT FIXED PAYMENTS ON OUR DEBT, WE MAY LACK SUFFICIENT CASH FLOW TO OPERATE OUR BUSINESS AS WE HAVE IN THE PAST AND MAY NEED TO BORROW MONEY IN THE FUTURE TO MAKE THESE PAYMENTS AND OPERATE OUR BUSINESS We have borrowed substantial amounts of money in the past and may borrow more money in the future. At September 30, 1999, we had approximately $1,310 million of debt outstanding to third parties consisting of approximately $757 million in bank debt, $529 million in various series of senior subordinated notes and $24 million in various other short-term and long-term debt. In addition, the Company had 287.5 million in long-term notes payable to Lamar Advertising Company. The total debt of the Company at September 30, 1999 was $1,598 million which represented approximately 53% of our total capitalization. A large part of our cash flow from operations must be used to make principal and interest payments on our debt. If our operations make less money in the future, we may need to borrow to make these payments. In addition, we finance most of our acquisitions through borrowings under our bank credit facility which presently has a total committed amount of $1 billion in term and revolving credit loans. At September 30, 1999, we had approximately $243 million available to borrow under this bank credit facility. Since our borrowing capacity under our bank credit facility is limited, we may not be able to continue to finance future acquisitions at our historical rate with borrowings under this bank credit facility. We may need to borrow additional amounts or seek other sources of financing to fund future acquisitions. We cannot guarantee that such additional financing will be available or available on favorable terms. We also may need the consent of the banks under our bank credit facility, or the holders of other indebtedness, to borrow additional money. OUR BUSINESS COULD BE HURT BY CHANGES IN ECONOMIC AND ADVERTISING TRENDS We sell advertising space to generate revenues. A decrease in demand for advertising space could adversely affect our business. General economic conditions and trends in the advertising industry affect the amount of advertising space purchased. A reduction in money spent on our displays could result from: o a general decline in economic conditions; o a decline in economic conditions in particular markets where we conduct business; o a reallocation of advertising expenditures to other available media by significant users of our displays; or o a decline in the amount spent on advertising in general. 2 OUR OPERATIONS ARE IMPACTED BY THE REGULATION OF OUTDOOR ADVERTISING Our operations are significantly impacted by federal, state and local government regulation of the outdoor advertising business. The federal government conditions federal highway assistance on states imposing location restrictions on the placement of billboards on primary and interstate highways. Federal laws also impose size, spacing and other limitations on billboards. Some states have adopted standards more restrictive than the federal requirements. Local governments generally control billboards as part of their zoning regulations. Some local governments have enacted ordinances which require removal of billboards by a future date. Others prohibit the construction of new billboards and the reconstruction of significantly damaged billboards, or allow new construction only to replace existing structures. Local laws which mandate removal of billboards at a future date often do not provide for payment to the owner for the loss of structures that are required to be removed. Certain federal and state laws require payment of compensation in such circumstances. Local laws that require the removal of a billboard without compensation have been challenged in state and federal courts with conflicting results. Accordingly, we may not be successful in negotiating acceptable arrangements when our displays have been subject to removal under these types of local laws. Additional regulations may be imposed on outdoor advertising in the future. Legislation regulating the content of billboard advertisements has been introduced in Congress from time to time in the past. Additional regulations or changes in the current laws regulating and affecting outdoor advertising at the federal, state or local level may have a material adverse effect on our results of operations. OUR CONTINUED GROWTH THROUGH ACQUISITIONS MAY BECOME MORE DIFFICULT AND INVOLVES COSTS AND UNCERTAINTIES We have substantially increased our inventory of advertising displays through acquisitions. Our operating strategy involves making purchases in markets where we currently compete as well as in new markets. However, the following factors may affect our ability to continue to pursue this strategy effectively. o The outdoor advertising market has been consolidating, and this may adversely affect our ability to find suitable candidates for purchase. o We are also likely to face increased competition from other outdoor advertising companies for the companies or assets we wish to purchase. Increased competition may lead to higher prices for outdoor advertising companies and assets and decrease those we are able to purchase. o We do not know if we will have sufficient capital resources to make purchases, obtain any required consents from our lenders, or find acquisition opportunities with acceptable terms. o From January 1, 1997 to September 30, 1999, we completed 142 transactions involving the purchase of complementary outdoor advertising assets, including the acquisition on September 15, 1999 of Chancellor Media Outdoor Corporation for a purchase price consisting of $700 million in cash and a fixed amount of 26,227,273 shares of Lamar Advertising Company Class A common stock and the acquisition on October 1, 1998 of Outdoor Communications, Inc. for $385 million. We must integrate these and other acquired assets and businesses into our existing operations. This process of integration may result in unforeseen difficulties and could require significant time and attention from our management that would otherwise be directed at developing our existing business. Further, we cannot be certain that the benefits and cost savings that we anticipate from these purchases will develop. DUE TO THE CHANCELLOR OUTDOOR ACQUISITION, WE HAVE SIGNIFICANTLY EXPANDED OUR OPERATIONS IN MAJOR MARKETS WHERE WE CANNOT BE SURE OUR BUSINESS STRATEGY WILL CONTINUE TO BE SUCCESSFUL The acquisition of Chancellor Outdoor has significantly expanded our operations in major markets. Because we have historically focused on middle markets and have not had substantial operations in major markets to date, we cannot guarantee that we will be able to replicate the success that we have achieved with our business strategy in middle markets. Achieving our goals in major markets will depend to a great extent on our ability to attract and retain national advertising customers. Our success to date has been built in large measure on our ability to attract and retain local advertising customers. Approximately 81% of our net advertising revenues for 1998 derived from local 3 advertising. We cannot be sure that the strategies that have worked well with local advertising customers will work with national advertisers. In addition, expanding our operations in major markets will put us in increased competition with larger competitors with more diversified media operations who may have a more established market presence and greater financial resources then we do. We may also face more intense competition from other forms of outdoor advertising and other media in major markets than we do in middle markets. THE BAN ON TOBACCO ADVERTISING HAS ELIMINATED A TRADITIONALLY SIGNIFICANT SOURCE OF OUR REVENUES AND WE MAY NOT BE ABLE TO CONTINUE TO REPLACE THESE LOST REVENUES THROUGH OTHER SOURCES We have removed all of our outdoor advertising of tobacco products in connection with settlements the states reached with the U.S. tobacco companies. Our tobacco revenues as a percentage of consolidated net revenues were 7% for the twelve months ended December 31, 1998 and 3% for the nine months ended September 30, 1999. The ban on outdoor advertising of tobacco products in the settlement increased our available inventory. To date, we have been successful in replacing the tobacco advertising removed with substitute advertising at comparable rates. We cannot be sure, however, that we will continue to be able to do so in the future. If we are unable to continue to replace tobacco advertising, the resulting increase in available inventory could cause us to reduce our rates or limit our ability to raise rates. In addition, we cannot guarantee that substitute advertisers will pay rates as favorable to us as those paid by tobacco advertisers. WE FACE COMPETITION FROM LARGER AND MORE DIVERSIFIED OUTDOOR ADVERTISERS AND OTHER FORMS OF ADVERTISING THAT COULD HURT OUR PERFORMANCE We cannot be sure that in the future we will compete successfully against the current and future sources of outdoor advertising competition and competition from other media. The competitive pressure that we face could adversely affect our profitability or financial performance. Even though, as a result of the Chancellor Outdoor acquisition, we are the largest company focusing exclusively on outdoor advertising, we face competition from larger companies with more diversified operations which also include radio and other broadcast media. We also face competition from other forms of media, including television, radio, newspapers and direct mail advertising. We must also compete with an increasing variety of other out-of-home advertising media that include advertising displays in shopping centers, malls, airports, stadiums, movie theaters and supermarkets, and on taxis, trains and buses. In our logo sign business, we currently face competition for state-awarded service contracts from two other logo sign providers as well as local companies. Initially, we compete for state-awarded service contracts as they are privatized. Because these contracts expire after a limited time, we must compete to keep our existing contracts each time they are up for renewal. IF OUR CONTINGENCY PLANS RELATING TO HURRICANES FAIL, THE RESULTING LOSSES COULD HURT OUR BUSINESS Although we have developed contingency plans designed to deal with the threat posed to our advertising structures by hurricanes, we cannot guarantee that these plans will work. If these plans fail, significant losses could result. A significant portion of our structures is located in the Mid-Atlantic and Gulf Coast regions of the United States. These areas are highly susceptible to hurricanes during the late summer and early fall. In the past, we have incurred significant losses due to severe storms. These losses resulted from structural damage, overtime compensation, loss of billboards that could not be replaced under applicable laws and reduced occupancy because billboards were out of service. We have determined that it is not economical to obtain insurance against losses from hurricanes and other storms. Instead, we have developed contingency plans to deal with the threat of hurricanes. For example, we attempt to remove the advertising faces on billboards at the onset of a storm, when possible, which permits the structures to better withstand high winds during a storm. We then replace these advertising faces after the storm has passed. However, these plans may not be effective in the future and, if they are not, significant losses may result. OUR LOGO SIGN CONTRACTS ARE SUBJECT TO STATE AWARD AND RENEWAL A growing portion of our revenues and operating income come from our state-awarded service contracts for logo signs. We cannot predict what remaining states, if any, will start logo sign programs 4 or convert state-run logo sign programs to privately operated programs. We compete with many other parties for new state-awarded service contracts for logo signs. Even when we are awarded a contract, the award may be challenged under state contract bidding requirements. If an award is challenged, we may incur delays and litigation costs. Generally, state-awarded logo sign contracts have a term, including renewal options, of ten to twenty years. States may terminate a contract early, but in most cases must pay compensation to the logo sign provider for early termination. Typically, at the end of the term of the contract, ownership of the structures is transferred to the state without compensation to the logo sign provider. Of our current logo sign contracts, three are subject to renewal in May, June and October 2000. We cannot guarantee that we will be able to obtain new logo sign contracts or renew our existing contracts. In addition, after we receive a new state-awarded logo contract, we generally incur significant start-up costs. We cannot guarantee that we will continue to have access to the capital necessary to finance those costs. OUR OPERATIONS COULD BE AFFECTED BY THE LOSS OF KEY EXECUTIVES Our success depends to a significant extent upon the continued services of our executive officers and other key management and sales personnel. Kevin P. Reilly, Jr., our Chief Executive Officer and the Chief Executive Officer of Lamar Advertising Company, our regional managers and the manager of our logo sign business, in particular, are essential to our continued success. Although we have designed our incentive and compensation programs to retain key employees, we have no employment contracts with any of our employees and none of our executive officers have signed non-compete agreements. We do not maintain key man insurance on our executives. If any of our executive officers or other key management and sales personnel stopped working with us in the future, it could have an adverse effect on our business. WE COULD EXPERIENCE SYSTEM FAILURES AND DISRUPTIONS OF OUR OPERATIONS AS A RESULT OF THE YEAR 2000 DATE RECOGNITION PROBLEM The year 2000 date recognition problem could cause our computer systems to fail, resulting in miscalculations and incorrect data. Computer systems which may be affected by this year 2000 problem include computer systems embedded in production equipment; displays containing computer systems; business data processing systems; production, management and planning systems; and personal computers. The Company has conducted an assessment of its software and related systems and believes they are year 2000 compliant. The Company's year 2000 effort also included communication with significant third party vendors and customers to determine the extent to which the Company's systems are vulnerable to those parties' failure to reach year 2000 compliance. The Company cannot assure you that our customers, suppliers and other third parties that we deal with are or will be year 2000 compliant in a timely manner or that the Company's systems will be unaffected. Interruptions in the services provided to us or in the purchases made by these third parties could also disrupt our operations. Parties affected by a disruption in our operations and services could make claims or bring lawsuits against us. Depending upon the extent and duration of any disruptions caused by the year 2000 problem and the specific services affected, these disruptions could have an adverse affect on our business. -----END PRIVACY-ENHANCED MESSAGE-----