UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2007

o		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

Lamar Media Corp.

(Exact name of registrants as specified in their charters)

Delaware		72-1449411
Delaware		72-1205791
(State or other jurisdiction of incorporation or		(I.R.S Employer
organization)		Identification No.)
5551 Corporate Blvd., Baton Rouge, LA		70808
(Address of principle executive offices)		(Zip Code)

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

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

Indicate by check mark whether Lamar Advertising Company is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether Lamar Media Corp. is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      Accelerated filer o      Non-accelerated filer þ

Indicate by check mark whether Lamar Advertising Company is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No þ

Indicate by check mark whether Lamar Media Corp. is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No þ

The number of shares of Lamar Advertising Company’s Class A common stock outstanding as of May 4, 2007: 82,701,402

The number of shares of the Lamar Advertising Company’s Class B common stock outstanding as of May 4, 2007: 15,397,865

The number of shares of Lamar Media Corp. common stock outstanding as of May 4, 2007: 100

This combined Form 10-Q is separately filed by (i) Lamar Advertising Company and (ii) Lamar Media Corp. (which is a wholly owned subsidiary of Lamar Advertising Company). Lamar Media Corp. meets the conditions set forth in general instruction H(1) (a) and (b) of Form 10-Q and is, therefore, filing this form with the reduced disclosure format permitted by such instruction.

 

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This combined Quarterly Report on Form 10-Q of Lamar Advertising Company (“Lamar Advertising” or the “Company”) and Lamar Media Corp. (“Lamar Media”) 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:

	•		expected operating results;
	•		market opportunities;
	•		acquisition opportunities;
	•		stock repurchase program;
	•		ability to compete; and
	•		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:

	•		risks and uncertainties relating to the Company’s significant indebtedness;
	•		the demand for outdoor advertising;
	•		the performance of the U.S. economy generally and the level of expenditures on outdoor advertising particularly;
	•		the Company’s ability to renew expiring contracts at favorable rates;
	•		the integration of companies that the Company acquires and its ability to recognize cost savings or operating efficiencies as a result of these acquisitions;
	•		the Company’s need for and ability to obtain additional funding for acquisitions or operations;
	•		the market price of the Company’s Class A common stock;
	•		the existence and nature of investment and digital deployment opportunities available to the Company from time to time; and
	•		the regulation of the outdoor advertising industry by federal, state and local governments.

For a further description of these and other risks and uncertainties, the Company encourages you to read carefully Item 1A to the combined Annual Report on Form 10-K for the year ended December 31, 2006 of the Company and Lamar Media (the “2006 Combined Form 10-K”).

The forward-looking statements contained in this combined Quarterly Report on Form 10-Q speak only as of the date of this combined 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 Quarterly 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, except as may be required by law.

CONTENTS

			Page
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Lamar Advertising Company
Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006			4
Condensed Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006			5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006			6
Notes to Condensed Consolidated Financial Statements			7 - 12
Lamar Media Corp.
Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006			13
Condensed Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006			14
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006			15
Note to Condensed Consolidated Financial Statements			16
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17 - 22
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks			23
ITEM 4. Controls and Procedures			23
PART II — OTHER INFORMATION
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			24
ITEM 5 Other Information			24
ITEM 6. Exhibits			24
Amended and Restated Certificate of Incorporation
Series D Incremental Loan Agreement
Statement Regarding Computation of Earnings to Fixed Charges
Statement Regarding Computation of Earnings to Fixed Charges
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification Pursuant to Section 906

PART I — FINANCIAL INFORMATION

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

		March 31,				December 31,
		2007				2006
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	279			$	11,796
Receivables, net of allowance for doubtful accounts of $6,609 and $6,400 in 2007 and 2006, respectively			125,365				127,552
Prepaid expenses			57,146				38,215
Deferred income tax assets			19,918				34,224
Other current assets			17,581				18,983
Total current assets			220,289				230,770
Property, plant and equipment			2,501,719				2,432,977
Less accumulated depreciation and amortization			(1,062,075	)			(1,027,029	)
Net property, plant and equipment			1,439,644				1,405,948
Goodwill			1,358,562				1,357,706
Intangible assets			861,104				860,850
Deferred financing costs, net of accumulated amortization of $28,235 and $27,143 in 2007 and 2006, respectively			26,990				25,990
Other assets			35,800				42,964
Total assets		$	3,942,389			$	3,924,228
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	18,409			$	14,567
Current maturities of long-term debt			16,475				8,648
Accrued expenses			44,744				69,940
Deferred income			14,042				17,824
Total current liabilities			93,670				110,979
Long-term debt			2,455,965				1,981,820
Deferred income tax liabilities			129,693				140,019
Asset retirement obligation			143,487				141,503
Other liabilities			12,492				11,374
Total liabilities			2,835,307				2,385,695
Stockholders’ equity:
Series AA preferred stock, par value $.001, $63.80 cumulative dividends, authorized 5,720 shares; 5,720 shares issued and outstanding at 2007 and 2006			—				—
Class A preferred stock, par value $638, $63.80 cumulative dividends, 10,000 shares authorized; 0 shares issued and outstanding at 2007 and 2006			—				—
Class A common stock, par value $.001, 175,000,000 shares authorized; 92,284,051 and 91,796,429 shares issued at 2007 and 2006, respectively; 82,687,402 and 84,335,679 outstanding at 2007 and 2006 respectively			92				92
Class B common stock, par value $.001, 37,500,000 shares authorized, 15,397,865 shares issued and outstanding at 2007 and 2006			15				15
Additional paid-in capital			2,266,311				2,250,716
Accumulated comprehensive income			1,600				2,253
Accumulated deficit			(624,627	)			(315,072	)
Cost of shares held in treasury, 9,596,649 and 7,460,750 shares in 2007 and 2006,			(536,309	)			(399,471	)
Total Stockholders’ equity			1,107,082				1,538,533
Total liabilities and stockholders’ equity		$	3,942,389			$	3,924,228

See accompanying notes to condensed consolidated financial statements.

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

		Three months ended
		March 31,
		2007				2006
Net revenues		$	275,185			$	253,333
Operating expenses (income)
Direct advertising expenses (exclusive of depreciation and amortization)			100,783				95,209
General and administrative expenses (exclusive of depreciation and amortization)			55,302				47,811
Corporate expenses (exclusive of depreciation and amortization)			14,572				11,480
Depreciation and amortization			73,318				73,178
Gain on disposition of assets			(312	)			(1,678	)
			243,663				226,000
Operating income			31,522				27,333
Other expense (income)
Gain on disposition of investment			(15,448	)			—
Interest income			(493	)			(227	)
Interest expense			31,845				24,843
			15,904				24,616
Income before income tax expense			15,618				2,717
Income tax expense			6,779				1,177
Net income			8,839				1,540
Dividends to preferred share holders			91				91
Net income applicable to common stock		$	8,748			$	1,449
Earnings per share:
Basic earnings per share		$	0.09			$	0.01
Diluted earnings per share		$	0.09			$	0.01
Cash dividends declared per share of common stock (Note 11)		$	3.25			$	—
Weighted average common shares used in computing earnings per share:
Weighted average common shares outstanding			99,222,644				105,009,487
Incremental common shares from dilutive stock options			842,221				847,519
Incremental common shares from convertible debt			—				—
Weighted average common shares diluted			100,064,865				105,857,006

See accompanying notes to condensed consolidated financial statements.

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

		Three months ended
		March 31,
		2007				2006
Cash flows from operating activities:
Net income		$	8,839			$	1,540
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			73,318				73,178
Non-cash equity-based compensation			9,447				2,998
Amortization included in interest expense			1,090				1,213
Gain on disposition of assets			(15,760	)			(1,678	)
Deferred tax expense (benefit)			3,981				(5,708	)
Provision for doubtful accounts			1,148				1,161
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables			1,033				(131	)
Prepaid expenses			(18,858	)			(18,104	)
Other assets			(4,391	)			3,465
Increase (decrease) in:
Trade accounts payable			4,327				(138	)
Accrued expenses			(27,062	)			(22,679	)
Other liabilities			(3,760	)			(196	)
Net cash provided by operating activities			33,352				34,921
Cash flows used in investing activities:
Acquisitions			(60,067	)			(66,601	)
Capital expenditures			(50,064	)			(46,558	)
Proceeds from disposition of assets			19,857				1,388
Payments received on Notes Receivable			9,056				—
Net cash used in investing activities			(81,218	)			(111,771	)
Cash flows from financing activities:
Cash used for purchase of treasury shares			(130,106	)			(114,214	)
Net proceeds from issuance of common stock			4,967				22,670
Principal payments on long-term debt			(27	)			(795	)
Net borrowings under credit agreements			482,000				157,000
Debt issuance costs			(2,107	)			—
Dividends			(318,394	)			(91	)
Net cash provided by financing activities			36,333				64,570
Effect of exchange rate changes in cash and cash equivalents			16				—
Net decrease in cash and cash equivalents			(11,517	)			(12,280	)
Cash and cash equivalents at beginning of period			11,796				19,419
Cash and cash equivalents at end of period		$	279			$	7,139
Supplemental disclosures of cash flow information:
Cash paid for interest		$	50,262			$	36,689
Cash paid for state and federal income taxes		$	1,627			$	3,316

See accompanying notes to condensed consolidated financial statements.

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

1. Significant Accounting Policies

The information included in the foregoing interim condensed consolidated financial statements is unaudited. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. These interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes thereto included in the 2006 Combined Form 10-K.

2. Stock-Based Compensation

Equity Incentive Plan. Lamar’s 1996 Equity Incentive Plan has reserved 10 million shares of Class A common stock for issuance to directors and employees, including shares underlying granted options and common stock reserved for issuance under its performance-based incentive program. Options granted under the plan expire ten years from the grant date with vesting terms ranging from three to five years which primarily includes 1) options that vest in one-fifth increments beginning on the grant date and continuing on each of the first four anniversaries of the grant date and 2) options that cliff-vest on the fifth anniversary of the grant date. All grants are made at fair market value based on the closing price of our Class A common stock as reported on the NASDAQ Global Select Market on the date of grant.

We use a Black-Scholes-Merton option pricing model to estimate the fair value of share-based awards under SFAS 123(R). The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility. The Company had no option grants during the three months ended March 31, 2007.

Stock Purchase Plan. Lamar’s 2000 Employee Stock Purchase Plan has reserved 924,000 shares of common stock for issuance to employees. The following is a summary of ESPP share activity for the three months ended March 31, 2007:

		Shares
Available for future purchases, January 1, 2007			469,646
Purchases			( 21,012	)
Available for future purchases, March 31, 2007			448,634

Performance-based compensation. Unrestricted shares of our Class A common stock may be awarded to key officers, employees and directors under our 1996 Equity Incentive Plan based on the achievement of certain Company performance measures for fiscal 2007. The number of shares to be issued; if any, will be dependent on the level of achievement of these performance measures as determined by the Company’s Compensation Committee based on our 2007 results and will be issued in the first quarter of 2008. The shares subject to these awards can range from a minimum of 0% to a maximum of 100% of the target number of shares depending on the level at which the goals are attained. Based on the Company’s performance through March 31, 2007, the Company has accrued $699 as compensation expense related to these agreements.

Stock grants to option holders. On March 30, 2007, the Company issued Class A common stock in respect of all shares underlying vested, unexercised options held as of March 22, 2007 (the “vested option shares”) by an active employee, consultant or director of the Company. Holders of vested options shares received a stock award with a fair market value of $3.25 multiplied by the number of vested options shares held by such holder. The Company determined the number of shares issuable based on a fair market value of $63.77 per share, which was the average of the closing prices of the Class A common stock during the period from March 1, 2007 through and including March 21, 2007. The Company recorded $6,961 as compensation expense related to this grant.

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

The table below summarizes the impact on our results of operations for the three months ended March 31, 2007 of outstanding stock options and stock grants and stock grants under our 1996 Plan and issuances under our ESPP recognized under the provisions of SFAS 123(R):

		Three months				Three months
		ended				ended
		March 31, 2007				March 31, 2006
Stock-based compensation expense:
Issuances under employee stock purchase plan		$	200			$	360
Employee stock options			1,587				1,476
Reserved for performance-based stock awards			699				1,162
Issuance to options holders			6,961				—
Income tax benefit			(3,332	)			( 503	)
Net decrease in net income		$	6,115			$	2,495
Decrease in earnings per common share:
Basic		$	0.06			$	0.02
Diluted		$	0.06			$	0.02

3. Acquisitions

During the three months ended March 31, 2007, the Company completed several acquisitions of outdoor advertising assets for a total cash purchase price of approximately $60,067.

Each of these acquisitions was accounted for under the purchase method of accounting, and, accordingly, the accompanying consolidated financial statements include the results of operations of each acquired entity from the date of acquisition. The acquisition costs have been allocated to assets acquired and liabilities assumed based on fair value at the dates of acquisition. The following is a summary of the preliminary allocation of the acquisition costs in the above transactions.

		Total
Current assets		$	1,011
Property, plant and equipment			29,956
Goodwill			453
Site locations			24,316
Non-competition agreements			153
Customer lists and contracts			4,401
Other liabilities			(223	)
		$	60,067

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

3. Acquisitions (cont’d)

Summarized below are certain unaudited pro forma statements of operations data for the three months ended March 31, 2007 and March 31, 2006 as if each of the above acquisitions and the acquisitions occurring in 2006, which were fully described in the 2006 Combined Form 10-K, had been consummated as of January 1, 2006. This pro forma information does not purport to represent what the Company’s results of operations actually would have been had such transactions occurred on the date specified or to project the Company’s results of operations for any future periods.

		Three months ended
		March 31,
		2007				2006
Pro forma net revenues		$	275,956			$	256,938
Pro forma net income applicable to common stock		$	8,538			$	210
Pro forma net income per common share — basic		$	0.09			$	—
Pro forma net income per common share — diluted		$	0.08			$	—

4. Depreciation and Amortization

The Company includes all categories of depreciation and amortization on a separate line in its Statement of Operations. The amount of depreciation and amortization expense excluded from the following operating expenses in its Statement of Operations are:

		Three months ended
		March 31,
		2007				2006
Direct advertising expenses		$	69,128			$	70,005
General and administrative expenses			1,691				1,614
Corporate expenses			2,499				1,559
		$	73,318			$	73,178

5. Goodwill and Other Intangible Assets

The following is a summary of intangible assets at March 31, 2007 and December 31, 2006.

		Estimated				March 31, 2007								December 31, 2006
		Life				Gross Carrying				Accumulated				Gross Carrying				Accumulated
		(Years)				Amount				Amortization				Amount				Amortization
Amortizable Intangible Assets:
Customer lists and contracts			7 – 10				$    448,458				$ 386,017				$    444,167				$ 380,374
Non-competition agreements			3 – 15				60,419				55,966				60,279				55,466
Site locations			15				1,285,903				495,315				1,262,525				474,151
Other			5 – 15				13,600				9,978				13,537				9,667
							1,808,380				947,276				1,780,508				919,658
Unamortizable Intangible Assets:
Goodwill							$ 1,612,197				$ 253,635				$ 1,611,341				$253,635

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

5. Goodwill and Other Intangible Assets (continued)

The changes in the gross carrying amount of goodwill for the three months ended March 31, 2007 are as follows:

Balance as of December 31, 2006		$	1,611,341
Goodwill acquired during the three months ended March 31, 2007			856
Balance as of March 31, 2007		$	1,612,197

6. Asset Retirement Obligations

The Company’s asset retirement obligations include the costs associated with the removal of its structures, resurfacing of the land and retirement cost, if applicable, related to the Company’s outdoor advertising portfolio. The following table reflects information related to our asset retirement obligations:

Balance at December 31, 2006		$	141,503
Additions to asset retirement obligations			383
Accretion expense			2,292
Liabilities settled			( 691	)
Balance at March 31, 2007		$	143,487

7. Long Term Debt

On March 28, 2007, Lamar Media Corp., a wholly-owned subsidiary of Lamar Advertising Company entered into a Series E Incremental Loan Agreement with its lenders, in the aggregate amount of $250,000 which was funded on March 28, 2007. The Series E Incremental Loans will begin amortizing in quarterly installments paid on each June 30, September 30, December 31 and March 31 as follows:

Principal Payment Date		Principal Amount
June 30, 2009 – March 31, 2010		$	3,125
June 30, 2010 – March 31, 2011		$	6,250
June 30, 2011 – March 31, 2012		$	9,375
June 30, 2012 – March 31, 2013		$	43,750

The Series E Incremental Loans will mature March 31, 2013.

Also, on March 28, 2007, Lamar Media Corp. entered into a Series F Incremental Loan Agreement in the aggregate amount of $325,000 which was funded on March 28, 2007. The Series F Incremental Loans will begin amortizing in quarterly installments paid on each June 30, September 30, December 31, and March 31 as follows:

Principal Payment Date		Principal Amount
June 30, 2009 – December 31, 2013		$	812.5
March 31, 2014		$	309,562.5

The Series F Incremental Loans will mature on March 31, 2014.

In conjunction with the Series E and F Term loans described above, the Company’s credit agreement dated as of September 30, 2005, was further amended by Amendment No. 3 dated March 28, 2007, to (i) permit the Series E and Series F Incremental Loans to be borrowed up to an aggregate of $575.0 million and restore the amount available for additional incremental loans to $500.0 million and (ii) delete the “Interest Coverage Ratio”, “the Senior Coverage Ratio” financial covenants and the step-down to 5.75x in the “Total Debt Ratio” financial covenant.

LAMAR ADVERTISING COMPANY AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

8. Summarized Financial Information of Subsidiaries

Separate financial statements of each of the Company’s direct or indirect wholly owned subsidiaries that have guaranteed Lamar Media’s obligations with respect to its publicly issued notes (collectively, the “Guarantors”) are not included herein because the Company has no independent assets or operations, the guarantees are full and unconditional and joint and several and the only subsidiaries that are not a guarantors are in the aggregate minor. Lamar Media’s ability to make distributions to Lamar Advertising is restricted under the terms of its bank credit facility and the indentures relating to Lamar Media’s outstanding notes. As of March 31, 2007 and December 31, 2006, the net assets restricted as to transfers from Lamar Media Corp. to Lamar Advertising Company in the form of cash dividends, loans or advances were $327,630 and $407,894, respectively.

9. Earnings Per Share

Earnings per share are computed in accordance with SFAS No. 128, “Earnings Per Share.” Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if the Company’s options and warrants were converted to common stock. The number of dilutive shares resulting from this calculation is 842,221 and 847,519 for the three months ended March 31, 2007 and 2006. Diluted earnings per share should also reflect the potential dilution that could occur if the Company’s convertible debt was converted to common stock. The number of potentially dilutive shares related to the Company’s convertible debt excluded from the calculation because of their antidilutive effect is 5,611,569 and 5,581,755 for the three months ended March 31, 2007 and March 31, 2006, respectively.

10. Income Taxes

Effective January 1, 2007, the Company adopted FIN 48. Upon the adoption of FIN 48, the Company commenced a review of all open tax years in all jurisdictions. The adoption of FIN 48 did not have a material effect on our consolidated financial position or results of operations. As a result of the adoption, the Company’s total balance for unrecognized tax benefits is $0.3 million as of March 31, 2007. If the benefits were recognized in future periods they would have an impact on the Company’s future effective tax rate.

In addition, management has accrued in the consolidated financial statements any penalties and interest, to the extent they would be assessed, on any underpayment of income tax. Such accruals have been and will continue to be the Company’s accounting policy into the future. As of March 31, 2007, management had accrued $0.1 million of interest and penalties relating to unrecognized income tax benefits, which was included in our accrued current tax liability in the accompanying consolidated balance sheet.

As of March 31, 2007, management does not anticipate any significant changes in the balance of unrecognized tax benefits during the next twelve months.

The Company files federal and state income tax returns in the U. S. as well as in Canada. The Company also files income tax returns in the Commonwealth of Puerto Rico. With few exceptions, the Company is no longer subject to federal or state income tax examinations by tax authorities for years before 2002. Due to net operating loss carryovers, the Company is subject to examination adjustments to its net operating loss carryovers by tax authorities going back to 1997.

The Internal Revenue Service (“IRS”) completed an examination of our federal income tax return for 2003 with no changes to taxable income. The State of New York has commenced an audit of our 2003 New York income tax return. However, the audit has not been finalized. We currently do not expect any changes in taxable income to result from this audit.

11. Dividend to Common Shareholders

The Company’s board of directors declared a special dividend of $3.25 per share of Common Stock in February 2007. The dividend was paid on March 30, 2007 to stockholders of record on March 22, 2007 in the aggregate amount of $318,303.

12. New Accounting Pronouncements

In February 2007, the (FASB) issued Statement of Accounting Standard No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115” (Statement 159). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses on these instruments in earnings. Statement 159 is effective as of January 1, 2008. The Company does not expect any material financial statement implications relating to the adoption of this Statement.

In September 2006, the FASB issued Statement of Accounting Standards No. 157, “Fair Value Measurements” (Statement 157). Statement 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. Statement 157 applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, Statement 157 does not require any new fair value measurements. However, for some entities, the application of Statement 157 will change current practice. Statement 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within these fiscal years. We are assessing the impact of Statement 157, which we do not expect to have an impact on our financial position, results or operations or cash flows.

LAMAR MEDIA CORP.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

		March 31,				December 31,
		2007				2006
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	279			$	11,796
Receivables, net of allowance for doubtful accounts of $6,609 and $6,400 in 2007 and 2006, respectively			125,365				127,552
Prepaid expenses			57,146				38,215
Deferred income tax assets			25,463				26,884
Other current assets			16,403				18,095
Total current assets			224,656				222,542
Property, plant and equipment			2,501,719				2,432,977
Less accumulated depreciation and amortization			(1,062,075	)			(1,027,029	)
Net property, plant and equipment			1,439,644				1,405,948
Goodwill			1,348,537				1,347,775
Intangible assets			860,507				860,237
Deferred financing costs net of accumulated amortization of $16,546 and $15,744 in 2007 and 2006, respectively			19,754				20,186
Other assets			32,764				39,299
Total assets		$	3,925,862			$	3,895,987
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Trade accounts payable		$	18,409			$	14,567
Current maturities of long-term debt			16,475				8,648
Accrued expenses			52,476				77,612
Deferred income			14,042				17,824
Total current liabilities			101,402				118,651
Long-term debt			2,455,965				1,981,820
Deferred income tax liabilities			150,638				148,310
Asset retirement obligation			143,487				141,503
Other liabilities			28,838				13,236
Total liabilities			2,880,330				2,403,520
Stockholder’s equity:
Common stock, par value $.01, 3,000 shares authorized, 100 shares issued and outstanding at 2007 and 2006			—				—
Additional paid-in-capital			2,444,485				2,444,485
Accumulated comprehensive income			1,600				2,253
Accumulated deficit			(1,400,553	)			(954,271	)
Total Stockholder’s equity			1,045,532				1,492,467
Total liabilities and stockholder’s equity		$	3,925,862			$	3,895,987

See accompanying note to condensed consolidated financial statements.

LAMAR MEDIA CORP.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
(IN THOUSANDS)

		Three months ended
		March 31,
		2007				2006
Net revenues		$	275,185			$	253,333
Operating expenses (income)
Direct advertising expenses (exclusive of depreciation and amortization)			100,783				95,209
General and administrative expenses (exclusive of depreciation and amortization)			55,302				47,811
Corporate expenses (exclusive of depreciation and amortization)			14,457				11,350
Depreciation and amortization			73,318				73,178
Gain on disposition of assets			(312	)			(1,678	)
			243,548				225,870
Operating income			31,637				27,463
Other expense (income)
Gain on disposition of investment			(15,448	)			—
Interest income			(493	)			(227	)
Interest expense			31,554				24,327
			15,613				24,100
Income before income tax expense			16,024				3,363
Income tax expense			7,164				1,458
Net income		$	8,860			$	1,905

See accompanying note to condensed consolidated financial statements.

LAMAR MEDIA CORP.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
(IN THOUSANDS)

		Three months ended
		March 31,
		2007				2006
Cash flows from operating activities:
Net income		$	8,860			$	1,905
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			73,318				73,178
Non cash equity-based compensation			9,447				2,998
Amortization included in interest expense			799				698
Gain on disposition of assets			(15,760	)			(1,678	)
Deferred tax expense (benefit)			3,749				(1,144	)
Provision for doubtful accounts			1,148				1,161
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables			1,033				(131	)
Prepaid expenses			(18,858	)			(18,104	)
Other assets			(5,910	)			(404	)
Increase (decrease) in:
Trade accounts payable			4,327				(138	)
Accrued expenses			(26,710	)			(23,153	)
Other liabilities			9,609				22,279
Net cash provided by operating activities			45,052				57,467
Cash flows from investing activities:
Acquisitions			(60,067	)			(66,601	)
Capital expenditures			(50,064	)			(46,525	)
Payments received on notes receivable			9,056				—
Proceeds from disposition of assets			19,857				1,388
Net cash used in investing activities			(81,218	)			(111,738	)
Cash flows from financing activities:
Principal payments on long-term debt			(27	)			(795	)
Net borrowings under credit agreement			482,000				157,000
Dividend to parent			(455,233	)			(114,214	)
Debt issuance costs			(2,107	)			—
Net cash provided by financing activities			24,633				41,991
Effect of exchange rate changes in cash and cash equivalents			16				—
Net decrease in cash and cash equivalents			(11,517	)			(12,280	)
Cash and cash equivalents at beginning of period			11,796				19,419
Cash and cash equivalents at end of period		$	279			$	7,139
Supplemental disclosures of cash flow information:
Cash paid for interest		$	50,262			$	36,689
Cash paid for state and federal income taxes		$	1,627			$	3,316
Parent company stock issued related to acquisitions		$	—			$	—

See accompanying note to condensed consolidated financial statements.

LAMAR MEDIA CORP.
AND SUBSIDIARIES

NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

1. Significant Accounting Policies

The information included in the foregoing interim condensed consolidated financial statements is unaudited. In the opinion of management all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of Lamar Media’s financial position and results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. These interim condensed consolidated financial statements should be read in conjunction with Lamar Media’s consolidated financial statements and the notes thereto included in the 2006 Combined Form 10-K.

Certain notes are not provided for the accompanying condensed consolidated financial statements as the information in notes 1, 2, 3, 4, 5, 6, 7, 8, 10, 11 and 12 to the condensed consolidated financial statements of Lamar Advertising Company included elsewhere in this report is substantially equivalent to that required for the condensed consolidated financial statements of Lamar Media Corp. Earnings per share data is not provided for Lamar Media Corp., as it is a wholly owned subsidiary of Lamar Advertising Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion contains forward-looking statements. Actual results could differ materially from those anticipated by the forward-looking statements due to risks and uncertainties described in the section of this combined report on Form 10-Q entitled “Note Regarding Forward–Looking Statements” and in Item 1A to the 2006 Combined Form 10-K. You should carefully consider each of these risks and uncertainties in evaluating the Company’s and Lamar Media’s financial conditions and results of operations. Investors are cautioned 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 three months ended March 31, 2007 and 2006. 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. 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. Advertising spending is particularly sensitive to changes in general economic conditions which affect the rates we are able to charge for advertising on our displays and our ability to maximize occupancy on our displays.

Since December 31, 2001, the Company has increased the number of outdoor advertising displays it operates by approximately 5% by completing strategic acquisitions of outdoor advertising and transit assets for an aggregate purchase price of approximately $994 million, which included the issuance of 4,050,958 shares of Lamar Advertising Company Class A common stock valued at the time of issuance at approximately $153 million and warrants valued at the time of issuance of approximately $2 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 performances of individual markets and of the Company as a whole are not necessarily comparable on a year-to-year basis. The Company expects to continue to pursue acquisitions that complement the Company’s business.

Growth of the Company’s business requires expenditures for maintenance and capitalized costs associated with new billboard displays, replacement of damaged billboard displays, logo sign and transit contracts, and the purchase of real estate and operating equipment. The following table presents a breakdown of capitalized expenditures for the three months ended March 31, 2007 and 2006:

		Three months ended
		March 31,
		(in thousands)
		2007				2006
Total Capital Expenditures:
Billboard – traditional		$	20,525			$	17,261
Billboard – digital			15,786				18,027
Logos			1,774				1,605
Transit			439				214
Land and buildings			9,100				7,273
Operating equipment			2,440				2,178
Total capital expenditures		$	50,064			$	46,558

RESULTS OF OPERATIONS

Three Months ended March 31, 2007 compared to Three Months ended March 31, 2006

Net revenues increased $21.9 million or 8.6% to $275.2 million for the three months ended March 31, 2007 from $253.3 million for the same period in 2006. This increase was attributable primarily to an increase in billboard net revenues of $22.5 million or 9.9% over the prior period, a $.4 million increase in logo sign revenue, which represents an increase of 3.4% over the prior period, and a $1.0 million decrease in transit revenue over the prior period, which represents a decrease of 7.8%

The increase in billboard net revenue of $22.5 million was generated by acquisition activity of approximately $4.6 million and internal growth of approximately $17.9 million, while the increase in logo sign revenue of $.4 million was generated by internal growth across various markets within the logo sign programs of approximately $1.4 million, which was offset by the loss of $1.0 million of revenue due to the loss of the Company’s Texas logo contract. The decrease in transit revenue of approximately $1.0 million was primarily due to the loss of various transit contracts.

Net revenues for the three months ended March 31, 2007, as compared to acquisition-adjusted net revenue for the three months ended March 31, 2006, increased $19.0 million or 7.4% as a result of net revenue internal growth. See “Reconciliations” below.

Operating expenses, exclusive of depreciation and amortization and gain on sale of assets, increased $16.2 million or 10.5% to $170.7 million for the three months ended March 31, 2007 from $154.5 million for the same period in 2006. There was a $13.1 million increase as a result of additional operating expenses related to the operations of acquired outdoor advertising assets and increases in costs in operating the Company’s core assets and a $3.1 million increase in corporate expenses.

Depreciation and amortization expense remained relatively constant for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006 due to consistent levels of capital expenditures between the two periods presented.

Due to the above factors, operating income increased $4.2 million to $31.5 million for three months ended March 31, 2007, compared to $27.3 million for the same period in 2006.

During the first quarter of 2007, the Company recognized a $15.4 million gain as a result of the sale of a private company in which the Company had an ownership interest.

Interest expense increased $7.0 million from $24.8 million for the three months ended March 31, 2006 to $31.8 million for the three months ended March 31, 2007 due to increased debt balances as well as an increase in interest rates on variable rate debt.

The increase in operating income and the gain on disposition of investment, offset by the increase in interest expense described above resulted in a $12.9 million increase in income before income taxes. This increase in income resulted in an increase in the income tax expense of $5.6 million for the three months ended March 31, 2007 over the same period in 2006. The effective tax rate for the three months ended March 31, 2007 was 43.4%, which is greater than the statutory rates due to permanent differences resulting from non-deductible compensation expense related to stock options in accordance with SFAS 123R, Share Based Payment, and other non-deductible expenses such as meals and entertainment and amortization. In addition, our effective tax rate is higher due to limitations on our ability to utilize foreign tax credits on our foreign source income.

As a result of the above factors, the Company recognized net income for the three months ended March 31, 2007 of $8.8 million, as compared to net income of $1.5 million for the same period in 2006.

In February 2007, the Company’s board of directors declared a special cash dividend of $3.25 per share of Common Stock. The aggregate dividend of $318.3 million was paid on March 30, 2007 to stockholders of record on March 22, 2007. Lamar had approximately 82.5 million shares of Class A Common Stock and 15.4 million shares of Class B Common Stock, which is convertible into Class A Common Stock on a one-for-one basis at the option of its holder, outstanding on the record date.

Reconciliations:

Because acquisitions occurring after December 31, 2005 (the “acquired assets”) have contributed to our net revenue results for the periods presented, we provide 2006 acquisition-adjusted net revenue, which adjusts our 2006 net revenue for the three months ended March 31, 2006 by adding to it the net revenue generated by the acquired assets prior to our acquisition of them for the same time frame that those assets were owned in the three months ended March 31, 2007. We provide this information as a supplement to net revenues to enable investors to compare periods in 2007 and 2006 on a more consistent basis without the effects of acquisitions. Management uses this comparison to assess how well we are performing within our existing assets.

Acquisition-adjusted net revenue is not determined in accordance with generally accepted accounting principles (GAAP). For this adjustment, we measure the amount of pre-acquisition revenue generated by the assets during the period in 2006 that corresponds with the actual period we have owned the assets in 2007 (to the extent within the period to which this report relates). We refer to this adjustment as “acquisition net revenue.”

Reconciliations of 2006 reported net revenue to 2006 acquisition-adjusted net revenue as well as a comparison of 2006 acquisition–adjusted net revenue to 2007 net revenue for each of the three month periods ended March 31, are provided below:

Comparison of 2007 Net Revenue to 2006 Acquisition-Adjusted Net Revenue

		Three months ended
		March 31,
		2007				2006
		(in thousands)
Reported net revenue		$	275,185			$	253,333
Acquisition net revenue, net of divestitures			—				2,803
Adjusted totals		$	275,185			$	256,136

LIQUIDITY AND CAPITAL RESOURCES

Overview

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 Corp., is the borrower under the bank credit facility and maintains all corporate cash balances. Any cash requirements of the Company, 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.

Sources of Cash

Total Liquidity at March 31, 2007. As of March 31, 2007 we had approximately $385.3 million of total liquidity, which is comprised of approximately $.3 million in cash and cash equivalents and the ability to draw approximately $385.0 million under our revolving bank credit facility.

Cash Generated by Operations. For the three months ended March 31, 2007 and 2006 our cash provided by operating activities was $33.4 million and $34.9 million, respectively. While our net income was approximately $8.8 million for the three months ended March 31, 2007, we generated cash from operating activities of $33.4 million during that same period, primarily due to adjustments needed to reconcile net income to cash provided by operating activities, which primarily consisted of depreciation and amortization of $73.3 million. This was offset by an increase in working capital of $48.7 million. We expect to generate cash flows from operations during 2007 in excess of our cash needs for operations and capital expenditures as described herein. We expect to use the excess cash generated principally for acquisitions and to fund repurchases under our stock repurchase program. See “— Cash Flows” for more information.

Credit Facilities. As of March 31, 2007, Lamar Media had approximately $385.0 million of unused capacity under the revolving credit facility included in its bank credit facility. The bank credit facility was refinanced on September 30, 2005 and is comprised of a $400.0 million revolving bank credit facility and a $400.0 million term facility. The 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, up to a maximum aggregate amount of $500.0 million. On January 17, 2007, Lamar Media entered into a Series D Incremental Loan Agreement and obtained commitments from its lenders for a term loan of $7.0 million, which was funded on January 17, 2007. On March 28, 2007, Lamar Media entered into Series E and Series F Incremental Loan Agreements and obtained commitments from their lenders for term loans of $250 million and $325 million, respectively, which were both funded on March 28, 2007. In addition, the $500 million incremental facility, which had previously been reduced by the aggregate amount of the Series C and Series D Incremental Loans and would have been reduced by the Series E and Series F Incremental Loans, was restored to $500 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.

Factors Affecting Sources of Liquidity

Internally Generated Funds. The key factors affecting internally generated cash flow are general economic conditions, specific economic conditions in the markets where the Company conducts its business and overall spending on advertising by advertisers.

Restrictions Under Credit Facilities and Other Debt Securities. Currently Lamar Media has outstanding approximately $385.0 million 7¹/₄% Senior Subordinated Notes due 2013 issued in December 2002 and June 2003 and $400.0 million 6 5/8% Senior Subordinated Notes due 2015 issued in August 2005 and $216 million 6 5/8% Senior Subordinated Notes due 2015 – Series B issued in August, 2006. The indentures relating to Lamar Media’s outstanding notes restrict its ability to incur indebtedness other than:

	•		up to $1.3 billion of indebtedness under its bank credit facility;
	•		currently outstanding indebtedness or debt incurred to refinance outstanding debt;
	•		inter-company debt between Lamar Media and its subsidiaries or between subsidiaries;
	•		certain purchase money indebtedness and capitalized lease obligations to acquire or lease property in the ordinary course of business that cannot exceed the greater of $20 million or 5% of Lamar Media’s net tangible assets; and
	•		additional debt not to exceed $40 million.

Lamar Media is required to comply with certain covenants and restrictions under its bank credit agreement. If Lamar Media fails to comply with these tests, its obligations under the bank credit agreement may be accelerated. At March 31, 2007 and currently, Lamar Media is in compliance with all such tests.

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

•

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.

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

•

a fixed charges coverage ratio, defined as EBITDA, as defined below, for the most recent four fiscal quarters to the sum of (1) the total payments of principal and interest on debt for such period, plus (2) capital expenditures made during such period, plus (3) income and franchise tax payments made during such period, plus (4) dividends, of greater than 1.05 to 1.

As defined under Lamar Media’s 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, interest in respect of mirror loan indebtedness, 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 restricted payment made by Lamar Media or any of its restricted subsidiaries to the Company during any period to enable the 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 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 if and to the extent such operating expenses would be deducted in the calculation of EBTIDA if funded directly by Lamar Media or any restricted subsidiary.

The Company believes that its current level of cash on hand, availability under its bank credit agreement and future cash flows from operations are sufficient to meet its operating needs through the year 2007. All debt obligations are reflected on the Company’s balance sheet.

Uses of Cash

Capital Expenditures. Capital expenditures excluding acquisitions were approximately $50.1 million for the three months ended March 31, 2007 which is relatively constant as compared to the prior period. We anticipate our 2007 total capital expenditures to be approximately $105.0 million before digital capital expenditures.

Acquisitions. During the three months ended March 31, 2007, the Company financed its acquisition activity of approximately $60.1 million with borrowings under Lamar Media’s revolving credit facility and cash on hand. In 2007, we expect to spend between $125 million and $150 million on acquisitions, which we may finance through borrowings, cash on hand, the issuance of Class A common stock, or some combination of the foregoing, depending on market conditions. We plan on continuing to invest in both capital expenditures and acquisitions that can provide high returns in light of existing market conditions.

Stock Repurchase Program. At January 1, 2007, the Company had approximately $100.7 million of repurchase capacity remaining under a repurchase plan adopted in August 2006. In addition to that plan, the Company’s board of directors approved a new stock repurchase program in February 2007, of up to $500.0 million of the Company’s Class A common stock over a period not to exceed 24 months. During the three months ended March 31, 2007, the Company purchased approximately 2,033,947 shares for an aggregate purchase price of approximately $130.1 million. The Share repurchases under the plan may be made on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased is determined by Lamar’s management based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time. Any repurchased shares will be available for future use for general corporate and other purposes.

Special Cash Dividend. In February 2007, the Company’s board of directors declared a special cash dividend of $3.25 per share of Common Stock that was paid on March 30, 2007 to stockholders of record on March 22, 2007. Lamar had approximately 82.5 million shares of Class A Common Stock and 15.4 million shares of Class B Common Stock, which is convertible into Class A Common Stock on a one-for-one basis at the option of its holder, outstanding as of the record date resulting in an aggregate dividend payment of $318.3 million.

Debt Service and Contractual Obligations. As of March 31, 2007, we had outstanding debt of approximately $2.47 billion. Lamar Media had principal reduction obligations and revolver commitment reductions under its bank credit agreement prior to its replacement on September 30, 2005 that are detailed in Note 8 to the Company’s Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2006.

The following table details Lamar Media’s principal reduction obligations and related interest obligations on long term debt under its bank credit agreement as of March 31, 2007, which updates those obligations to reflect material changes in Lamar Media’s outstanding long-term debt since December 31, 2006 as detailed above under the heading “Credit Facilities”.

						Payments Due by Period
						Less Than												After
Contractual Obligations		Total				1 Year				1 - 3 Years				4 - 5 Years				5 Years
										(In millions)
Long-Term Debt		$	2,472.4			$	16.5			$	109.6			$	680.1			$	1,666.2
Interest obligations on long term debt(1)			1,021.2				162.8				327.0				285.8				245.6
Total payments due		$	3,493.6			$	179.3			$	436.6			$	965.9			$	1,911.8

Cash Flows

The Company’s cash flows provided by operating activities decreased by $1.6 million for the three months ended March 31, 2007 due to an increase in net income of $7.3 million as described in “Results of Operations” an increase in adjustments to reconcile net income (loss) to cash provided by operating activities of $2.1 million primarily an increase in non-cash compensation of $6.4 million, an increase in deferred income tax expense of $9.7 million offset by an increase in gain on dispositions of assets of $14.1 million. In addition, as compared to the same period in 2006, there were increases in other assets of $7.9 million, decreases in accrued expenses of $4.4 million and in other liabilities of $3.6 million.

Cash flows used in investing activities decreased $30.6 million from $111.8 million for the three months ended March 31, 2006 to $81.2 million for the three months ended March 31, 2007, primarily due to a decrease in acquisitions of $6.5 million and an increase in proceeds from disposition of assets of $18.5 million and an increase in payments received on notes to receivables of $9.1 million.

Cash flows provided by financing activities was $36.3 million for the three months ended March 31, 2007 primarily due to $482.0 million in net borrowings under credit agreements, offset by $130.1 million in cash used for purchase of shares of the Company’s Class A common stock and $318.4 million in cash used for dividends.

Lamar Media Corp.

The following is a discussion of the consolidated financial condition and results of operations of Lamar Media for the three months ended March 31, 2007 and 2006. This discussion should be read in conjunction with the consolidated financial statements of Lamar Media and the related notes.

RESULTS OF OPERATIONS

Three Months ended March 31, 2007 compared to Three Months ended March 31, 2006

Net revenues increased $21.9 million or 8.6% to $275.2 million for the three months ended March 31, 2007 from $253.3 million for the same period in 2006. This increase was attributable primarily to an increase in billboard net revenues of $22.5 million or 9.9% over the prior period, a $.4 million increase in logo sign revenue, which represents an increase of 3.4% over the prior period, and a $1.0 million decrease in transit revenue over the prior period, which represents a decrease of 7.8%

The increase in billboard net revenue of $22.5 million was generated by acquisition activity of approximately $4.6 million and internal growth of approximately $17.9 million, while the increase in logo sign revenue of $.4 million was generated by internal growth across various markets within the logo sign programs of approximately $1.4 million, which was offset by the loss of $1.0 million of revenue due to the loss of the Company’s Texas logo contract. The decrease in transit revenue of approximately $1.0 million was primarily due to the loss of various transit contracts.

Net revenues for the three months ended March 31, 2007, as compared to acquisition-adjusted net revenue for the three months ended March 31, 2006, increased $19.0 million or 7.4% as a result of net revenue internal growth. See “Reconciliations” below.

Operating expenses, exclusive of depreciation and amortization and gain on sale of assets, increased $16.1 million or 10.4% to $170.5 million for the three months ended March 31, 2007 from $154.4 million for the same period in 2006. There was a $13.0 million increase as a result of additional operating expenses related to the operations of acquired outdoor advertising assets and increases in costs in operating Lamar Media’s core assets and a $3.1 million increase in corporate expenses.

Depreciation and amortization expense remained relatively constant for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006 due to consistent levels of capital expenditures between the two periods presented.

Due to the above factors, operating income increased $4.1 million to $31.6 million for three months ended March 31, 2007 compared to $27.5 million for the same period in 2006.

During the first quarter of 2007, the Company recognized a $15.4 million gain as a result of the sale of a private company in which the Company had an ownership interest.

Interest expense increased $7.3 million from $24.3 million for the three months ended March 31, 2006 to $31.6 million for the three months ended March 31, 2007 due to increased debt balances as well as an increase in interest rates on variable rate debt.

The increase in operating income, and the gain on disposition of investment, offset by the increase in interest expense described above resulted in a $12.7 million increase in income before income taxes. This increase in income resulted in an increase in the income tax expense of $5.7 million for the three months ended March 31, 2007 over the same period in 2006. The effective tax rate for the three months ended March 31, 2007 was 44.7%, which is greater than the statutory rates due to permanent differences resulting from non-deductible compensation expense related to stock options in accordance with SFAS 123R, Share Based Payment, and other non-deductible expenses such as meals and entertainment and amortization. In addition, our effective tax rate is higher due to limitations on our ability to utilize foreign tax credits on our foreign source income.

As a result of the above factors, Lamar Media recognized net income for the three months ended March 31, 2007 of $8.9 million, as compared to net income of $1.9 million for the same period in 2006.