LAMAR ADVERTISING CO/NEW - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended December 31, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from to
--------------- ---------------

Commission File Number 0-30242
LAMAR ADVERTISING COMPANY

Commission File Number 1-12407
LAMAR MEDIA CORP.
(Exact name of registrants as specified in their charters)

Delaware 72-1449411
Delaware 72-1205791
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No)

5551 Corporate Blvd., Baton Rouge, LA 70808
(Address of principal executive offices) (Zip Code)

Registrants' telephone number, including area code: (225) 926-1000

SECURITIES OF LAMAR ADVERTISING COMPANY
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES OF LAMAR ADVERTISING COMPANY
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Class A common stock, $.001 par value

SECURITIES OF LAMAR MEDIA CORP.
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Lamar Advertising Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]

Indicate by check mark whether Lamar Advertising Company is an accelerated filer
(as defined in Rule 126-2 under the Securities Exchange Act of 1934). Yes [X] No
[ ]

Indicate by check mark whether Lamar Media Corp. is an accelerated filer (as
defined in Rule 126-2 under the Securities Exchange Act of 1934). Yes [ ] No [X]

The aggregate market value of the voting stock held by nonaffiliates of Lamar
Advertising Company as of June 28, 2002: $2,949,493,181

The number of shares of Lamar Advertising Company's Class A common stock
outstanding as of March 5, 2003: 85,677,059

The number of shares of the Lamar Advertising Company's Class B common stock
outstanding as of March 5, 2003: 16,417,073

THIS COMBINED FORM 10-K IS SEPARATELY FILED BY (i) LAMAR ADVERTISING COMPANY AND
II) LAMAR MEDIA CORP. (WHICH IS A WHOLLY-OWNED SUBSIDIARY OF LAMAR ADVERTISING
COMPANY). LAMAR MEDIA CORP. MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION I(1) (a) AND (b) OF FORM 10-K AND IS, THEREFORE, FILING THIS FORM
WITH THE REDUCED DISCLOSURE FORMAT PERMITTED BY SUCH INSTRUCTION.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of Lamar Advertising Company's proxy statement for the Annual Meeting
of Stockholders to be held on May 22, 2003 are incorporated by reference into
Part III of this Form 10-K.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This combined Annual Report on Form 10-K of Lamar Advertising Company and Lamar
Media Corp. contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These are statements that relate to future periods and include
statements about the Company's, and Lamar Media's:

o expected operating results;

o market opportunities;

o acquisition opportunities;

o ability to compete; and

o stock price.

Generally, the words anticipates, believes, expects, intends, estimates,
projects, plans and similar expressions identify forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause the Company's and Lamar Media's
actual results, performance or achievements or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by these forward-looking statements. These risks, uncertainties and
other important factors include, among others:

o the performance of the U.S. economy generally and the level of
expenditures on outdoor advertising particularly;

o the Company's ability to renew expiring contracts at favorable rates;

o the integration of companies that the Company acquires and its ability
to recognize cost savings or operating efficiencies as a result of
these acquisitions;

o risks and uncertainties relating to the Company's significant
indebtedness;

o the Company's need for and ability to obtain additional funding for
acquisitions or operations; and

o the regulation of the outdoor advertising industry.

The forward-looking statements contained in this combined Annual Report on Form
10-K speak only as of the date of this combined Annual Report. Lamar Advertising
Company and Lamar Media Corp. expressly disclaim any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statement
contained in this combined Annual Report to reflect any change in their
expectations with regard thereto or any change in events, conditions or
circumstances on which any forward-looking statement is based.

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PART I

ITEM 1. BUSINESS

GENERAL

Lamar Advertising Company, referred to herein as the Company or Lamar
Advertising, is one of the largest outdoor advertising companies in the United
States based on number of displays and has operated under the Lamar name since
1902. As of December 31, 2002, the Company owned and operated approximately
146,000 billboard advertising displays in 44 states, operated over 95,000 logo
advertising displays in 21 states and the province of Ontario, Canada, and
operated approximately 13,000 transit advertising displays in 16 states.

The Company makes its annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to these reports available
free of charge through its website, www.lamar.com, as soon as reasonably
practicable after filing them with the Securities and Exchange Commission.

The three principal areas that make up the Company's business are:

o Billboard advertising. The Company offers customers a fully
integrated service, covering their billboard display requirements from
ad copy production to placement and maintenance. The Company's
billboard advertising displays are comprised of bulletins and posters.
As a result of their greater impact and higher cost, bulletins are
usually located on major highways. Posters are usually concentrated on
major traffic arteries or on city streets to target pedestrian traffic.

o Logo signs. The Company is the largest provider of logo sign services
in the United States, operating 21 of the 26 privatized state logo sign
contracts. Logo signs are erected near highway exits to direct motor
traffic to service and tourist attractions, as well as to advertise
gas, food, camping and lodging.

o Transit advertising. The Company provides transit advertising in 41
transit markets. Transit displays appear on the exterior or interior of
public transportation vehicles or stations, such as buses, trains,
commuter rail, subways, platforms and terminals.

The Company's business has grown rapidly through a combination of internal
growth and acquisitions. The Company's growth has been enhanced by strategic
acquisitions that resulted in increased operating efficiencies, greater
geographic diversification and increased market penetration. Historically, focus
has been on small to mid-sized markets where acquisition opportunities have been
pursued in order to establish a leadership position. Since January 1, 1997, the
Company has successfully completed over 450 acquisitions of outdoor advertising
businesses and assets. The Company's acquisitions have expanded its operations
in major markets and it currently has a presence in 35 of the top 50 outdoor
advertising markets in the United States. The Company's large national footprint
gives it the ability to offer cross-market advertising opportunities to both
local and national advertising customers.

The Company has been in operation since 1902 and completed a reorganization on
July 20, 1999 to create a new holding company structure. At that time, Lamar
Advertising Company was renamed Lamar Media Corp. and all its stockholders
became stockholders in a new holding company. The new holding company then took
the Lamar Advertising Company name and Lamar Media Corp. became a wholly owned
subsidiary of Lamar Advertising Company.

STRATEGY

The Company's objective is to be a leading provider of outdoor advertising
services in the markets it serves. The Company's strategy to achieve this goal
includes the following elements:

Continue to provide high quality local sales and service. The Company seeks to
identify and closely monitor the needs of its customers and to provide them with
a full complement of high quality advertising services at a lower cost than
competitive media. Local advertising constituted approximately 86% of its net
revenues for the year ended December 31, 2002, which management believes is
higher than the industry average. The Company believes that the experience of
its regional and local managers has contributed greatly to its success. For
example, the Company's regional managers have been with the Company for an
average of 22 years. In an effort to provide high quality sales service at the
local level, the Company employed 785 local account executives as of December
31, 2002. Local account executives are typically supported by additional local
staff and have the ability to draw upon the resources of the central office, as
well as offices in its other markets, in the event that business opportunities
or customers' needs support such an allocation of resources.

Continue a centralized control and decentralized management structure. The
Company's management believes that for its particular business, centralized
control and a decentralized organization provides for greater economies of scale
and is more

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responsive to local market demands. Therefore, the Company maintains centralized
accounting and financial control over its local operations, but the local
managers are responsible for the day-to-day operations in each local market and
are compensated according to that market's financial performance.

Continue to focus on internal growth. Within its existing markets, the Company
seeks to increase its revenue and improve its cash flow by employing highly
targeted local marketing efforts to improve its display occupancy rates and by
increasing advertising rates. This strategy is facilitated through its local
offices, which allows the Company to respond quickly to the demands of its local
customer base. In addition, the Company routinely invests in upgrading its
existing displays and constructing new displays in order to provide high quality
service to its current customers and to attract new advertisers. From January 1,
1997 to December 31, 2002, the Company has invested over $410 million in
improvements to its existing displays and in constructing new displays.

Continue to pursue strategic acquisitions. The Company intends to enhance its
growth by pursuing strategic acquisitions, which it anticipates will result in
increased operating efficiencies, greater geographic diversification and
increased market penetration. In addition to acquiring outdoor advertising
assets in new markets, the Company purchases complimentary outdoor advertising
assets within its existing markets or in contiguous markets. The Company
believes that acquisitions offer opportunities for inter-market cross-selling.
Although the advertising industry is becoming more consolidated, the Company
believes there will be continuing opportunities for implementing its acquisition
strategy given the industry's continued fragmentation among smaller advertising
companies. From January 1, 2002 to December 31, 2002, the Company completed 75
acquisitions of advertising businesses and assets for an aggregate purchase
price of approximately $135 million. Certain of the Company's principal
acquisitions since January 1, 2002 are described below.

Delite Outdoor of Ohio Holdings, Inc. On January 1, 2002, the Company
purchased the stock of Delite Outdoor of Ohio Holdings, Inc. for $38
million. The purchase price consisted of 963,488 shares of Lamar
Advertising Class A common stock.

MC Partners On January 8, 2002, the Company purchased the assets of MC
Partners for a cash purchase price of approximately $15.3 million.

American Outdoor Advertising, Inc. On May 31, 2002, the Company
purchased the assets of American Outdoor Advertising, Inc. for $15.7
million. The purchase price consisted of 349,376 shares of Lamar
Advertising Class A common stock, as well as approximately $725
thousand in cash.

Continue to pursue other outdoor advertising opportunities. The Company plans to
pursue additional logo sign contracts. Logo sign opportunities arise
periodically, both from states initiating new logo sign programs and states
converting from government-owned and operated programs to privately-owned and
operated programs. Furthermore, the Company plans to pursue additional tourist
oriented directional sign programs in both the United States and Canada and also
other motorist information signing programs as opportunities present themselves.
In an effort to maintain market share, the Company has entered the transit
advertising business through the operation of displays on bus shelters, benches
and buses in 41 of its outdoor advertising markets.

COMPANY OPERATIONS

BILLBOARD ADVERTISING

INVENTORY:

The Company operates the following types of billboard advertising displays:

BULLETINS generally are 14 feet high and 48 feet wide (672 square feet) and
consist of panels on which advertising copy is displayed. The advertising copy
is printed with computer-generated graphics on a single sheet of vinyl that is
wrapped around the structure. On occasion, to attract more attention, some of
the panels may extend beyond the linear edges of the display face and may
include three-dimensional embellishments. Because of their greater impact and
higher cost, bulletins are usually located on major highways.

POSTERS generally are 12 feet high by 25 feet wide (300 square feet) and are the
most common type of billboard. Advertising copy for these posters consists of
lithographed or silk-screened paper sheets supplied by the advertiser that are
pasted and applied like wallpaper to the face of the display, or single sheets
of vinyl with computer-generated advertising copy that are wrapped around the
structure. Standardized posters are concentrated on major traffic arteries or on
city streets and target pedestrian traffic.

For the year ended December 31, 2002, approximately 72% of the Company's
billboard advertising net revenues were derived from bulletin sales and 28% from
poster sales.

4

The physical structures on which the advertising displays are located are owned
by the Company and are built on locations the Company either owns or leases. In
each local office one employee typically performs site leasing activities for
the markets served by that office. See Item 2. - "Properties".

Bulletin space is generally sold as individually selected displays for the
duration of the advertising contract. Bulletins may also be sold as part of a
rotary plan where advertising copy is periodically rotated from one location to
another within a particular market. Poster space is generally sold in packages
called showings, which comprise a given number of displays in a market area.
Posters provide advertisers with access either to a specified percentage of the
general population or to a specific targeted audience. Displays making up a
showing are placed in well-traveled areas and are distributed so as to reach a
wide audience in a particular market. Bulletin space is generally sold for 6 to
12 month periods. Poster space averages between 30 and 90 days.

PRODUCTION:

In the majority of the Company's markets, its local production staffs perform
the full range of activities required to create and install billboard
advertising displays. Production work includes creating the advertising copy
design and layout, coordinating its printing and installing the designs on
displays. The Company provides its production services to local advertisers and
to advertisers that are not represented by advertising agencies, since national
advertisers represented by advertising agencies often use preprinted designs
that require only installation. The Company's creative and production personnel
typically develop new designs or adopt copy from other media for use on
billboards. The Company's artists also often assist in the development of
marketing presentations, demonstrations and strategies to attract new customers.

With the increased use of vinyl and pre-printed advertising copy furnished to
the outdoor advertising company by the advertiser or its agency, outdoor
advertising companies require less labor-intensive production work. In addition,
increased use of vinyl and preprinted copy is also attracting more customers to
the outdoor advertising medium. The Company believes this trend over time will
reduce operating expenses associated with production activities.

CATEGORIES OF BUSINESS:

The following table sets forth the top ten categories of business from which the
Company derived its billboard advertising revenues for year ended December 31,
2002 and the respective percentages of such revenue. These categories accounted
for approximately 71% of the Company's billboard advertising net revenues in the
year ended December 31, 2002. No one advertiser accounted for more than 1% of
the Company's billboard advertising net revenues in that period.

LOGO SIGNS

The Company entered the business of logo sign advertising in 1988. The Company
is the largest provider of logo sign services in the United States, operating 21
of the 26 privatized state logo contracts. The Company operates over 28,000 logo
sign structures containing over 95,000 logo advertising displays in the United
States and Canada.

5

The Company has been awarded contracts to erect and operate logo signs in the
province of Ontario, Canada and the following states:

Colorado Kentucky Missouri (1) Ohio
Delaware Maine Nebraska Oklahoma
Florida Michigan Nevada South Carolina
Georgia Minnesota New Jersey Texas
Kansas Mississippi New Mexico Utah
Virginia

- ----------

(1) The logo sign contract in Missouri is operated by a 66 2/3% owned
partnership.

The Company also operates the tourism signing contracts for the states of
Colorado, Kentucky, Michigan, Missouri, Nebraska, Nevada, New Jersey and Ohio,
as well as for the province of Ontario, Canada.

State logo sign contracts represent the contract right to erect and operate logo
signs within a state. The term of the contracts vary, but generally range from
five to ten years, with additional renewal terms. The logo sign contracts
generally provide for termination by the state prior to the end of the term of
the contract, in most cases with compensation to be paid to the Company. At the
end of the term of the contract, ownership of the structures is transferred to
the state. Depending on the contract in question, the Company may or may not be
entitled to compensation at the end of the contract term. Of the Company's logo
sign contracts in place at December 31, 2002, three are due to terminate in
2003, one in September and two in December and two are subject to renewal in
2003, one in July and one in September. The Company also designs and produces
logo sign plates for its customers throughout the country, as well as customers
in states which have not yet privatized their logo sign programs.

TRANSIT ADVERTISING

The Company entered into the transit advertising business in 1993. The Company
provides transit advertising on bus shelters, benches and buses in 41 transit
markets. The Company's production staff provides a full range of creative and
installation services to its transit advertising customers.

COMPETITION

BILLBOARD ADVERTISING

The Company competes in each of its markets with other outdoor advertisers, as
well as other media, including broadcast and cable television, radio, print
media and direct mail marketers. In addition, the Company also competes with a
wide variety of out-of-home media, including advertising in shopping centers,
malls, airports, stadiums, movie theaters and supermarkets, as well as on taxis,
trains and buses. Advertisers compare relative costs of available media and
cost-per-thousand impressions, particularly when delivering a message to
customers with distinct demographic characteristics. In competing with other
media, outdoor advertising relies on its relative cost efficiency and its
ability to reach a broad segment of the population in a specific market or to
target a particular geographic area or population with a particular set of
demographic characteristics within that market.

The outdoor advertising industry is fragmented, consisting of several large
outdoor advertising and media companies with operations in multiple markets, as
well as smaller and local companies operating a limited number of structures in
single or a few local markets. Although the advertising industry is becoming
more consolidated, according to the Outdoor Advertising Association of America
(OAAA) as of December 31, 2002, there were approximately 600 companies in the
outdoor advertising industry operating approximately 600,000 outdoor displays.
In a number of its markets, the Company encounters direct competition from other
major outdoor media companies, including Infinity Broadcasting Corp. (formerly
Outdoor Systems, Inc.) and Clear Channel Communications, Inc. (formerly Eller
Media Company) both of which may have greater total resources than the Company.
The Company believes that its strong emphasis on sales and customer service and
its position as a major provider of advertising services in each of its primary
markets enables it to compete effectively with the other outdoor advertising
companies, as well as other media, within those markets. However, certain of the
Company's large competitors with other media assets such as radio and television
have the ability to cross-sell their different advertising products to their
customers.

LOGO SIGNS

The Company faces competition in obtaining new logo sign contracts and in
bidding for renewals of expiring contracts. The Company faces competition from
three other providers of logo signs in seeking state-awarded logo service
contracts. In addition, local companies within each of the states that solicit
bids will compete against the Company in the open-bid process. Competition from
these sources is also encountered at the end of each contract period. In
marketing logo signs to advertisers, the Company competes with the other forms
of out-of-home advertising described above.

6

REGULATION

Outdoor advertising is subject to governmental regulation at the federal, state
and local levels. Federal law, principally the Highway Beautification Act of
1965 (the HBA), regulates outdoor advertising on federally aided primary and
interstate highways. The HBA requires, as a condition to federal highway
assistance, states to restrict billboards on such highways to commercial and
industrial areas, and requires certain additional size, spacing and other
limitations. All states have passed state billboard control statutes and
regulations at least as restrictive as the federal requirements, including
removal at the owner's expense and without compensation of any illegal signs on
such highways. The Company believes that the number of its billboards that may
be subject to removal as illegal is immaterial. No state in which the Company
operates has banned billboards, but some have adopted standards more restrictive
than the federal requirements. Municipal and county governments generally also
have sign controls as part of their zoning laws. Some local governments prohibit
construction of new billboards and some allow new construction only to replace
existing structures, although most allow construction of billboards subject to
restrictions on zones, size, spacing and height.

Federal law does not require removal of existing lawful billboards, but does
require payment of compensation if a state or political subdivision compels the
removal of a lawful billboard along a federally aided primary or interstate
highway. State governments have purchased and removed legal billboards for
beautification in the past, using federal funding for transportation enhancement
programs, and may do so in the future. Governmental authorities from time to
time use the power of eminent domain to remove billboards. Thus far, the Company
has been able to obtain satisfactory compensation for any of its billboards
purchased or removed as a result of governmental action, although there is no
assurance that this will continue to be the case in the future. Local
governments do not generally purchase billboards for beautification, but some
have attempted to force removal of legal but nonconforming billboards
(billboards which conformed with applicable zoning regulations when built but
which do not conform to current zoning regulations) after a period of years
under a concept called amortization, by which the governmental body asserts that
just compensation is earned by continued operation over time. Although there is
some question as to the legality of amortization under federal and many state
laws, amortization has been upheld in some instances. The Company generally has
been successful in negotiating settlements with municipalities for billboards
required to be removed. Restrictive regulations also limit the Company's ability
to rebuild or replace nonconforming billboards. The outdoor advertising industry
is heavily regulated and at various times and in various markets can be expected
to be subject to varying degrees of regulatory pressure affecting the operation
of advertising displays. Accordingly, although the Company's experience to date
is that the regulatory environment can be managed, no assurance can be given
that existing or future laws or regulations will not materially and adversely
affect the Company.

EMPLOYEES

The Company employed approximately 3,000 persons at December 31, 2002. Of these,
approximately 107 were engaged in overall management and general administration
at the Company's management headquarters and the remainder were employed in the
Company's operating offices. Of the total employees, approximately 785 were
direct sales and marketing personnel.

The Company has 14 local offices covered by collective bargaining agreements,
consisting of billposters and construction personnel. The Company believes that
its relations with its employees, including its 124 unionized employees, are
good, and the Company has never experienced a strike or work stoppage.

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ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT

Each officer's term of office extends until the meeting of the Board of
Directors following the next annual meeting of stockholders and until a
successor is elected and qualified or until his or her earlier resignation or
removal.

Kevin P. Reilly, Jr. has served as the Company's President and Chief Executive
Officer since February 1989 and as a director of the Company since February
1984. Mr. Reilly served as President of the Company's Outdoor Division from 1984
to 1989. Mr. Reilly, an employee of the Company since 1978, has also served as
Assistant and General Manager of the Company's Baton Rouge Region and Vice
President and General Manager of the Louisiana Region. Mr. Reilly received a
B.A. from Harvard University in 1977.

Keith A. Istre has been Chief Financial Officer of the Company since February
1989 and a director of the Company since February 1991. Mr. Istre joined the
Company as Controller in 1978 and became Treasurer in 1985. Prior to joining the
Company, Mr. Istre was employed by a public accounting firm in Baton Rouge from
1975 to 1978. Mr. Istre graduated from the University of Southwestern Louisiana
in 1974 with a B.S. in Accounting.

Sean E. Reilly has been Chief Operating Officer and President of the Company's
Outdoor Division since November 2001. He has been a director of the Company
since 1999. He began working with the Company as Vice President of Mergers and
Acquisitions in 1987 and served in that capacity until 1994. He also served as a
director of the Company from 1989 to 1996. Mr. Reilly was the Chief Executive
Officer of Wireless One, Inc., a wireless cable television company, from 1994 to
1997 after which he rejoined the Company as Vice President of Mergers and
Acquisitions and President of the Company's real estate division, TLC
Properties, Inc. Mr. Reilly received a B.A. from Harvard University in 1984 and
a J.D. from Harvard Law School in 1989.

ITEM 2. PROPERTIES

The Company's 53,500 square foot management headquarters is located in Baton
Rouge, Louisiana. The Company occupies approximately 90% of the space in this
facility and leases the remaining space. The Company owns 160 local operating
facilities with front office administration and sales office space connected to
back-shop poster and bulletin production space. In addition, the Company leases
an additional 124 operating facilities at an aggregate lease expense for 2002 of
approximately $3.8 million.

The Company owns approximately 3,300 parcels of property beneath outdoor
structures. As of December 31, 2002, the Company had approximately 75,700 active
outdoor site leases accounting for a total annual lease expense of approximately
$132.3 million. This amount represented 18% of total outdoor advertising net
revenues for that period. The Company's leases are for varying terms ranging
from month-to-month to in some cases a term of over ten years, and many provide
the Company with renewal options. There is no significant concentration of
displays under any one lease or subject to negotiation with any one landlord.
The Company believes that an important part of its management activity is to
manage its lease portfolio and negotiate suitable lease renewals and extensions.

ITEM 3. LEGAL PROCEEDINGS

The Company from time to time is involved in litigation in the ordinary course
of business, including disputes involving advertising contracts, site leases,
employment claims and construction matters. The Company is also involved in
routine administrative and judicial proceedings regarding billboard permits,
fees and compensation for condemnations. The Company is not a party to any
lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

8

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Since August 2, 1996, the Company's Class A common stock has traded on the
over-the-counter market and prices have been quoted on the Nasdaq National
Market under the symbol LAMR. Prior to August 2, 1996, the day on which the
Class A common stock was first publicly traded, there was no public market for
the Class A common stock. As of March 5, 2003, the Class A common stock was held
by 198 shareholders of record. The Company believes, however, that the actual
number of beneficial holders of the Class A common stock may be substantially
greater than the stated number of holders of record because a substantial
portion of the Class A common stock is held in street name.

The following table sets forth, for the periods indicated, the high and low bid
prices for the Class A common stock as reported on the Nasdaq National Market.

The Company's Class B common stock is not publicly traded and is held of record
by members of the Reilly Family and the Reilly Family Limited Partnership.

The Company does not anticipate paying dividends on either class of its common
stock in the foreseeable future. The Company's Series AA preferred stock is
entitled to preferential dividends, in an annual aggregate amount of $364,903,
before any dividends may be paid on the common stock. In addition, the Company's
new bank credit facility and other indebtedness have terms restricting the
payment of dividends. Any future determination as to the payment of dividends
will be subject to such limitations, will be at the discretion of the Company's
Board of Directors and will depend on the Company's results of operations,
financial condition, capital requirements and other factors deemed relevant by
the Board of Directors.

ITEM 6. SELECTED FINANCIAL DATA

LAMAR ADVERTISING COMPANY

The selected consolidated statement of operations and balance sheet data
presented below are derived from the audited consolidated financial statements
of the Company. The data presented below should be read in conjunction with the
audited consolidated financial statements, related notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included herein.

9

STATEMENT OF OPERATIONS DATA:
(Dollars in Thousands)

(1) Adjusted EBITDA is defined as operating income (loss) before
depreciation and amortization and gain or loss on disposition of
assets. Adjusted EBITDA is not a measure of financial performance under
accounting principles generally accepted in the United States of
America (GAAP). Adjusted EBITDA should not be considered in isolation
or as an alternative to net income or cash flows from operating
activities, which are determined in accordance with GAAP, as an
indicator of the Company's operating performance or as measure of its
liquidity. It is, however, a measurement that Company management
believes is useful to evaluate the Company's operating performance as
it reflects operating income before the impact of depreciation and
amortization and gain or loss of disposition of assets, which can vary
widely depending on non-operating activities. Adjusted EBITDA is also a
measure that management believes is customarily used by financial
analysts to evaluate the financial performance of companies in the
media industry. The calculation of Adjusted EBITDA used by the Company
may not be comparable to similarly titled measures used by other
companies. Set forth below is a reconciliation of Adjusted EBITDA to
operating income (loss):

(2) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net
revenues.

(3) Cash flows from operating, investing, and financing activities are
obtained from the Company's consolidated statements of cash flows
prepared in accordance with GAAP.

(4) As of the end of the period.

(5) Certain balance sheet reclassifications were made in order to be
comparable to the current year presentation.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This report contains forward-looking statements, including in particular,
statements regarding the Company's anticipated performance for the first quarter
of 2003. These statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected in these
forward-looking statements. These risks and uncertainties include, among others,
(1) the Company's significant indebtedness; (2) the continued popularity of
outdoor advertising as an advertising medium; (3) the regulation of the outdoor
advertising industry; (4) the Company's need for and ability to obtain
additional funding for acquisitions or operations; (5) the integration of
companies that the Company acquires and its ability to recognize cost savings or
operating efficiencies as a result of these acquisitions; (6) the extent and
length of the current economic downturn generally and the demand for advertising
in particular; and (7) other factors, including those described below under the
heading "Factors Affecting Future Operating Results", and elsewhere in this
Annual Report. The Company cautions investors not to place undue reliance on the
forward-looking statements contained in this document. These statements speak
only as of the date of this document, and the Company undertakes no obligation
to update or revise the statements, except as may be required by law.

LAMAR ADVERTISING COMPANY

The following is a discussion of the consolidated financial condition and
results of operations of the Company for the years ended December 31, 2002, 2001
and 2000. This discussion should be read in conjunction with the consolidated
financial statements of the Company and the related notes.

OVERVIEW

The Company's net revenues, which represent gross revenues less commissions paid
to advertising agencies that contract for the use of advertising displays on
behalf of advertisers, are derived primarily from the sale of advertising on
outdoor advertising displays owned and operated by the Company.

Since December 31, 2000, the Company has increased the number of outdoor
advertising displays it operates by approximately 11% by completing over 180
strategic acquisitions of outdoor advertising and transit assets for an
aggregate purchase price of approximately $466 million, which included the
issuance of 2,130,464 shares of Lamar Advertising Company Class A common stock
valued at the time of issuance at approximately $85.1 million. The Company has
financed its recent acquisitions and intends to finance its future acquisition
activity from available cash, borrowings under its bank credit agreement and the
issuance of Class A common stock. See "Liquidity and Capital Resources" below.
As a result of acquisitions, the operating performance of individual markets and
of the Company as a whole are not necessarily comparable on a year-to-year
basis.

The Company relies on sales of advertising space for its revenues, and its
operating results are therefore affected by general economic conditions, as well
as trends in the advertising industry.

Growth of the Company's business requires expenditures for maintenance and
capitalized costs associated with new billboard displays, logo sign and transit
contracts, and the purchase of real estate and operating equipment. Capitalized
expenditures were $78.4 million in 2002, $85.3 million in 2001 and $78.3 million
in 2000. The following table presents a breakdown of capitalized expenditures
for the past three years:

11

CRITICAL ACCOUNTING POLICIES

The Company believes the following critical accounting policies effect its
significant judgments and estimates used in the preparation of its consolidated
financial statements:

Revenue Recognition - As discussed in Note 1 of the Notes to the Consolidated
Financial Statements, the Company recognizes revenues as advertising services
are provided. Advertising revenue is recorded net of agency commissions.

Intangible Assets - The Company has significant intangible assets recorded on
its balance sheet. Intangible assets primarily represent goodwill of $1,178
million, site locations of $761 million and customer relationships of $176
million associated with the Company's acquisitions. The fair values of
intangible assets recorded are determined using discounted cash flow models that
require management to make assumptions related to the future operating results
of each acquisition and the anticipated future economic environment. If actual
results differ from management's assumptions, an impairment of these intangibles
may exist and a charge to income would be made in the period such impairment is
determined.

Accounting Estimates - Management is required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues, expenses and
related disclosure of contingent liabilities. The Company bases its estimates on
historical experience, reasonable assumptions and where applicable, established
valuation techniques. Specifically, management has made critical estimates in
the following areas:

Allowance for Doubtful Accounts - The Company maintains allowances for
doubtful accounts based on the payment patterns of its customers.
Management analyzes historical results, the economic environment,
changes in the credit worthiness of its customers, and other relevant
factors in determining the adequacy of the Company's allowance. Bad
debt expense was $9 million, $8 million and $6 million or approximately
1% of net revenue for the years ended December 31, 2002, 2001 and 2000,
respectively. If the future economic environment continues to decline,
the inability of customers to pay may occur and the allowance for
doubtful accounts may need to be increased, which will result in
additional bad debt expense in future years.

Long-Lived Asset Recovery - Long-lived assets, consisting primarily of
property, plant and equipment and intangibles comprise a significant
portion of the Company's total assets. Property, plant and equipment of
$1,284 million and intangible assets of $989 million are reviewed for
impairment whenever events or changes in circumstances have indicated
that their carrying amounts may not be recoverable. Recoverability of
assets is measured by a comparison of the carrying amount of an asset
to future undiscounted net cash flows expected to be generated by that
asset before interest expense. These undiscounted cash flow projections
are based on management assumptions surrounding future operating
results and anticipated future economic environment. If actual results
differ from management's assumptions, an impairment of these intangible
assets may exist and a charge to income would be made in the period
such impairment is determined.

Goodwill Impairment - The Company had goodwill of $1,178 million as of
December 31, 2002 and must perform an annual impairment analysis of
goodwill or more frequently if events and circumstances indicate that
the asset might be impaired. This analysis requires management to make
assumptions as to the implied fair value of goodwill as compared to its
carrying value. In conducting the impairment analysis, the Company
determines implied fair value of goodwill utilizing quoted market
prices of its Class A common stock, as well as discounted cash flow
models before interest expense. These discounted cash flow models
require management to make assumptions related to the future operating
results of the Company and the anticipated future economic environment.
Based upon the Company's review, no impairment charge was required upon
the adoption of Statement of Financial Accounting Standard (SFAS) No.
142, "Goodwill and Other Intangible Assets," in January 2002 or at its
annual test for impairment on December 31, 2002.

Deferred Taxes - As of December 31, 2002, the Company has made the
determination that its deferred tax assets of $146.9 million, the
primary component of which is the Company's net operating loss
carryforward, are fully realizable due to the existence of certain
deferred tax liabilities of approximately $254.8 million that are
anticipated to reverse during the carryforward period. Accordingly, the
Company has not recorded a valuation allowance to reduce its deferred
tax assets. Should the Company determine that it would not be able to
realize all or part of its net deferred tax assets in the future, an
adjustment to the deferred tax asset would be charged to income in the
period such determination was made. For a more detailed description,
see Note 9 of the Notes to the Consolidated Financial Statements.

12

RESULTS OF OPERATIONS

The following table presents certain items in the Consolidated Statements of
Operations as a percentage of net revenues for the years ended December 31,
2002, 2001 and 2000:

Adjusted EBITDA is defined as operating income (loss) before depreciation and
amortization and gain or loss on disposition of assets. Adjusted EBITDA is not a
measure of financial performance under accounting principles generally accepted
in the United States of America (GAAP). Adjusted EBITDA should not be considered
in isolation or as an alternative to net income or cash flows from operating
activities, which are determined in accordance with GAAP, as an indicator of the
Company's operating performance or as measure of its liquidity. It is, however,
a measurement that Company management believes is useful to evaluate the
Company's operating performance as it reflects operating income before the
impact of depreciation and amortization and gain or loss of disposition of
assets, which can vary widely depending on non-operating activities. Adjusted
EBITDA is also a measure that management believes is customarily used by
financial analysts to evaluate the financial performance of companies in the
media industry. The calculation of Adjusted EBITDA used by the Company may not
be comparable to similarly titled measures used by other companies. Set forth
below is a reconciliation of Adjusted EBITDA to operating income (loss):

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

Net revenues increased $46.6 million or 6.4% to $775.7 million for the year
ended December 31, 2002 from $729.1 million for the same period in 2001. This
increase was attributable primarily to (i) an increase in billboard net revenues
of $38.3 million or 5.5%, (ii) a $2.6 million increase in logo sign revenue,
which represents an increase of 7.3% over the prior year, and (iii) a $3.8
million increase in transit revenue, which represents an 81.7% increase over the
prior year.

The increase in billboard net revenues of $38.3 million was significantly due to
acquisition activity. During the two year period ending December 31, 2002, the
Company acquired approximately $466.3 million of outdoor advertising assets
within markets the Company previously operated. The aggregate net revenues of
these acquired assets for the twelve-month period prior to acquisition was
approximately $65 million. The acquisitions were completed at various intervals
during 2001 and 2002 and the actual net revenues were included in the Company's
performance at that time. Because of adverse economic conditions that existed in
2002, the Company's billboard net revenue growth came from acquisitions as
described above.

The increase in logo sign revenue of $2.6 million was significantly due to price
increases negotiated by the Company with the state of Virginia, which generated
an increase in net revenue of $1.3 million as compared to the same period in
2001. The remaining increase of $1.3 million was generated by internal growth
across various markets within the logo sign program.

The increase in transit revenue of $3.8 million was generated by internal growth
resulting from changes in management and sales processes within the transit
program.

Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $39.5 million or 9.8% to $442.0 million for the year ended
December 31, 2002 from $402.5 million for the same period in 2001. There was a
$36.2 million increase as a result of additional operating expenses related to
the operations of acquired outdoor advertising assets and increases in
personnel, sign site rent, insurance costs and property taxes. The remaining
$3.3 million increase in expenses is a result of increases in logo sign, transit
and corporate overhead expenses.

13

As a result of the contributing factors discussed above, Adjusted EBITDA
increased $7.2 million to $333.7 million for the year ended December 31, 2002
from $326.5 million for the same period in 2001. The definition of Adjusted
EBITDA and other important information, including a reconciliation to operating
income (loss), are set forth above. See "Results of Operations" on page 13.

Depreciation and amortization expense decreased $77.6 million or 21.8% from
$355.5 million for the year ended December 31, 2001 to $277.9 million for the
year ended December 31, 2002 as a result of the Company's adoption of SFAS No.
142, "Goodwill and Other Intangible Assets", which eliminated the amortization
expense for goodwill.

Due to the above factors, operating income increased $84.3 million to $56.2
million for year ended December 31, 2002 compared to an operating loss of $28.1
million for the same period in 2001.

On October 25, 2002, the Company's wholly-owned subsidiary, Lamar Media Corp.,
redeemed all of its outstanding 9 1/4% Senior Subordinated Notes due 2007 in
aggregate principal amount of approximately $74.1 million for a redemption price
equal to 104.625% of the principal amount thereof plus accrued interest to the
redemption date of approximately $1.3 million. In the fourth quarter of 2002,
the Company recorded approximately $5.9 million as an expense related to the
prepayment of the 9 1/4% Senior Subordinated Notes due 2007.

Interest expense decreased $19.6 million from $126.9 million for the year ended
December 31, 2001 to $107.3 million for the year ended December 31, 2002 as a
result of lower interest rates for the year ended December 31, 2002 as compared
to the same period in 2001.

The increase in operating income and the decrease in interest expense described
above resulted in a $98.3 million decrease in loss before income taxes. The
decrease in loss before income taxes, resulted in a decrease in the income tax
benefit of $26.0 million for the year ended December 31, 2002 over the same
period in 2001. The effective tax rate for the year ended December 31, 2002 is
35.2%.

As a result of the above factors, the Company recognized a net loss for the year
ended December 31, 2002 of $36.3 million, as compared to a net loss of $108.6
million for the same period in 2001.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Net revenues increased $41.7 million or 6.1% to $729.1 million for the year
ended December 31, 2001 from $687.3 million for the same period in 2000. This
increase was predominantly attributable to (i) an increase in billboard net
revenues of $43.4 million or 6.7%, which was generated by acquisitions during
2001 and 2000, and (ii) a $2.7 million increase in logo sign revenue, which
represents a 8.2% increase over the prior year, and (iii) offset by at $2.6
million decrease in transit revenue.

The increase in billboard net revenues of $43.4 million was due to acquisition
activity. During the two year period ending December 31, 2001, the Company
acquired approximately $876.8 million of outdoor advertising assets within
markets the Company previously operated. The aggregate net revenues of these
assets for the twelve-month period prior to acquisition was approximately $117
million.

The acquisitions were completed at various intervals during 2000 and 2001 and
the actual net revenues were included in the Company's performance at that time.
Because of adverse economic conditions that existed in 2001, the Company's
billboard net revenue growth came from acquisitions as described above.

The increase in logo sign revenue of $2.7 million was due to both price
increases negotiated by the Company with the state of Texas, which generated an
increase in net revenue of $0.7 million as compared to the same period in 2000,
and additional logo interchanges awarded in the state of Michigan, which
generated an increase in net revenue of $0.5 million as compared to the same
period in 2000. The remaining increase of $1.5 million was generated by internal
growth across various markets within the logo sign program.

The decrease in transit revenue of $2.6 million was primarily caused by a
decrease in net revenue of $2.2 million in the Company's Denver, Colorado
market, as a result of a management problem and other sales processes issues,
which were subsequently addressed by allocating additional management resources
to this market and renegotiating certain contractual obligations to reduce
required fixed payments.

Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $47.0 million or 13.2% to $402.5 million for
the year ended December 31, 2001 from $355.5 million for the same period in
2000. This increase is primarily due to additional operating expenses associated
with acquisitions made in 2001 and 2000 and increases in personnel, sign site
rent, materials and overhead.

14

As a result of these factors, Adjusted EBITDA decreased $5.3 million or 1.6% to
$326.5 million for the year ended December 2001 from $331.8 million for the same
period in 2000. The definition of Adjusted EBITDA and other important
information, including a reconciliation to operating income (loss), are set
forth above. See "Results of Operations" on page 13.

Depreciation and amortization expense increased $37.4 million or 11.8% from
$318.1 million for the year ended December 31, 2000 to $355.5 million for the
year ended December 31, 2001 as a result of an increase in capital assets
resulting from the Company's recent acquisition activity.

Due to the above factors, operating income decreased $42.8 million or 291.2%
from $14.7 million for the year ended December 31, 2000 to a $28.1 million
operating loss for the year ended December 31, 2001.

Interest expense decreased $20.7 million from $147.6 million for the year ended
December 31, 2000 to $126.9 million for the year ended December 31, 2001 as a
result of declining interest rates for the year ended December 31, 2001 over the
same period in 2000.

The decrease in operating income offset by the decrease in interest expense
described above resulted in a $23.1 million increase in loss before income
taxes.

The increase in loss before income taxes, resulted in an increase in the income
tax benefit of $8.6 million for the year ended December 31, 2001 over the same
period in 2000. The effective tax rate for the year ended December 31, 2001 is
29.6% which is less than the statutory rates due to permanent difference
resulting from non-deductible amortization of goodwill.

As a result of the foregoing factors, the Company recognized a net loss for the
year ended December 31, 2001 of $108.6 million, as compared to a net loss of
$94.1 million for the same period in 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically satisfied its working capital requirements with
cash from operations and borrowings under its bank credit facility. The
Company's wholly owned subsidiary, Lamar Media, is the borrower under the bank
credit facility and maintains all corporate cash balances. Any cash requirements
of Lamar Advertising, therefore, must be funded by distributions from Lamar
Media. The Company's acquisitions have been financed primarily with funds
borrowed under the bank credit facility and issuance of its Class A common stock
and debt securities. If an acquisition is made by one of the Company's
subsidiaries using the Company's Class A common stock, a permanent contribution
of additional paid-in-capital of Class A common stock is distributed to that
subsidiary.

The Company's net cash provided by operating activities increased to $237.0
million in fiscal 2002 due primarily to a decrease in net loss of $72.3 million
offset by a decrease in noncash items of $42.6 million, which primarily includes
a decrease in depreciation and amortization of $77.6 million offset by a
decrease in deferred income tax benefit of $30.8 million, the loss on early
extinguishment of debt of $2.4 million and an increase in the provision for
doubtful accounts of $1.2 million as a result of an increase in bad debt expense
of the same amount. In addition as compared to 2001, there was a decrease in
receivables of $5.0 million, an increase in accrued expenses of $11.8 million
and an increase in deferred income of $2.3 million. Net cash used in investing
activities decreased $226.7 million from $382.5 million in 2001 to $155.8
million in 2002 primarily due to the decrease in merger and acquisition activity
by the Company in 2002 of $222.9 million. There was also a $6.9 million decrease
in capital expenditures and a decrease in proceeds from the sale of property and
equipment of $1.5 million. Net cash used in financing activities increased to
$78.5 million in fiscal 2002 due to a $73.6 million increase in principal
payments of long-term debt due primarily to the redemption of the Lamar Media's
9 1/4% Senior Subordinated Notes. In addition, there was a $46.3 million
decrease in proceeds from issuance of the Company's Class A common stock and an
$80 million decrease in borrowings from credit agreements.

During the year ended December 31, 2002, the Company financed its acquisition
activity of approximately $135.2 million with approximately $60.0 million in
borrowings under the Company's old bank credit agreement and the issuance
1,405,464 shares of the Company's Class A common stock. During 2002, the Company
paid off its outstanding revolver balance and made scheduled principal payments
of approximately $66.6 million under the Company's old bank credit agreement. As
of December 31, 2002, the Company had $309.6 million available under the old
revolving bank credit facility.

The Company's wholly-owned subsidiary, Lamar Media Corp., replaced its old bank
credit facility with a new bank credit facility on March 7, 2003. The new bank
credit facility comprised of a $225.0 million revolving bank credit facility and
a $975.0 million term facility. The new bank credit facility also includes a
$500.0 million incremental facility, which permits Lamar Media to request that
its lenders enter into commitments to make additional term loans to it, up to a
maximum aggregate amount of $500.0 million. The lenders have no obligation to
make additional term loans to Lamar Media under the incremental facility, but
may enter into such commitments in their sole discretion.

In the future, Lamar Media has principal reduction obligations and revolver
commitment reductions under its new bank credit agreement. In addition it has
fixed commercial commitments. These commitments are detailed as follows:

15

(1) Updated to reflect the terms of the Company's new credit facility,
effective March 7, 2003.

(2) Lamar Media had no balance outstanding at December 31, 2002.

On September 25, 2002, the Company's wholly owned subsidiary, Lamar Media Corp.,
called for full redemption on October 25, 2002 of its outstanding 9 1/4% Senior
Subordinated Notes due 2007 in aggregate principal amount of approximately $74.1
million for a redemption price equal to 104.625% of the principal amount thereof
plus accrued interest to the redemption date of approximately $1.3 million.
Lamar Media called the 9 1/4% Senior Subordinated Notes due 2007 pursuant to the
optional redemption provisions of the 9 1/4% Senior Subordinated Notes due 2007
and the related indenture applicable to optional redemptions. Lamar Media used
cash on hand to redeem the 9 1/4% Senior Subordinated Notes due 2007. In the
fourth quarter of 2002, the Company recorded approximately $5.9 million as an
expense related to the prepayment of the 9 1/4% Senior Subordinated Notes due
2007.

On September 25, 1997, Lamar Media issued $200 million aggregate principal
amount of 8 5/8% Senior Subordinated Notes due 2007. These notes are redeemable
at its option at any time at redemption prices with a premium that decreases
annually from approximately 4.3% for a redemption on or after September 15,
2002, to approximately 2.9% on or after September 15, 2003, and further to
approximately 1.5% on or after September 15, 2004, with no premium if the
redemption occurs on or after September 15, 2005. The notes are required to be
repurchased earlier in the event of a change of control. The indenture covering
the notes also includes certain restrictive covenants that limit its ability to
incur additional debt, pay dividends and make other restricted payments,
consummate certain transactions and other matters.

On December 23, 2002, Lamar Media issued $260 million in principal amount of
7 1/4% Senior Subordinated Notes due 2013. These notes are unsecured senior
subordinated obligations of Lamar Media and (i) are subordinated to all of Lamar
Media's existing senior debt, (ii) will be subordinated to any future senior
debt incurred by Lamar Media, (iii) rank equally with all of Lamar Media's
existing and any future senior subordinated debt and (iv) will rank senior to
any future subordinated debt incurred by Lamar Media. The net proceeds from the
issuance and sale of these notes, together with additional cash, were used on
January 22, 2003 to redeem all of Lamar Media's outstanding 9 5/8% Senior
Subordinated Notes due 2006 for a total redemption price of approximately $266.7
million, which consisted of a redemption price equal to 103.208% of the
outstanding $255 million aggregate principal amount and accrued interest thereon
to the date of redemption of approximately $3.5 million. The Company will record
a loss on the extinguishment of debt of approximately $6.8 million in the first
quarter of 2003.

The indentures relating to Lamar Media's outstanding notes restrict its ability
to incur indebtedness other than:

o up to $1.3 billion of indebtedness under its bank credit
facility;

o currently outstanding indebtedness or debt incurred to
refinance outstanding debt;

o inter-company debt between Lamar Media and its subsidiaries or
between subsidiaries; and

o certain other debt incurred in the ordinary course of business
(provided that all of the above ranks junior in right of
payment to the notes that has a maturity or mandatory sinking
fund payment prior to the maturity of the notes).

Lamar Media is required to comply with certain covenants and restrictions under
its new bank credit agreement. If the Company fails to comply with these tests,
the payments set forth in the above table may be accelerated. At December 31,
2002 and currently Lamar Media is in compliance with all such tests.

16

Lamar Media cannot exceed the following financial ratios under its new bank
credit facility:

o a total debt ratio, defined as total consolidated debt to
EBITDA, as defined below, for the most recent four fiscal
quarters, of 6.00 to 1 (through December 30, 2004) and 5.75 to
1 (after December 30, 2004); and

o a senior debt ratio, defined as total consolidated senior debt
to EBITDA, as defined below, for the most recent four fiscal
quarters, of 4.00 to 1 (through December 30, 2004) and 3.75 to
1 (after December 30, 2004).

In addition, the new bank credit facility requires that Lamar Media must
maintain the following financial ratios:

o an interest coverage ratio, defined as EBITDA, as defined
below, for the most recent four fiscal quarters to total
consolidated accrued interest expense for that period, of at
least 2.25 to 1; and

o a fixed charges coverage ratio, defined as the ratio of
EBITDA, as defined below, for the most recent four fiscal
quarters to (1) the total payments of principal and interest
on debt for such period (2) capital expenditures made during
such period and (3) income and franchise tax payments made
during such period, of at least 1.05 to 1.

As defined under Lamar Media's new bank credit facility, EBITDA is, for any
period, operating income for Lamar Media and its restricted subsidiaries
(determined on a consolidated basis without duplication in accordance with GAAP)
for such period (calculated before taxes, interest expense, depreciation,
amortization and any other non-cash income or charges accrued for such period
and (except to the extent received or paid in cash by Lamar Media or any of its
restricted subsidiaries) income or loss attributable to equity in affiliates for
such period) excluding any extraordinary and unusual gains or losses during such
period and excluding the proceeds of any casualty events whereby insurance or
other proceeds are received and certain dispositions not in the ordinary course.
Any dividend payment made by Lamar Media or any of its restricted subsidiaries
to Lamar Advertising Company during any period to enable Lamar Advertising
Company to pay certain qualified expenses on behalf of Lamar Media and its
subsidiaries, shall be treated as operating expenses of Lamar Media for the
purposes of calculating EBITDA for such period. EBITDA under the new bank credit
agreement is also adjusted to reflect certain acquisitions or dispositions as if
such acquisitions or dispositions were made on the first day of such period.

The Company believes that its current level of cash on hand, availability under
its new bank credit agreement and future cash flows from operations are
sufficient to meet its operating needs through the year 2003. All debt
obligations are on the Company's balance sheet.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, Financial Accounting Standards Board (FASB) issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 requires the Company
to record the fair value of an asset retirement obligation as a liability in the
period in which it incurs a legal obligation associated with the retirement of
tangible long-lived assets that result from the acquisition, construction,
development, and/or normal use of the assets. The Company will also record a
corresponding asset that is depreciated over the life of the asset. Subsequent
to the initial measurement of the asset retirement obligation, the obligation
will be adjusted at the end of each period to reflect the passage of time and
changes in the estimated future cash flows underlying the obligation. The
Company is required to adopt SFAS No. 143 on January 1, 2003. The Company has
not yet determined the impact to the consolidated financial statements for the
adoption of SFAS No. 143.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", ("Statement 146") which addresses financial
accounting and reporting for costs associated with exit or disposal activities.
It nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The principal difference between Statement
146 and Issue 94-3 relates to the recognition of a liability for a cost
associated with an exit or disposal activity. Statement 146 requires that a
liability be recognized for those costs only when the liability is incurred,
that is, when it meets the definition of a liability in the FASB's conceptual
framework. In contrast, under Issue 94-3, a company recognized a liability for
an exit cost when it committed to an exit plan. Statement 146 also establishes
fair value as the objective for initial measurement of liabilities related to
exit or disposal activities. The Statement is effective for exit or disposal
activities that are initiated after December 31, 2002 and is not expected to
have an impact on the Company's financial statements. The Company adopted the
provisions related to Statement No. 146 as of January 1, 2003.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34". This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a

17

guarantor is required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The initial recognition and
measurement provisions of the Interpretation are applicable to guarantees issued
or modified after December 31, 2002 and are not expected to have a material
effect on the Company's financial statements. The disclosure requirements are
effective for financial statements of interim and annual periods ending after
December 15, 2002.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." This Statement amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements. Certain of the disclosure modifications are required for
fiscal years ending after December 15, 2002 and are included in the notes to
these consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51." This
interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. The application of the Interpretation is not
expected to have a material effect on the Company's financial statements as the
Company has no variable interest entities. The Interpretation requires certain
disclosures in financial statements issued after January 31, 2003 if it is
reasonably possible that the Company will consolidate or disclose information
about variable interest entities when the Interpretation becomes effective.

LAMAR MEDIA CORP.

The following is a discussion of the consolidated financial condition and
results of operations of Lamar Media for the years ended December 31, 2002, 2001
and 2000. This discussion should be read in conjunction with the consolidated
financial statements of Lamar Media and the related notes.

The following table presents certain items in the Consolidated Statements of
Operations as a percentage of net revenues for Lamar Media Corp. for the years
ended December 31, 2002, 2001 and 2000:

Adjusted EBITDA is defined as operating income (loss) before depreciation and
amortization and gain or loss on disposition of assets. Adjusted EBITDA is not a
measure of financial performance under accounting principles generally accepted
in the United States of America (GAAP). Adjusted EBITDA should not be considered
in isolation or as an alternative to net income or cash flows from operating
activities, which are determined in accordance with GAAP, as an indicator of
Lamar Media's operating performance or as measure of its liquidity. It is,
however, a measurement that Lamar Media management believes is useful to
evaluate Lamar Media's performance as it reflects operating income before the
impact of depreciation and amortization and gain or loss of disposition of
assets, which can vary widely depending on non-operating activities. Adjusted
EBITDA is also a measure that management believes is customarily used by
financial analysts to evaluate the financial performance of companies in the
media industry. The calculation of Adjusted EBITDA used by Lamar Media may not
be comparable to similarly titled measures used by other companies.

Set forth below is a reconciliation of Adjusted EBTIDA to operating income
(loss):

18

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

Net revenues increased $46.6 million or 6.4% to $775.7 million for the year
ended December 31, 2002 from $729.1 million for the same period in 2001. This
increase was attributable primarily to (i) an increase in billboard net revenues
of $38.3 million or 5.5%, (ii) a $2.6 million increase in logo sign revenue
which represents a 7.3% increase over the prior year, (iii) and a $3.8 million
increase in transit revenue, which represents a 81.7% increase over the prior
year.

The increase in billboard net revenues of $38.3 million was significantly due to
acquisition activity. During the two year period ending December 31, 2002, Lamar
Media acquired approximately $461.6 million of outdoor advertising assets within
markets Lamar Media previously operated. The aggregate net revenues of these
acquired assets for the twelve month period prior to acquisition was
approximately $65.0 million. The acquisitions were completed at various
intervals during 2001 and 2002 and the actual net revenues were included in
Lamar Media's performance at that time. Because of adverse economic conditions
that existed in 2002, Lamar Media's billboard net revenue growth came from
acquisitions as described above.

The increase in logo sign revenue of $2.6 million was significantly due to price
increases negotiated by Lamar Media with the state of Virginia, which generated
an increase in net revenue of $1.3 million as compared to the same period in
2001. The remaining increase of $1.3 million was generated by internal growth
across various markets within the logo sign program.

The increase in transit revenue of $3.8 million was generated by internal growth
resulting from changes in management and sales processes within the transit
program.

Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $39.4 million or 9.8% to $441.7 million for the year ended
December 31, 2002 from $402.3 million for the same period in 2001. There was a
$36.2 million increase as a result of additional operating expenses related to
the operations of acquired outdoor advertising assets and increases in
personnel, sign site rent, insurance costs and property taxes. The remaining
$3.2 million increase in expenses is a result of increases in logo sign, transit
and overhead expenses.

As a result of the contributing factors discussed above, Adjusted EBITDA
increased $7.2 million to $334.0 million for the year ended December 31, 2002
from $326.8 million for the same period in 2001. The definition of Adjusted
EBITDA and other important information, including a reconciliation to operating
income (loss) are set forth above. See "Results of Operations" on page 18.

Depreciation and amortization expense decreased $77.2 million or 21.9% from
$351.8 million for the year ended December 31, 2001 to $274.6 million for the
year ended December 31, 2002 as a result of Lamar Media's adoption of SFAS No.
142, "Goodwill and Other Intangible Assets", which eliminated the amortization
expense for goodwill.

Due to the above factors, operating income increased $83.8 million to $59.7
million for year ended December 31, 2002 compared to an operating loss of $24.1
million for the same period in 2001.

On October 25, 2002, Lamar Media redeemed all of its outstanding 9 1/4% Senior
Subordinated Notes due 2007 in aggregate principal amount of approximately $74.1
million for a redemption price equal to 104.625% of the principal amount thereof
plus accrued interest to the redemption date of approximately $1.3 million. In
the fourth quarter of 2002, Lamar Media recorded approximately $5.9 million as
an expense related to the prepayment of the 9 1/4% Senior Subordinated Notes due
2007.

Interest expense decreased $20.8 million from $113.0 million for year ended
December 31, 2001 to $92.2 million for the year ended December 31, 2002 as a
result of lower interest rates as compared to the same period in 2001.

The increase in operating income and the decrease in interest expense described
above resulted in a $99.0 million decrease in loss before income taxes. The
decrease in loss before income taxes, resulted in an decrease in the income tax
benefit of $26.4 million for the year ended December 31, 2002 over the same
period in 2001. The effective tax rate for the year ended December 31, 2002 is
33.3%.

As a result of the above factors, Lamar Media recognized a net loss for the year
ended December 31, 2002 of $25.0 million, as compared to a $97.6 million loss in
2001.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Net revenues increased $41.8 million or 6.1% to $729.1 million for the year
ended December 31, 2001 from $687.3 million for the same period in 2000. This
increase was predominantly attributable to (i) an increase in billboard net
revenues of $43.4

19

million or 6.7%, which was generated by acquisitions during 2001 and 2000, and
(ii) a $2.7 million increase in logo sign revenue, which represents a 8.2%
increase over the prior year, and (iii) offset by at $2.6 million decrease in
transit revenue.

The increase in billboard net revenues of $43.4 million was due to acquisition
activity. During the two year period ending December 31, 2001, Lamar Media
acquired approximately $868.7 million of outdoor advertising assets within
markets it previously operated. The aggregate net revenues of these acquired
assets for the twelve month period prior to its acquisition was approximately
$117 million.

The acquisitions were completed at various intervals during 2000 and 2001 and
the actual net revenues were included in Lamar Media's performance at that time.
Because of adverse economic conditions that existed in 2001, Lamar Media's
billboard net revenue growth came from acquisitions as described above.

The increase in logo sign revenue of $2.7 million was due to both price
increases negotiated by Lamar Media with the state of Texas, which generated an
increase in net revenue of $0.7 million as compared to the same period in 2000
and additional logo interchanges awarded in the state of Michigan, which
generated an increase in net revenue of $0.5 million as compared to the same
period in 2000. The remaining increase of $1.5 million was generated by internal
growth across various markets within the logo sign program.

The decrease in transit revenue of $2.6 million was primarily caused by a
decrease in net revenue of $2.2 million in the Company's Denver, Colorado
market, as a result of a management problem and other sales processes issues
which were subsequently addressed by allocating additional management resources
to this market and renegotiating certain contractual obligations to reduce
required fixed payments.

Operating expenses, exclusive of depreciation and amortization and gain on
disposition of assets, increased $47.5 million or 13.4% to $402.3 million for
the year ended December 31, 2001 from $354.8 million for the same period in
2000. This increase is primarily due to additional operating expenses associated
with acquisitions made in 2001 and 2000 and increases in personnel, sign site
rent, materials and overhead.

As a result of these factors, Adjusted EBITDA decreased $5.8 million or 1.7% to
$326.8 million for the year ended December 2001 from $332.6 million for the same
period in 2000. The definition of Adjusted EBITDA and other important
information, including a reconciliation to operating income (loss), as set forth
above. See "Results of Operations" on page 18.

Depreciation and amortization expense increased $36.3 million or 11.5% from
$315.5 million for the year ended December 31, 2000 to $351.8 million for the
year ended December 31, 2001 as a result of an increase in capital assets
resulting from Lamar Media's recent acquisition activity.

Due to the above factors, operating income decreased $42.2 million or 233.1%
from $18.1 million for the year ended December 31, 2000 to a $24.1 million
operating loss for the year ended December 31, 2001.

Interest expense decreased $34.6 million from $147.6 million for the year ended
December 31, 2000 to $113.0 million for the year ended December 31, 2001 as a
result of declining interest rates for the twelve months ending December 31,
2001 over the same period in 2000.

The decrease in operating income offset by the decrease in interest expense
described above resulted in a $8.6 million increase in loss before income taxes.

The increase in loss before income taxes, resulted in an increase in the income
tax benefit of $3.0 million for the year ended December 31, 2001 over the same
period in 2000. The effective tax rate for the year ended December 31, 2001 is
28.5% which is less than the statutory rates due to the permanent differences
resulting from nondeductible amortization of goodwill.

As a result of the foregoing factors, Lamar Media recognized a net loss for the
year ended December 31, 2001 of $97.6 million, as compared to a net loss of
$91.9 million for the same period in 2000.

FACTORS AFFECTING FUTURE OPERATING RESULTS

THE COMPANY'S SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT ITS BUSINESS AND
MAY CREATE A NEED TO BORROW ADDITIONAL MONEY IN THE FUTURE TO MAKE THE
SIGNIFICANT FIXED PAYMENTS ON ITS DEBT AND OPERATE ITS BUSINESS.

The Company has borrowed substantial amounts of money in the past and may borrow
more money in the future. At December 31, 2002, Lamar Advertising Company had
approximately $287.5 million of convertible notes outstanding. At December 31,
2002, after giving effect to the redemption of Lamar Media's 9 5/8% Senior
Subordinated Notes due 2006 on January 22, 2003, Lamar Media would have had
approximately $1.5 billion of debt outstanding consisting of approximately
$975.5 million in bank

20

debt, $1.2 million in senior notes, $459.2 million in various series of senior
subordinated notes and $16.0 million in various other short-term and long-term
debt. In addition, the indentures governing Lamar Media's notes and bank credit
facility allows it to incur substantial additional indebtedness in the future.
As of December 31, 2002, Lamar Media had approximately $309.6 million available
to borrow under its then existing bank credit facility. On March 7, 2003, Lamar
Media replaced the bank credit facility with a new bank credit facility under
which it had $219.6 million of borrowing capacity as of March 7, 2003. The new
bank credit facility also permits Lamar Media to request that its lenders enter
into commitments to make additional term loans to Lamar Media, up to a maximum
aggregate amount of $500.0 million. Lamar Media's lenders have no obligation to
make additional term loans to Lamar Media, but may enter into such commitments
in their sole discretion. The Company's substantial indebtedness and the fact
that a large part of the Company's cash flow from operations must be used to
make principal and interest payments on its debt may have important
consequences, including:

o limiting cash flow available to fund the Company's working
capital, capital expenditures, potential acquisitions or other
general corporate requirements;

o increasing the Company's vulnerability to general adverse
economic and industry conditions;

o limiting the Company's ability to obtain additional financing
to fund future working capital, capital expenditures,
potential acquisitions or other general corporate
requirements;

o limiting the Company's flexibility in planning for, or
reacting to, changes in its business and industry;

o placing the Company at a competitive disadvantage compared to
its competitors with less indebtedness; and

o making it more difficult for the Company to comply with
financial covenants in its bank credit facility.

In addition, if the Company's operations make less money in the future, it may
need to borrow to make principal and interest payments on its debt. The Company
also finances most of its acquisitions through borrowings under Lamar Media's
bank credit facility. Since its borrowing capacity under its credit facility is
limited, the Company may not be able to continue to finance future acquisitions
at its historical rate with borrowings under its credit facility. The Company
may need to borrow additional amounts or seek other sources of financing to fund
future acquisitions. Such additional financing may not be available on favorable
terms. The Company may need the consent of the banks under its credit facility,
or the holders of other indebtedness, to borrow additional money.

RESTRICTIONS IN THE COMPANY'S, AND ITS WHOLLY OWNED, DIRECT SUBSIDIARY, LAMAR
MEDIA'S DEBT AGREEMENTS REDUCE OPERATING FLEXIBILITY AND CONTAIN COVENANTS AND
RESTRICTIONS THAT CREATE THE POTENTIAL FOR DEFAULTS.

The terms of the indenture relating to Lamar Advertising's outstanding notes,
Lamar Media's bank credit facility and the indentures relating to Lamar Media's
outstanding notes restrict, among other things, the ability of Lamar Advertising
and Lamar Media to:

o incur or repay debt;

o dispose of assets;

o create liens;

o make investments;

o enter into affiliate transactions; and

o pay dividends.

Lamar Media's ability to make distributions to Lamar Advertising is also
restricted under the terms of these agreements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" on page 15. Under Lamar Media's bank credit facility the
Company must maintain specified financial ratios and levels including:

o a minimum interest coverage ratio;

o a minimum fixed charges ratio;

o a maximum senior debt ratio; and

o a maximum total debt ratio.

See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" on page 15.

If Lamar Media fails 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 the Company and could lead to an event of default under the indentures
governing its debt. Any of these events could have a material adverse effect on
its business, financial condition and results of operations. The Company's
ability to comply with these restrictions, and any similar restrictions in
future agreements, depends on its operating performance. Because its performance
is subject to prevailing economic, financial and business conditions and other
factors that are beyond the Company's control, it may be unable to comply with
these restrictions in the future.

21

THE COMPANY'S BUSINESS IS DERIVED FROM ADVERTISING AND ADVERTISING IS
PARTICULARLY SENSITIVE TO CHANGES IN ECONOMIC CONDITIONS AND ADVERTISING TRENDS.

The Company sells advertising space to generate revenues. Advertising spending
is particularly sensitive to changes in general economic conditions and
advertising spending typically decreases when economic conditions are tough. A
decrease in demand for advertising space could adversely affect the Company's
business. A reduction in money spent on advertising displays could result from:

o a general decline in economic conditions;

o a decline in economic conditions in particular markets where
the Company conducts business;

o a reallocation of advertising expenditures to other available
media by significant users of the Company's displays; or

o a decline in the amount spent on advertising in general.

THE COMPANY'S OPERATIONS ARE IMPACTED BY THE REGULATION OF OUTDOOR ADVERTISING
BY FEDERAL, STATE AND LOCAL GOVERNMENTS.

The Company's 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. In addition, four states have enacted
bans on billboard advertising. 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. Some 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, the Company may not be successful in negotiating
acceptable arrangements when the Company's 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 the
Company's results of operations.

THE COMPANY'S CONTINUED GROWTH BY ACQUISITIONS MAY BECOME MORE DIFFICULT AND
INVOLVES COSTS AND UNCERTAINTIES.

Historically, the Company has substantially increased its inventory of
advertising displays through acquisitions. The Company's growth strategy
involves acquiring outdoor advertising businesses and assets in markets where it
currently competes as well as in new markets. However, the following factors may
affect the Company's ability to continue to pursue this strategy effectively:

o there might not be suitable acquisition candidates,
particularly as a result of the consolidation of the outdoor
advertising industry, and the Company may have a more
difficult time negotiating acquisitions that are favorable to
it;

o the Company may face increased competition from other outdoor
advertising companies, which may have greater financial
resources than the Company, for the businesses and assets it
wishes to acquire, which may result in higher prices for those
businesses and assets;

o the Company may not have access to sufficient capital
resources on acceptable terms, if at all, to finance its
acquisitions and may not be able to obtain required consents
from its lenders;

o the Company may be unable to effectively integrate acquired
businesses and assets with its existing operations as a result
of unforeseen difficulties that could require significant time
and attention from its management that would otherwise be
directed at developing its existing business; and

o the Company may not realize the benefits and cost savings that
it anticipates from its acquisitions.

THE COMPANY FACES COMPETITION FROM LARGER AND MORE DIVERSIFIED OUTDOOR
ADVERTISERS AND OTHER FORMS OF ADVERTISING THAT COULD HURT ITS PERFORMANCE.

The Company may not be able to compete successfully against the current and
future forms of outdoor advertising and other media. The competitive pressure
that it faces could adversely affect its profitability or financial performance.
Although Lamar Advertising is the largest company focusing exclusively on
outdoor advertising, it faces competition from larger companies with

22

more diversified operations that also include television, radio and other
broadcast media. In addition, the Company's diversified competitors have the
opportunity to cross-sell their different advertising products to their
customers. The Company also faces competition from other forms of media,
including newspapers, direct mail advertising and the Internet. It 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.

IF THE COMPANY'S CONTINGENCY PLANS RELATING TO HURRICANES FAIL, THE RESULTING
LOSSES COULD HURT THE COMPANY'S BUSINESS.

Although the Company has developed contingency plans designed to deal with the
threat posed to advertising structures by hurricanes, it is possible that these
plans will not work. If these plans fail, significant losses could result.

The Company has determined that it is not economical to obtain insurance against
losses from hurricanes and other natural disasters. Instead, the Company has
developed contingency plans to deal with the threat of hurricanes. For example,
the Company attempts to remove the advertising faces on billboards at the onset
of a storm, when possible, which better permits the structures to withstand high
winds during a storm. The Company then replaces 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.

THE COMPANY'S LOGO SIGN CONTRACTS ARE SUBJECT TO STATE AWARD AND RENEWAL.

A portion of the Company's revenues and operating income come from its
state-awarded service contracts for logo signs. For the year ended December 31,
2002, approximately 5% of the Company's net revenues were derived from its logo
sign contracts. The Company cannot predict what remaining states, if any, will
start logo sign programs or convert state-run logo sign programs to privately
operated programs. The Company currently competes with three other logo sign
providers as well as local companies for state-awarded service contracts for
logo signs.

Generally, state-awarded logo sign contracts have a term of five to ten years,
with additional renewal periods. Some states have the right to terminate a
contract early, but in most cases must pay compensation to the logo sign
provider for early termination. At the end of the term of the contract,
ownership of the structures is transferred to the state. Depending on the
contract in question, the logo provider may or may not be entitled to
compensation at the end of the contract term. Of the Company's 21 logo sign
contracts in place at December 31, 2002, two are subject to renewal, one in July
2003 and one in September 2003. Three are scheduled to terminate, one in
September 2003, and two in December 2003. The Company may not be able to obtain
new logo sign contracts or renew its existing contracts. In addition, after a
new state-awarded logo contract is received, the Company generally incurs
significant start-up costs. If the Company does not continue to have access to
the capital necessary to finance those costs, it will not be able to accept new
contracts.

THE COMPANY IS CONTROLLED BY CERTAIN SIGNIFICANT STOCKHOLDERS WHO ARE ABLE TO
CONTROL THE OUTCOME OF ALL MATTERS SUBMITTED TO ITS STOCKHOLDERS FOR APPROVAL
AND WHOSE INTEREST IN THE COMPANY MAY BE DIFFERENT THAN YOURS.

Certain members of the Reilly family, including Kevin P. Reilly, Jr., the
Company's president and chief executive officer, as of December 31, 2002, own in
the aggregate approximately 16% of Lamar Advertising's common stock, assuming
the conversion of all Class B common stock to Class A common stock. This
represents 66% of Lamar Advertising's outstanding voting stock. By virtue of
such stock ownership, such persons have the power to:

o elect the Company's entire board of directors;

o control the Company's management and policies; and

o determine the outcome of any corporate transaction or other
matters required to be submitted to the Company's stockholders
for approval, including the amendment of its certificate of
incorporation, mergers, consolidation and the sale of all or
substantially all of its assets.

INFLATION

In the last three years, inflation has not had a significant impact on the
Company.

SEASONALITY

The Company's revenues and operating results have exhibited some degree of
seasonality in past periods. Typically, the Company experiences its strongest
financial performance in the summer and fall and its lowest in the first quarter
of the calendar year. The Company expects this trend to continue in the future.
Because a significant portion of the Company's expenses is fixed, a reduction in
revenues in any quarter is likely to result in a period to period decline in
operat