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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, 2003

[   ] 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 0-30242Lamar 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:

None

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 30, 2003: $2,897,761,305

The number of shares of Lamar Advertising Companys Class A common stock
outstanding as of February 20, 2004: 87,546,504
The number of shares of the Lamar Advertising Companys Class B common stock
outstanding as of February 20, 2004: 16,147,073

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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TABLE OF CONTENTS



|                                                  |                                                                                               |                                                 |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I                                           
|                                                  | ITEM 1. BUSINESS                                                                             
|                                                  | ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT                                                
|                                                  | ITEM 2. PROPERTIES                                                                           
|                                                  | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                                  | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II                                          
|                                                  | ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS            
|                                                  | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                                  | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                  | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                                  | ITEM 8. FINANCIAL STATEMENTS                                                                 
|                                                  |                                                                                               | Consolidated Balance Sheets                    
|                                                  |                                                                                               | Consolidated Statements of Operations          
|                                                  |                                                                                               | Consolidated Statements of Stockholders Equity
|                                                  |                                                                                               | Consolidated Statements of Cash Flows          
|                                                  |                                                                                               | Notes to Consolidated Financial Statements     
|                                                  | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|                                                  | ITEM 9A. CONTROLS AND PROCEDURES                                                             
|PART III                                         
|                                                  | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                                                  | ITEM 11. EXECUTIVE COMPENSATION                                                              
|                                                  | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                                  | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|                                                  | ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                              
|PART IV                                          
|                                                  | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|SIGNATURES                                       
|INDEX TO EXHIBITS                                
|Statement Re: Computation of Per Share Earnings  
|Code of Business Conduct and Ethics              
|Subsidiaries of the Registrant                   
|Consent of KPMG LLP                              
|Chief Executive Officer to Sec. 302 Certification
|Chief Financial Officer to Sec. 302 Certification
|Certification Pursuant to 18 U.S.C. Section 1350 



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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 27, 2004 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:



| |  |  | expected operating results;
| | - |  | ---------------------------
|
| |  |  | market opportunities;      
|
| |  |  | acquisition opportunities; 
|
| |  |  | 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; and                                                          
| 
| |  | 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.

2



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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, 2003, the Company owned and operated over 147,000
billboard advertising displays in 43 states, operated over 98,000 logo
advertising displays in 20 states and the province of Ontario, Canada, and
operated approximately 13,000 transit advertising displays in 14 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 or furnishing them to the Securities and
Exchange Commission. Information contained on the website is not part of this
report.

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



| |  |  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.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  Logo signs.The Company is the largest provider of logo sign services in
the United States, operating 20 of the 25 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.                                                                                                                                                                    
|
| |  |  Transit advertising.The Company provides transit advertising in 38 transit
markets. Transit displays appear on the exterior or interior of public
transportation vehicles or stations.                                                                                                                                                                                                                                                                                                   

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 538 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 32 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. Local advertising constituted approximately 82% of its
net revenues for the year ended December 31, 2003, 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 23 years. In an effort to provide high quality sales service at the
local level, the Company employed 524 local account executives as of December
31, 2003. 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 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

3



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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, 2003, the Company has invested over $489.3
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 complementary 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, 2003 to December 31, 2003, the Company
completed 84 acquisitions of advertising businesses and assets for an aggregate
purchase price of approximately $188.2 million. Certain of the Companys
principal acquisitions since January 1, 2003 are described below.

Delite Outdoor, Inc.- On March 3, 2003, the Company purchased the stock of
Delite Outdoor, Inc. for $18.0 million. The purchase price consisted of
588,543 shares of Lamar Advertising Class A common stock valued at $18.0
million.

Outdoor Media Group, Inc.- On May 1, 2003, the Company purchased the assets of
Outdoor Media Group, Inc. for $40.0 million. The purchase price consisted of
307,134 shares of Lamar Advertising Class A common stock as well as
approximately $30.0 million cash.

Adams Outdoor, Inc.- On June 2, 2003, the Company purchased the stock of Adams
Outdoor, Inc. for approximately $40.1 million. The purchase price included
501,626 shares of Lamar Advertising Class A common stock and approximately
$22.6 million 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 38 of its outdoor advertising markets.

COMPANY OPERATIONS

Billboard Advertising

Inventory:

The Company operates the following types of billboard advertising displays:

Bulletinsgenerally 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.

Postersgenerally 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.

4



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For the year ended December 31, 2003 approximately 72% of the Companys
billboard advertising net revenues were derived from bulletin sales and 28%
from poster sales.

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 the year ended
December 31, 2003 and the respective percentages of such revenue. These
categories accounted for approximately 73% of the Companys billboard
advertising net revenues in the year ended December 31, 2003. No one advertiser
accounted for more than 1% of the Companys billboard advertising net revenues
in that period.

|                                 |  |                            |    |  
|-------------------------------- |  | -------------------------- | -- | -
|                                 |  | Percentage Net Advertising
|Categories                       |  | Revenues                  
|Restaurants                      |  |                            | 12 | %
|Retailers                        |  |                            | 10 | %
|Automotive                       |  |                            | 10 | %
|Hotels and Motels                |  |                            | 8  | %
|Gaming                           |  |                            | 6  | %
|Health Care                      |  |                            | 6  | %
|Service                          |  |                            | 6  | %
|Amusement  Entertainment/Sports |  |                            | 5  | %
|Financial  Banks/Credit Unions  |  |                            | 5  | %
|Real Estate Companies            |  |                            | 5  | %
|                                 |  |                            |    |  
|                                 |  |                            | 73 | %

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
20 of the 25 privatized state logo contracts. The Company operates over 28,000
logo sign structures containing over 98,000 logo advertising displays in the
United States and Canada.

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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) |  | Oklahoma      
|Delaware |  | Maine       |  | Nebraska     |  | South Carolina
|Florida  |  | Michigan    |  | Nevada       |  | Texas         
|Georgia  |  | Minnesota   |  | New Jersey   |  | Utah          
|Kansas   |  | Mississippi |  | Ohio         |  | 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, 2003, three are due to terminate
in 2004, one in April, one in June and one in December and one is subject to
renewal in April 2004. 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 38 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, 2003, there were approximately 645 companies in the
outdoor advertising industry operating approximately 1,165,444 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 other forms
of out-of-home advertising described above.

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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 that 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, 2003. Of
these, approximately 119 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 817 were direct sales and marketing personnel.

The Company has 13 local offices covered by collective bargaining agreements,
consisting of billposters and construction personnel. The Company believes that
its relations with its employees, including its 129 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

|                     |  |     |    |       |  |                                                              
|-------------------- |  | --- | -- | ----- |  | -------------------------------------------------------------
|NAME                 |  | AGE |    | TITLE
|                     |  |     |    |      
|Kevin P. Reilly, Jr. |  |     | 49 |       |  | Chairman, President and Chief Executive Officer              
|Keith A. Istre       |  |     | 51 |       |  | Chief Financial Officer and Treasurer                        
|Sean E. Reilly       |  |     | 42 |       |  | Chief Operating Officer and President of the
Outdoor Division

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. Mr. Istre joined the Company as Controller in 1978 and became Treasurer
in 1985. He also served as a director of the Company from February 1991 to May
2003. 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 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 May 1989 to May
1996 and from May 1999 to May 2003. 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 164 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 110 operating facilities at an aggregate lease expense for
2003 of approximately $3.6 million.

The Company owns approximately 4,000 parcels of property beneath outdoor
structures. As of December 31, 2003, the Company had approximately 76,100
active outdoor site leases accounting for a total annual lease expense of
approximately $143.1 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



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##### Table of Contents






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 February 20, 2004, the Class A common stock
was held by 189 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.

|                              |                |  |      |       |     |  |   |       | 
|----------------------------- | -------------- |  | ---- | ----- | --- |  | - | ----- | 
|                              |                |  | High |       | Low
|                              |                |  |      |       |    
|Year ended December 31, 2002: |                |  |      |       |     |  |   |      
|                              | First Quarter  |  | $    | 43.50 |     |  | $ | 33.35 | 
|                              | Second Quarter |  |      | 45.66 |     |  |   | 32.90 | 
|                              | Third Quarter  |  |      | 37.72 |     |  |   | 25.48 | 
|                              | Fourth Quarter |  |      | 36.80 |     |  |   | 27.55 | 
|Year ended December 31, 2003: |                |  |      |       |     |  |   |      
|                              | First Quarter  |  | $    | 38.04 |     |  | $ | 27.65 | 
|                              | Second Quarter |  |      | 37.98 |     |  |   | 28.71 | 
|                              | Third Quarter  |  |      | 35.57 |     |  |   | 28.95 | 
|                              | Fourth Quarter |  |      | 37.69 |     |  |   | 29.30 | 

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 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.

9



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##### Table of Contents






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.

Statement of Operations Data:
(Dollars in Thousands)

|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |         |         | 
|---------------------------------------------------------------------------------- | ----------------------------------- | ------------------------ | --------- | -------------------------------- | ------- | ---- | --------- | ------- | ------- | ---- | --------- | ------- | ------- | - | --------- | ------- | ------- | - | --------- | ------- | ------- | 
|                                                                                   |                                     |                          |           | For the Years Ended December 31,
|                                                                                   |                                     |                          |           | 2003                             |         | 2002 |           | 2001    |         | 2000 |           | 1999   
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |        
|Net revenues                                                                       |                                     | $                        | 810,139   |                                  |         | $    | 775,682   |         |         | $    | 729,050   |         |         | $ | 687,319   |         |         | $ | 444,135   |        
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Operating expenses:                                                                |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|                                                                                   | Direct advertising expenses         |                          |           | 292,017                          |         |      |           | 274,772 |         |      |           | 251,483 |         |   |           | 217,465 |         |   |           | 143,090 |        
|                                                                                   | General and administrative expenses |                          |           | 171,520                          |         |      |           | 167,182 |         |      |           | 151,048 |         |   |           | 138,072 |         |   |           | 94,372  |        
|                                                                                   | Depreciation and amortization       |                          |           | 282,273                          |         |      |           | 277,893 |         |      |           | 355,529 |         |   |           | 318,096 |         |   |           | 177,138 |        
|                                                                                   | Gain on disposition of assets       |                          |           | (748                             | )       |      |           | (336    | )       |      |           | (923    | )       |   |           | (986    | )       |   |           | (5,481  | )      
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|                                                                                   |                                     | Total operating expenses |           |                                  | 745,062 |      |           |         | 719,511 |      |           |         | 757,137 |   |           |         | 672,647 |   |           |         | 409,119 | 
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Operating income (loss)                                                            |                                     |                          | 65,077    |                                  |         |      | 56,171    |         |         |      | (28,087   | )       |         |   | 14,672    |         |         |   | 35,016    |        
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Other expense (income):                                                            |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|                                                                                   | Loss on extinguishment of debt      |                          |           | 33,644                           |         |      |           | 5,850   |         |      |           |        |         |   |           |        |         |   |           | 298     |        
|                                                                                   | Interest income                     |                          |           | (502                             | )       |      |           | (929    | )       |      |           | (640    | )       |   |           | (1,715  | )       |   |           | (1,421  | )      
|                                                                                   | Interest expense                    |                          |           | 87,750                           |         |      |           | 107,272 |         |      |           | 126,861 |         |   |           | 147,607 |         |   |           | 89,619  |        
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|                                                                                   |                                     | Total other expense      |           |                                  | 120,892 |      |           |         | 112,193 |      |           |         | 126,221 |   |           |         | 145,892 |   |           |         | 88,496  | 
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Loss before income taxes and cumulative effect of
a change in accounting principle |                                     |                          | (55,815   | )                                |         |      | (56,022   | )       |         |      | (154,308  | )       |         |   | (131,220  | )       |         |   | (53,480   | )      
|Income tax benefit                                                                 |                                     |                          | (20,643   | )                                |         |      | (19,694   | )       |         |      | (45,674   | )       |         |   | (37,115   | )       |         |   | (9,712    | )      
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Loss before cumulative effect of a change in accounting
principle                  |                                     |                          | (35,172   | )                                |         |      | (36,328   | )       |         |      | (108,634  | )       |         |   | (94,105   | )       |         |   | (43,768   | )      
|Cumulative effect of a change in accounting
principle, net                         |                                     |                          | 11,679    |                                  |         |      |          |         |         |      |          |         |         |   |          |         |         |   | 767       |        
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Net loss                                                                           |                                     |                          | (46,851   | )                                |         |      | (36,328   | )       |         |      | (108,634  | )       |         |   | (94,105   | )       |         |   | (44,535   | )      
|Preferred stock dividends                                                          |                                     |                          | (365      | )                                |         |      | (365      | )       |         |      | (365      | )       |         |   | (365      | )       |         |   | (365      | )      
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Net loss applicable to common stock                                                |                                     | $                        | (47,216   | )                                |         | $    | (36,693   | )       |         | $    | (108,999  | )       |         | $ | (94,470   | )       |         | $ | (44,900   | )      
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Loss per common share  basic
and diluted:                                         |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Loss before cumulative effect of a change in
accounting principle                  |                                     | $                        | (0.35     | )                                |         | $    | (0.36     | )       |         | $    | (1.11     | )       |         | $ | (1.04     | )       |         | $ | (0.64     | )      
|Cumulative effect of a change in accounting principle                              |                                     |                          | (0.11     | )                                |         |      |          |         |         |      |          |         |         |   |          |         |         |   | (0.01     | )      
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Net loss                                                                           |                                     | $                        | (0.46     | )                                |         | $    | (0.36     | )       |         | $    | (1.11     | )       |         | $ | (1.04     | )       |         | $ | (0.65     | )      
|                                                                                   |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Other Data:                                                                        |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Cash flows provided by operating activities (1)                                    |                                     | $                        | 260,075   |                                  |         | $    | 240,443   |         |         | $    | 190,632   |         |         | $ | 177,601   |         |         | $ | 110,551   |        
|Cash flows used in investing activities (1)                                        |                                     | $                        | (210,041  | )                                |         | $    | (155,763  | )       |         | $    | (382,471  | )       |         | $ | (435,595  | )       |         | $ | (950,650  | )      
|Cash
flows (used in) provided by financing activities (1)                          |                                     | $                        | (57,847   | )                                |         | $    | (81,955   | )       |         | $    | 132,384   |         |         | $ | 321,933   |         |         | $ | 719,903   |        
|BALANCE SHEET DATA (2)                                                             |                                     |                          |           |                                  |         |      |           |         |         |      |           |         |         |   |           |         |         |   |           |        
|Cash and cash equivalents                                                          |                                     | $                        | 7,797     |                                  |         | $    | 15,610    |         |         | $    | 12,885    |         |         | $ | 72,340    |         |         | $ | 8,401     |        
|Cash on deposit for debt extinguishment                                            |                                     |                          |          |                                  |         |      | 266,657   |         |         |      |          |         |         |   |          |         |         |   |          |        
|Working capital (3)                                                                |                                     |                          | 69,902    |                                  |         |      | 95,922    |         |         |      | 27,261    |         |         |   | 72,526    |         |         |   | 43,112    |        
|Total assets (3)                                                                   |                                     |                          | 3,637,347 |                                  |         |      | 3,888,106 |         |         |      | 3,671,652 |         |         |   | 3,642,844 |         |         |   | 3,209,270 |        
|Total debt (including current maturities)                                          |                                     |                          | 1,704,863 |                                  |         |      | 1,994,433 |         |         |      | 1,811,585 |         |         |   | 1,738,280 |         |         |   | 1,615,781 |        
|Total long-term obligations (3)                                                    |                                     |                          | 1,840,327 |                                  |         |      | 1,856,372 |         |         |      | 1,877,532 |         |         |   | 1,824,928 |         |         |   | 1,733,035 |        
|Stockholders equity                                                               |                                     |                          | 1,722,805 |                                  |         |      | 1,709,173 |         |         |      | 1,672,221 |         |         |   | 1,689,455 |         |         |   | 1,391,529 |        



---

|(1) |  | Cash flows from operating, investing, and financing activities are
obtained from the Companys consolidated statements of cash flows prepared
in accordance with accounting principles generally accepted in the United
States of America (GAAP).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | As of the end of the period.                                                                                                                                                                                                                     
|   
|(3) |  | 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. These statements are subject
to risks and uncertainties including those described below under the heading
Factors Affecting Future Operating Results, and elsewhere in this report,
that could cause actual results to differ materially from those projected in
these forward-looking statements. 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, 2003,
2002 and 2001. 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, and in general advertising
spending has decreased in response to the decline in economic conditions.

Since December 31, 2001, the Company has increased the number of outdoor
advertising displays it operates by approximately 2% by completing
approximately 160 strategic acquisitions of outdoor advertising and transit
assets for an aggregate purchase price of approximately $323 million, which
included the issuance of 2,955,559 shares of Lamar Advertising Company Class A
common stock valued at the time of issuance at approximately $106.7 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, as amended, 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 expects to
continue to pursue acquisitions that complement the Companys existing
operations.

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 $78.3 million in 2003, $78.4 million in 2002 and
$85.3 million in 2001. The following table presents a breakdown of
capitalized expenditures for the past three years:

|                   |                            |   |              |        |      |   |        |        |  |   |        |        | 
|------------------ | -------------------------- | - | ------------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                   |                            |   | In Thousands
|                   |                            |   |             
|                   |                            |   | 2003         |        | 2002 |   | 2001  
|                   |                            |   |              |        |      |   |       
|Billboard          |                            | $ | 51,390       |        |      | $ | 47,424 |        |  | $ | 53,486 |       
|Logos              |                            |   | 7,315        |        |      |   | 6,605  |        |  |   | 8,222  |       
|Transit            |                            |   | 1,982        |        |      |   | 3,949  |        |  |   | 6,447  |       
|Land and buildings |                            |   | 9,823        |        |      |   | 13,761 |        |  |   | 10,115 |       
|PP&E               |                            |   | 7,765        |        |      |   | 6,651  |        |  |   | 7,050  |       
|                   |                            |   |              |        |      |   |        |        |  |   |        |       
|                   | Total capital expenditures |   | $            | 78,275 |      |   | $      | 78,390 |  |   | $      | 85,320 | 
|                   |                            |   |              |        |      |   |        |        |  |   |        |       

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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,
2003, 2002 and 2001:

|                              |                                     |  |                         |      |      |  |       |      |  |  |       |      | 
|----------------------------- | ----------------------------------- |  | ----------------------- | ---- | ---- |  | ----- | ---- |  |  | ----- | ---- | 
|                              |                                     |  | Year ended December 31,
|                              |                                     |  |                        
|                              |                                     |  | 2003                    |      | 2002 |  | 2001 
|                              |                                     |  |                         |      |      |  |      
|Net revenues                  |                                     |  | 100.0                   | %    |      |  | 100.0 | %    |  |  | 100.0 | %   
|Operating expenses:           |                                     |  |                         |      |      |  |       |      |  |  |       |     
|                              | Direct advertising expenses         |  |                         | 36.0 |      |  |       | 35.4 |  |  |       | 34.5 | 
|                              | General and administrative expenses |  |                         | 18.0 |      |  |       | 18.0 |  |  |       | 17.0 | 
|                              | Corporate expenses                  |  |                         | 3.2  |      |  |       | 3.6  |  |  |       | 3.7  | 
|Depreciation and amortization |                                     |  | 34.8                    |      |      |  | 35.8  |      |  |  | 48.9  |     
|Operating income (loss)       |                                     |  | 8.0                     |      |      |  | 7.2   |      |  |  | (3.9  | )   
|Interest expense              |                                     |  | 10.8                    |      |      |  | 13.8  |      |  |  | 17.4  |     
|Net loss                      |                                     |  | (5.8                    | )    |      |  | (4.7  | )    |  |  | (14.9 | )   

Year ended December 31, 2003 compared to year ended December 31, 2002

Net revenues increased $34.4 million or 4.4% to $810.1 million for the year
ended December 31, 2003 from $775.7 million for the same period in 2002. This
increase was attributable primarily to (i) an increase in billboard net
revenues of $29.8 million or 4.1%, (ii) a $3.2 million increase in logo
sign revenue, which represents an increase of 8.4% over the prior year, and
(iii) a $1.5 million increase in transit revenue, which represents a 17.0%
increase over the prior year.

The increase in billboard net revenues of $29.8 million was due to both
acquisition activity and internal growth while the increase in logo sign
revenue of $3.2 million and transit revenue growth of $1.5 million was
generated by internal growth across various markets within the logo sign and
transit programs. Net revenues for the year ended December 31, 2003 as
compared to acquisition-adjusted net revenue(1) for the year ended December 31,
2002, which includes adjustments for acquisitions for the same time frame as
actually owned in 2003, increased $14.4 million or 1.8% as a result of net
revenue internal growth.

Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $21.5 million or 4.9% to $463.5 million for the year ended
December 31, 2003 from $442.0 million for the same period in 2002. There was a
$23.6 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. This increase was offset by a $2.0
million decrease in corporate expenses due to the partial reversal in the
second quarter of 2003 of a charge related to a jury verdict rendered against
the Company in the third quarter of 2002, which is discussed below.

In the third quarter of 2002, the Company recorded a charge of $2.3 million
related to a jury verdict rendered in August 2002 against the Company for
compensatory and punitive damages. In May 2003, the Court ordered a reduction
to the punitive damage award, which was subject to the plaintiffs consent.
The plaintiff rejected the reduced award and the Court ordered a new trial.
Based on legal analysis, management believes the best estimate of the Companys
potential liability related to this claim is currently $1.3 million. The $1.0
million reduction in the reserve for this liability was recorded as a reduction
of corporate expenses in the second quarter of 2003.

Depreciation and amortization expense increased $4.4 million or 1.6% from
$277.9 million for the year ended December 31, 2002 to $282.3 million for the
year ended December 31, 2003, due to continued acquisition activity and capital
expenditures.

Due to the above factors, operating income increased $8.9 million to $65.1
million for year ended December 31, 2003 compared to $56.2 million for the same
period in 2002.



---

|(1) |  | Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net
Revenue:
|--- |  | ---------------------------------------------------------------------------

|                                 |  |                         |         |      |  |   |         | 
|-------------------------------- |  | ----------------------- | ------- | ---- |  | - | ------- | 
|                                 |  | Year ended December 31,
|                                 |  | (in thousands)         
|                                 |  | 2003                    |         | 2002
|                                 |  |                         |         |     
|Reported net revenue             |  | $                       | 810,139 |      |  | $ | 775,682 | 
|Acquisition net revenue          |  |                         |        |      |  |   | 20,016  | 
|                                 |  |                         |         |      |  |   |         | 
|Acquisition-adjusted net revenue |  | $                       | 810,139 |      |  | $ | 795,698 | 
|                                 |  |                         |         |      |  |   |         | 



| |  | The Companys management believes that acquisition-adjusted net
revenue is useful in evaluating the Companys performance and provides
investors and financial analysts a better understanding of the
Companys core operating results. The acquisition adjustments are
intended to provide information that may be useful for investors when
assessing period to period results. Our presentations of this
measure, however, may not be comparable to similarly titled measures
used by other companies.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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In January 2003, the Companys wholly owned subsidiary, Lamar Media Corp.,
redeemed all of its outstanding 9 5/8% Senior Subordinated Notes due 2006 in
aggregate principal amount of approximately $255.0 million for a redemption
price equal to 103.208% of the principal amount of the notes. In the first
quarter of 2003, the Company recorded approximately $11.2 million as a loss on
extinguishment of debt related to the prepayment of the 9 5/8% Senior
Subordinated Notes due 2006 and the write-off of related debt issuance costs.

In June 2003, Lamar Media Corp., redeemed $100.0 million in principal amount of
its 8 5/8% Senior Subordinated Notes due 2007, for a redemption price equal to
104.313% of the principal amount of the notes. In the second quarter of 2003,
the Company recorded a loss on extinguishment of debt of $5.8 million, related
to this prepayment.

In July 2003, the Company redeemed all of its outstanding 5 1/4% Convertible
Notes due 2006 in aggregate principal amount of approximately $287.5 million
for a redemption price equal to 103.0% of the principal amount of the notes.
As a result of this redemption, the Company recorded a loss on extinguishment
of debt of $12.6 million.

In December 2003, Lamar Media redeemed the remaining $100.0 million of its 8
5/8% Senior Subordinated Notes due 2007 for a redemption price equal to
102.875% of the principal amount of the notes. As a result of this redemption,
the Company recorded a loss on extinguishment of debt of $4.2 million in the
fourth quarter of 2003 related to the prepayment of the notes and associated
debt issuance costs.

Interest expense decreased $19.5 million from $107.3 million for the year ended
December 31, 2002 to $87.8 million for the year ended December 31, 2003 as a
result of lower interest rates both on existing and recently refinanced debt.

The increase in operating income and the decrease in interest expense described
above offset by the loss on extinguishment of debt resulted in a $0.2 million
decrease in loss before income taxes and cumulative effect of a change in
accounting principle. There was an increase in the income tax benefit of $0.9
million for the year ended December 31, 2003 over the same period in 2002 due
primarily to an increase in total tax benefit resulting from changes to the
expected utilization of the Companys net operating loss carryforward. The
effective tax rate for the year ended December 31, 2003 is 37.0%.

Due to the adoption of SFAS No. 143, the Company recorded a cumulative effect
of a change in accounting principle in the amount of $11.7 million net of an
income tax benefit of $7.5 million.

As a result of the above factors, the Company recognized a net loss for the
year ended December 31, 2003 of $46.9 million, as compared to a net loss of
$36.3 million for the same period in 2002.

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 which represents an increase of 5.5% over the prior
year, (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 due to acquisition
activity and internal growth. The increase in logo sign revenue of $2.6
million was primarily 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. Net revenues for the year ended December 31, 2002 as
compared to acquisitionadjusted net revenue(2) for the year ended December
31, 2001 which includes adjustments for acquisitions for the same time frame as
actually owned in 2002 increased $16.2 million or 2.1% as a result of net
revenue growth.



---

|(2) |  | Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net
Revenue:
|--- |  | ---------------------------------------------------------------------------

|                                 |  |                         |         |      |  |   |         | 
|-------------------------------- |  | ----------------------- | ------- | ---- |  | - | ------- | 
|                                 |  | Year ended December 31,
|                                 |  | (in thousands)         
|                                 |  | 2002                    |         | 2001
|                                 |  |                         |         |     
|Reported net revenue             |  | $                       | 775,682 |      |  | $ | 729,050 | 
|Acquisition net revenue          |  |                         |        |      |  |   | 30,481  | 
|                                 |  |                         |         |      |  |   |         | 
|Acquisition-adjusted net revenue |  | $                       | 775,682 |      |  | $ | 759,531 | 
|                                 |  |                         |         |      |  |   |         | 



| |  | The Companys management believes that acquisition-adjusted net
revenue is useful in evaluating the Companys performance and
provides investors and financial analysts a better understanding of
the Companys core operating results. The acquisition adjustments
are intended to provide information that may be useful for investors
when assessing period to period results. Our presentations of this
measure, however, may not be comparable to similarly titled measures
used by other companies.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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.

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.

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 Corp., 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 cash flows provided by operating activities increased by $19.6
million for the year ended December 31, 2003 due primarily to an increase in
adjustments to reconcile net loss to cash provided by operating activities of
$38.0 million, which primarily includes an increase in the loss on
extinguishment of debt of $27.8 million, an increase in depreciation and
amortization of $4.4 million and the cumulative effect of a change in
accounting principle of $11.7 million offset by an increase in deferred income
tax benefit of $5.0 million. This increase was offset by an increase in net
loss of $10.5 million. In addition, as compared to the same period in 2002,
there were increases in the change in receivables of $3.1 million, in other
assets of $4.7 million, in other liabilities of $1.3 million, in trade accounts
payable of $1.3 million, and prepaid expenses of $0.4 million and increases in
the change in accrued expenses of $2.9 million.

Cash flows used in investing activities increased $54.2 million from $155.8
million in 2002 to $210.0 million in 2003 primarily due to the increase in cash
used in acquisition activity by the Company in 2003 of $58.5 million offset by
a decrease in the change in notes receivable of $1.7 million and an increase in
proceeds from sale of property and equipment of $2.4 million.

Cash flows used in financing activities decreased by $24.1 million for the year
ended December 31, 2003 due to a $152.0 million increase in net proceeds from
note offerings and new notes payable, which is due to the issuance of Lamar
Advertisings $287.5 million 2 7/8% Convertible Notes, Lamar Medias issuance
of $125.0 million 7 1/4% Senior Subordinated Notes and increase in cash from
deposits for debt extinguishment of $533.3 million offset by a $627.3 million
increase in principal payments of long-term debt due primarily to the
redemption of Lamar Medias 9 5/8% Senior Subordinated Notes, 8 5/8% Senior
Subordinated Notes and the Companys 5 1/4% Convertible Notes. In addition,
there was a $5.2 million decrease in proceeds from issuance of the Companys
Class A common stock, an $8.7 million increase in debt issuance costs and a
$20.0 million decrease in net borrowings from credit agreements.

14



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During the year ended December 31, 2003, the Company financed its acquisition
activity of approximately $188.2 million with borrowings under Lamar Medias
revolving credit facility and cash on hand totaling $137.6 million as well as
the issuance of shares of the Companys Class A common stock valued
at the time of issuance at approximately $50.6 million.

The Companys wholly owned subsidiary, Lamar Media Corp., replaced its bank
credit facility on March 7, 2003 and subsequently amended it in February 2004.
The bank credit facility is comprised of a $225.0 million revolving bank credit
facility and a $975.0 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
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. At
December 31, 2003 Lamar Media had $179.4 million available under its revolving
bank credit facility.

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

|                                   |  |                   |         |           |  |                        |       |       |  |         |       |  |  |  |       |  |  |  |         | 
|---------------------------------- |  | ----------------- | ------- | --------- |  | ---------------------- | ----- | ----- |  | ------- | ----- |  |  |  | ----- |  |  |  | ------- | 
|                                   |  |                   |         |           |  | Payments Due by Period
|                                   |  |                   |         |           |  | (in millions)         
|                                   |  |                   |         |           |  |                       
|Contractual                        |  | Balance at        |         | Less than |  | 1  3                  |       | 4 - 5 |  | After 5
|Obligations                        |  | December 31, 2003 |         | 1 Year    |  | Years                  |       | Years |  | Years  
|                                   |  |                   |         |           |  |                        |       |       |  |        
|Long-Term Debt                     |  | $                 | 1,704.9 |           |  |                        | 5.0   |       |  |         | 126.2 |  |  |  | 165.2 |  |  |  | 1,408.5 | 
|Billboard site and building leases |  | $                 | 838.8   |           |  |                        | 112.2 |       |  |         | 179.7 |  |  |  | 137.2 |  |  |  | 409.7   | 
|                                   |  |                   |         |           |  |                        |       |       |  |         |       |  |  |  |       |  |  |  |         | 
|Total Payments due                 |  | $                 | 2,543.7 |           |  |                        | 117.2 |       |  |         | 305.9 |  |  |  | 302.4 |  |  |  | 1,818.2 | 
|                                   |  |                   |         |           |  |                        |       |       |  |         |       |  |  |  |       |  |  |  |         | 

|                            |  |              |       |           |  |                       |     |       |  |         |     |  |  |  |   |  |  |  |       | 
|--------------------------- |  | ------------ | ----- | --------- |  | --------------------- | --- | ----- |  | ------- | --- |  |  |  | - |  |  |  | ----- | 
|                            |  |              |       |           |  | Amount of            
|                            |  |              |       |           |  | Expiration Per Period
|                            |  |              |       |           |  | (in millions)        
|                            |  |              |       |           |  |                      
|Other Commercial            |  | Total Amount |       | Less than |  | 1  3                 |     | 4 - 5 |  | After 5
|Commitments                 |  | Committed    |       | 1 Year    |  | Years                 |     | Years |  | Years  
|                            |  |              |       |           |  |                       |     |       |  |        
|Revolving Bank Facility (1) |  | $            | 225.0 |           |  |                       |    |       |  |         |    |  |  |  |  |  |  |  | 225.0 | 
|                            |  |              |       |           |  |                       |     |       |  |         |     |  |  |  |   |  |  |  |       | 
|Standby Letters of Credit   |  | $            | 5.6   |           |  |                       | 1.3 |       |  |         | 4.3 |  |  |  |  |  |  |  |      | 
|                            |  |              |       |           |  |                       |     |       |  |         |     |  |  |  |   |  |  |  |       | 



---

|(1)Lamar Media had $40.0 million outstanding at December 31, 2003.
|------------------------------------------------------------------

In January 2003, Lamar Media redeemed all of its outstanding 9 5/8% Senior
Subordinated Notes due 2006 in aggregate principal amount of approximately
$255.0 million for a redemption price equal to 103.208% of the principal amount
of the notes. As a result of this redemption, the Company recorded a loss on
extinguishment of debt of $11.2 million which consisted of a prepayment penalty
of $8.2 million and associated debt issuance costs of approximately $3.0
million.

In June 2003, Lamar Media Corp. called for the redemption of $100.0 million of
its $200.0 million 8 5/8% Senior Subordinated Notes due 2007. The redemption
was funded by the issuance on June 12, 2003 of a $125.0 million add-on to its
$260.0 million 7 1/4% Notes due 2013 issued in December 2002. The issue price
of the $125.0 million 7 1/4% Notes was 103.661% of the principal amount of the
notes, which yields an effective rate of 6 5/8%. The redemption price of the
$100.0 million 8 5/8% senior subordinated notes was equal to 104.313% of the
principal amount of the notes. As a result of this redemption, the Company
recorded a loss on extinguishment of debt of $5.8 million which consisted of a
prepayment penalty of $4.3 million and associated debt issuance costs of
approximately $1.5 million.

In July 2003, the Company redeemed all of its $287.5 million 5 1/4% Convertible
Notes due 2006. The redemption was funded by the issuance on June 16, 2003 of
$287.5 million 2 7/8% Convertible Notes due 2010. The redemption price of the
notes was equal to 103.0% of the principal amount of the notes. As a result of
this redemption, the Company recorded a loss on extinguishment of debt of $12.6
million, which consisted of a prepayment penalty of $8.6 million and associated
debt issuance costs of approximately $4.0 million.

In December 2003, Lamar Media redeemed the remaining $100.0 million of its 8
5/8% Senior Subordinated Notes due 2007 for a redemption price equal to
102.875% of the principal amount of the notes. The redemption was funded by
cash from operations and borrowings under the Companys bank credit facility.
As a result of this redemption, the Company recorded a loss on extinguishment
of debt of $4.2 million which consisted of a prepayment penalty of $2.9 million
and associated debt issuance costs of approximately $1.3 million.

Currently Lamar Media has outstanding approximately $385.0 million 7 1/4%
Senior Subordinated Notes due 2013 issued in December 2002 and June 2003. The
indentures relating to Lamar Medias outstanding notes restrict its ability to
incur indebtedness other than:

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| |  |  | up to $1.2 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; and                                                                                                                                               
|
| |  |  | 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 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,
2003 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
(through December 30, 2004) and 5.75 to 1 (after December 30, 2004);
and    
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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 bank credit facility requires that Lamar Media must maintain the following financial ratios:



| |  | an interest coverage ratio defined as EBITDA (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                                                                                                                                                 
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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 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 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 bank credit agreement and future cash flows from operations are sufficient
to meet its operating needs through the year 2004. All debt obligations are on
the Companys balance sheet.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our results of operations and liquidity and
capital resources are based on our consolidated financial statements, which
have been prepared in accordance with the accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate
our estimates and judgments, including those related to long-lived asset
recovery, intangible assets, goodwill impairment, deferred taxes and allowance
for doubtful accounts. We base our estimates on historical and anticipated
results and trends and on various other assumptions that we believe are
reasonable under the circumstances, including assumptions as to future events
and, where applicable, established valuation techniques. These estimates form
the basis for making judgments about carrying values of assets and liabilities
that are not readily apparent from other sources. By their nature, estimates
are subject to an inherent degree of uncertainty. Actual results may differ
from our estimates. We believe that the following significant accounting
policies and assumptions may involve a higher degree of judgment and complexity
than others.

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 $1,254 million
and intangible assets of $967 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

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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 the 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. No such
impairment charge has been recorded by the Company that management believes is
due to the Companys disciplined approach in determining the purchase price of
acquisitions that drives the growth of the Companys long-lived assets.

Intangible Assets The Company has significant intangible assets recorded on
its balance sheet. Intangible assets primarily represent goodwill of $1,240
million, site locations of $778 million and customer relationships of $140.2
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, including projecting net revenue growth discounted using current cost
of capital rates, 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. Historically no impairment charge
has been required with respect to the Companys intangible assets.

Goodwill Impairment The Company had goodwill of $1,240 million as of December
31, 2003 and must perform an impairment analysis of goodwill annually or if
events and circumstances indicate that the asset might be impaired on a more
frequent basis. 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 which
are used to calculate the Companys enterprise value as compared to the
carrying value of the Companys assets. Discounted cash flow models before
interest expense are also used. These discounted cash flow models require
management to make assumptions including projecting the Companys net revenue
growth discounted using current cost of capital rates 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 and December 31, 2003.

Deferred Taxes As of December 31, 2003, the Company has made the
determination that its deferred tax assets of $168.5 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 $257.0 million that are anticipated to reverse during the
carryforward period. The Company bases this determination by projecting
taxable income over the relevant period. 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 10 of the Notes to the Consolidated Financial
Statements.

Asset Retirement Obligations The Company had an asset retirement obligation of
$36.9 million as of December 31, 2003 as a result of its adoption of SFAS No.
143, Accounting for Asset Retirement Obligations, on January 1, 2003. The
Company records the present value of obligations associated with the retirement
of tangible long-lived assets in the period in which they are incurred. The
liability is capitalized as part of the related long-lived assets carrying
amount. Over time, accretion of the liability is recognized as an operating
expense and the capitalized cost is depreciated over the expected useful life
of the related asset. The Companys asset retirement obligations relate
primarily to the dismantlement, removal, site reclamation and similar
activities of its outdoor advertising properties. In calculating the
liability, the Company calculates the present value of the estimated cost to
dismantle using an average cost to dismantle, adjusted for inflation and market
risk.

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, $9 million and $8
million or approximately 1% of net revenue for the years ended December 31,
2003, 2002 and 2001, respectively. If the future economic environment
declines, 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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, FASB Statement No. 143, Accounting for Asset Retirement
Obligations, was issued. Statement 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 also would 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 would 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
adopted Statement 143 as required, on January 1, 2003.

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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 did not have a
material 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 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 did not have a material effect on the Companys financial
statements.

In December 2003, the FASB issued Interpretation No. 46 (revised December
2003), 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 did not have an effect on the Companys financial statements
as the Company has no variable interest entities.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under FASB Statement No.
133, Accounting for Derivative Instruments and Hedging Activities. The
Company adopted SFAS No. 149 effective June 30, 2003. The adoption of SFAS No.
149 did not have an impact on its consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. Statement
150 affects the issuers accounting for three types of freestanding financial
instruments. One type is mandatory redeemable shares, which the issuing
company is obligated to buy back in exchange for cash or other assets. A
second type, which includes put options and forward purchase contracts,
involves instruments that do or may require the issuer to buy back some of its
shares in exchange for cash or other assets. The third type of instruments
that are liabilities under this Statement is obligations that can be settled
with shares, the monetary value of which is fixed, tied solely or predominately
to a variable such as a market index, or varies inversely with the value of the
issuers shares. Statement 150 does not apply to features embedded in a
financial instrument that is not a derivative in its entirety. Most of the
guidance in Statement 150 is effective for all financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
Company currently does not have any financial instruments that are within the
scope of SFAS No. 150.

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, 2003,
2002 and 2001. 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, 2003, 2002 and 2001:

18



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##### Table of Contents



|                              |                                     |  |                         |      |      |  |       |      |  |  |       |      | 
|----------------------------- | ----------------------------------- |  | ----------------------- | ---- | ---- |  | ----- | ---- |  |  | ----- | ---- | 
|                              |                                     |  | Year ended December 31,
|                              |                                     |  |                        
|                              |                                     |  | 2003                    |      | 2002 |  | 2001 
|                              |                                     |  |                         |      |      |  |      
|Net revenues                  |                                     |  | 100.0                   | %    |      |  | 100.0 | %    |  |  | 100.0 | %   
|Operating expenses:           |                                     |  |                         |      |      |  |       |      |  |  |       |     
|                              | Direct advertising expenses         |  |                         | 36.0 |      |  |       | 35.4 |  |  |       | 34.5 | 
|                              | General and administrative expenses |  |                         | 18.0 |      |  |       | 18.0 |  |  |       | 17.1 | 
|                              | Corporate expenses                  |  |                         | 3.1  |      |  |       | 3.5  |  |  |       | 3.6  | 
|Depreciation and amortization |                                     |  | 34.4                    |      |      |  | 35.4  |      |  |  | 48.2  |     
|Operating income (loss)       |                                     |  | 8.5                     |      |      |  | 7.7   |      |  |  | (3.3  | )   
|Interest expense              |                                     |  | 9.3                     |      |      |  | 11.9  |      |  |  | 15.5  |     
|Net loss                      |                                     |  | (3.6                    | )    |      |  | (3.2  | )    |  |  | (13.4 | )   

Year ended December 31, 2003 compared to year ended December 31, 2002

Net revenues increased $34.4 million or 4.4% to $810.1 million for the year
ended December 31, 2003 from $775.7 million for the same period in 2002. This
increase was attributable primarily to (i) an increase in billboard net
revenues of $29.8 million or 4.1%, (ii) a $3.2 million increase in logo
sign revenue, which represents an increase of 8.4% over the prior year, and
(iii) a $1.5 million increase in transit revenue, which represents a 17.0%
increase over the prior year.

The increase in billboard net revenues of $29.8 million was due to both
acquisition activity and internal growth while the increase in logo sign
revenue of $3.2 million and transit revenue growth of $1.5 million was
generated by internal growth across various markets within the logo sign and
transit programs. Net revenues for the year ended December 31, 2003 as
compared to acquisition-adjusted net revenue(3) for the year ended December 31,
2002, which includes adjustments for acquisitions for the same time frame as
actually owned in 2003, increased $14.4 million or 1.8% as a result of net
revenue internal growth.

Operating expenses, exclusive of depreciation and amortization and gain on sale
of assets, increased $21.5 million or 4.9% to $463.2 million for the year ended
December 31, 2003 from $441.7 million for the same period in 2002. There was a
$23.6 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. This increase was offset by a $2.0
million decrease in corporate expenses due to the partial reversal in the
second quarter of 2003 of a charge related to a jury verdict rendered against
Lamar Media in the third quarter of 2002, which is discussed below.

In the third quarter of 2002, Lamar Media recorded a charge of $2.3 million
related to a jury verdict rendered in August 2002 against Lamar Media for
compensatory and punitive damages. In May 2003, the Court ordered a reduction
to the punitive damage award, which was subject to the plaintiffs consent.
The plaintiff rejected the reduced award and the Court ordered a new trial.
Based on legal analysis, management believes the best estimate of Lamar Medias
potential liability related to this claim is currently $1.3 million. The $1.0
million reduction in the reserve for this liability was recorded as a reduction
of corporate expenses in the second quarter of 2003.

Depreciation and amortization expense increased $4.4 million or 1.6% from
$274.6 million for the year ended December 31, 2002 to $279.0 million for the
year ended December 31, 2003.

Due to the above factors, operating income increased $8.9 million to $68.6
million for year ended December 31, 2003 compared to $59.7 million for the same
period in 2002.

In January 2003, Lamar Media redeemed all of its outstanding 9 5/8% Senior
Subordinated Notes due 2006 in aggregate principal amount of approximately
$255.0 million for a redemption price equal to 103.208% of the principal amount
of the notes. In the first quarter of 2003, Lamar Media recorded approximately
$11.2 million as a loss on extinguishment of debt related to the prepayment of
the 9 5/8% Senior Subordinated Notes due 2006 and the write-off of related debt
issuance costs. In June 2003, Lamar Media redeemed $100.0 million in principal
amount of its 8 5/8% Senior Subordinated Notes due 2007, for a redemption price
equal to 104.313% of the principal amount of the notes. In the second quarter
of 2003, Lamar Media recorded
a loss on extinguishment of debt of $5.8 million, related to this prepayment.



---

|(3) |  | Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net
Revenue:
|--- |  | ---------------------------------------------------------------------------

|                                 |  |                         |         |      |  |   |         | 
|-------------------------------- |  | ----------------------- | ------- | ---- |  | - | ------- | 
|                                 |  | Year ended December 31,
|                                 |  | (in thousands)         
|                                 |  | 2003                    |         | 2002
|                                 |  |                         |         |     
|Reported net revenue             |  | $                       | 810,139 |      |  | $ | 775,682 | 
|Acquisition net revenue          |  |                         |        |      |  |   | 20,016  | 
|                                 |  |                         |         |      |  |   |         | 
|Acquisition-adjusted net revenue |  | $                       | 810,139 |      |  | $ | 795,698 | 
|                                 |  |                         |         |      |  |   |         | 



| |  | The Companys management believes that acquisition-adjusted net revenue
is useful in evaluating the Companys performance and provides
investors and financial analysts a better understanding of the
Companys core operating results. The acquisition adjustments are
intended to provide information that may be useful for investors when
assessing period to period results. Our presentations of this measure,
however, may not be comparable to similarly titled measures used by
other companies.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19



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##### Table of Contents



In December 2003, Lamar Media redeemed the remaining $100.0 million of its 8
5/8% Senior Subordinated Notes due 2007 for a redemption price equal to
102.875% of the principal amount of the notes. As a result of this redemption,
Lamar Media recorded a loss on extinguishment of debt of $4.2 million related
to the prepayment of the notes and associated debt issuance costs.

Interest expense decreased $17.1 million from $92.2 million for the year ended
December 31, 2002 to $75.1 million for the year ended December 31, 2003 as a
result of lower interest rates both on existing and recently refinanced debt.

The increase in operating income and the decrease in interest expense described
above offset by the loss on extinguishment of debt resulted in a $10.4 million
decrease in loss before income taxes and cumulative effect of a change in
accounting principle. Because of the decrease in loss before income taxes and
cumulative effect of a change in accounting principle, there was a decrease in
the income tax benefit of $3.0 million for the year ended December 31, 2003
over the same period in 2002. The effective tax rate for the year ended
December 31, 2003 is 34.9%.

Due to the adoption of SFAS No. 143, the Company recorded a cumulative effect
of a change in accounting principle, net of tax of $11.7 million.

As a result of the above factors, the Company recognized a net loss for the
year ended December 31, 2003 of $29.3 million, as compared to a net loss of
$25.0 million for the same period in 2002.

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 due to acquisition
activity and internal growth. 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. Net revenues for the year ended December 31, 2002 as
compared to acquisitionadjusted net revenue (4) for the year ended December
31, 2001 which includes adjustments for acquisitions for the same time frame as
actually owned in 2002 increased $16.2 million or 2.1% as a result of net
revenue growth.

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 corporate overhead expenses.

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 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 $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.



---

|(4) |  | Reconciliation of Reported Net Revenue to Acquisition-Adjusted Net
Revenue:
|--- |  | ---------------------------------------------------------------------------

|                                 |  |                         |         |      |  |   |         | 
|-------------------------------- |  | ----------------------- | ------- | ---- |  | - | ------- | 
|                                 |  | Year ended December 31,
|                                 |  | (in thousands)         
|                                 |  | 2002                    |         | 2001
|                                 |  |                         |         |     
|Reported net revenue             |  | $                       | 775,682 |      |  | $ | 729,050 | 
|Acquisition net revenue          |  |                         |        |      |  |   | 30,481  | 
|                                 |  |                         |         |      |  |   |         | 
|Acquisition-adjusted net revenue |  | $                       | 775,682 |      |  | $ | 759,531 | 
|                                 |  |                         |         |      |  |   |         | 



| |  | The Companys management believes that acquisition-adjusted net
revenue is useful in evaluating the Companys performance and
provides investors and financial analysts a better understanding of
the Companys core operating results. The acquisition adjustments
are intended to provide information that may be useful for
investors when assessing period to period results. Our
presentations of this measure, however, may not be comparable to
similarly titled measures used by other companies.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20



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##### Table of Contents



On October 25, 2002, Lamar Media
redeemed all of its outstanding 91⁄4% 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
91⁄4% Senior
Subordinated Notes due 2007.

Interest expense decreased $20.8 million from $113.0 million for the year ended
December 31, 2001 to $92.2 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 $99.0 million decrease in loss before income taxes. The
decrease in loss before income taxes, resulted in a decrease in the income tax
benefit of $26.4 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 net loss of
$97.6 million for the same period in 2001.

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, 2003, Lamar Advertising
Company had approximately $287.5 million of convertible notes outstanding. At
December 31, 2003, Lamar Media had approximately $1.4 billion of debt
outstanding consisting of approximately $1,015.0 million in bank debt, $389.4
million in various series of senior subordinated notes and $13.0 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, 2003,
Lamar Media had approximately $179.4 million available to borrow under its bank
credit facility. 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:



| |  |  | limiting cash flow available to fund the Companys working capital,
capital expenditures, potential acquisitions or other general corporate
requirements;                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increasing the Companys vulnerability to general adverse economic
and industry conditions;                                                                                        
|
| |  |  | limiting the Companys ability to obtain additional financing to fund
future working capital, capital expenditures, potential acquisitions or
other general corporate requirements;
|
| |  |  | limiting the Companys flexibility in planning for, or reacting to, changes in its business and industry;                                                                          
|
| |  |  | placing the Company at a competitive disadvantage compared to its competitors with less indebtedness; and                                                                          
|
| |  |  | 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:



| |  |  | incur or repay debt;                  
| | - |  | --------------------------------------
|
| |  |  | dispose of assets;                    
|
| |  |  | create liens;                         
|
| |  |  | make investments;                     
|
| |  |  | enter into affiliate transactions; and
|
| |  |  | pay dividends.                        

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##### Table of Contents



Lamar Medias ability to make distributions to Lamar Advertising is also
restricted under the terms of these agreements. Under Lamar Medias bank
credit facility the Company must maintain specified financial ratios and levels
including:



| |  |  | a minimum interest coverage ratio;
| | - |  | ----------------------------------
|
| |  |  | a minimum fixed charges ratio;    
|
| |  |  | a maximum senior debt ratio; and  
|
| |  |  | a maximum total debt ratio.       

See Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources beginning on page 14.

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.

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:



| |  |  | a general decline in economic conditions;                                                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------
|
| |  |  | a decline in economic conditions in particular markets where the Company conducts business;                           
|
| |  |  | a reallocation of advertising expenditures to other available media
by significant users of the Companys displays; or
|
| |  |  | a decline in the amount spent on advertising in general.                                                              

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:



| |  |  | 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;                                                             
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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;                             
|
| |  |  | 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;                                                                                                        
|
| |  |  | 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
|
| |  |  | 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 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,

22



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##### Table of Contents



airports, stadiums,
movie theaters and supermarkets, and on taxis, trains and buses.

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 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, 2003, 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 20 logo sign
contracts in place at December 31, 2003, one is subject to renewal in April
2004 and three are scheduled to terminate in 2004, one in April, one in June
and one in December 2004. 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, 2003, 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 65% of Lamar Advertisings outstanding voting stock.
By virtue of such stock ownership, such persons have the power to:



| |  |  | elect the Companys entire board of directors;                                                                                                                                                                                                                                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | control the Companys management and policies; and                                                                                                                                                                                                                                  
|
| |  |  | 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.

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

23



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##### Table of Contents



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.

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 operating performance and net earnings.

24



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##### Table of Contents






ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Lamar Advertising Company and Lamar Media Corp.

Lamar Advertising Company is exposed to interest rate risk in connection with
variable rate debt instruments issued by its wholly owned subsidiary Lamar
Media Corp. The information below summarizes the Companys interest rate risk
associated with its principal variable rate debt instruments outstanding at
December 31, 2003, and should be read in conjunction with Note 8 of the Notes
to the Companys Consolidated Financial Statements.

Loans under Lamar Media Corp.s bank credit agreement bear interest at variable
rates equal to the JPMorgan Chase Prime Rate or LIBOR plus the applicable
margin. Because the JPMorgan Chase Prime Rate or LIBOR may increase or
decrease at any time, the Company is exposed to market risk as a result of the
impact that changes in these base rates may have on the interest rate
applicable to borrowings under the bank credit agreement. Increases in the
interest rates applicable to borrowings under the bank credit agreement would
result in increased interest expense and a reduction in the Companys net
income.

At December 31, 2003, there was approximately $1,015.0 million of aggregate
indebtedness outstanding under the bank credit agreement, or approximately
59.7% of the Companys outstanding long-term debt on that date, bearing
interest at variable rates. The aggregate interest expense for 2003 with
respect to borrowings under the bank credit agreement was $36.1 million, and
the weighted average interest rate applicable to borrowings under this credit
facility during 2003 was 3.4%. Assuming that the weighted average interest
rate was 200-basis points higher (that is 5.4% rather than 3.4%), then the
Companys 2003 interest expense would have been approximately $20.1 million
higher resulting in a $12.2 million increase in the Companys 2003 net loss.

The Company has mitigated the interest rate risk resulting from its variable
interest rate long-term debt instruments by issuing fixed rate long-term debt
instruments and maintaining a balance over time between the amount of the
Companys variable rate and fixed rate indebtedness. In addition, the Company
has the capability under the bank credit agreement to fix the interest rates
applicable to its borrowings at an amount equal to LIBOR plus the applicable
margin for periods of up to twelve months, which would allow the Company to
mitigate the impact of short-term fluctuations in market interest rates. In
the event of an increase in interest rates, the Company may take further
actions to mitigate its exposure. The Company cannot guarantee, however, that
the actions that it may take to mitigate this risk will be feasible or that, if
these actions are taken, that they will be effective.




ITEM 8. FINANCIAL STATEMENTS (following on next page)

25



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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES

|                                                                                                     |  |  |         | 
|---------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Independent Auditors Report                                                                         |  |  | 27      | 
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                         |  |  | 28      | 
|Consolidated Statements of Operations for the years ended December 31,
2003, 2002 and 2001           |  |  | 29      | 
|Consolidated Statements of Stockholders Equity for the years ended
December 31, 2003, 2002 and 2001 |  |  | 30      | 
|Consolidated Statements of Cash Flows for the years ended December 31,
2003, 2002 and 2001           |  |  | 31      | 
|Notes to Consolidated Financial Statements                                                           |  |  | 32  50 | 
|Schedule 2  Valuation and Qualifying Accounts for the years ended
December 31, 2003, 2002 and 2001  |  |  | 51      | 

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##### Table of Contents



Independent Auditors Report

Board of Directors
Lamar Advertising Company:

We have audited the consolidated financial statements of Lamar Advertising
Company and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lamar Advertising
Company and subsidiaries as of December 31, 2003 and 2002, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

As discussed in Note 1(d) to the consolidated financial statements, effective
July 1, 2001, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations, and certain
provisions of SFAS No. 142, Goodwill and Other Intangible Assets, as required
for goodwill and intangible assets resulting from business combinations
consummated after June 30, 2001. The provisions of SFAS No. 142 were fully
adopted on January 1, 2002. As discussed in Note 9 to the consolidated
financial statements, the Company adopted the provisions of SFAS No. 143,
Accounting for Asset Retirement Obligations on January 1, 2003.

/s/ KPMG LLPKPMG LLP

New Orleans, Louisiana
February 9, 2004

27



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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES




Consolidated Balance Sheets
December 31, 2003 and 2002
(In thousands, except share and per share data)


|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |           |           |           | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------- | ------------------------------------------ | --------- | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                          |                                                                                                                                                              |                                   |                                            |           | 2003      |           | 2002     
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |          
|ASSETS                                    |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|Current assets:                           |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          | Cash and cash equivalents                                                                                                                                    |                                   | $                                          | 7,797     |           |           | $         | 15,610    |          
|                                          | Cash on deposit for debt extinguishment (note 8)                                                                                                             |                                   |                                            |          |           |           |           | 266,657   |          
|                                          | Receivables, net of allowance for doubtful accounts of $4,914 in
2003 and 2002                                                                               |                                   |                                            | 90,567    |           |           |           | 92,382    |          
|                                          | Prepaid expenses                                                                                                                                             |                                   |                                            | 32,377    |           |           |           | 30,091    |          
|                                          | Deferred income tax assets (note 10)                                                                                                                         |                                   |                                            | 6,051     |           |           |           | 6,428     |          
|                                          | Other current assets                                                                                                                                         |                                   |                                            | 7,325     |           |           |           | 7,315     |          
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          |                                                                                                                                                              | Total current assets              |                                            |           | 144,117   |           |           |           | 418,483   |          
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|Property, plant and equipment (note 4)    |                                                                                                                                                              |                                   | 1,933,003                                  |           |           |           | 1,850,657 |          
|                                          | Less accumulated depreciation and amortization                                                                                                               |                                   |                                            | (679,205  | )         |           |           | (566,889  | )        
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          |                                                                                                                                                              | Net property, plant and equipment |                                            |           | 1,253,798 |           |           |           | 1,283,768 |          
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|Goodwill (note 5)                         |                                                                                                                                                              |                                   | 1,240,275                                  |           |           |           | 1,178,428 |          
|Intangible assets (note 5)                |                                                                                                                                                              |                                   | 966,998                                    |           |           |           | 988,953   |          
|Other assets                              |                                                                                                                                                              |                                   | 32,159                                     |           |           |           | 18,474    |          
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          |                                                                                                                                                              |                                   | Total assets                               |           | $         | 3,637,347 |           |           | $         | 3,888,106 | 
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY      |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|Current liabilities:                      |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          | Trade accounts payable                                                                                                                                       |                                   | $                                          | 8,813     |           |           | $         | 10,051    |          
|                                          | Current maturities of long-term debt (note 8)                                                                                                                |                                   |                                            | 5,044     |           |           |           | 4,687     |          
|                                          | Current maturities related to debt extinguishment (note 8)                                                                                                   |                                   |                                            |          |           |           |           | 255,000   |          
|                                          | Accrued expenses (note 7)                                                                                                                                    |                                   |                                            | 45,986    |           |           |           | 38,881    |          
|                                          | Deferred income                                                                                                                                              |                                   |                                            | 14,372    |           |           |           | 13,942    |          
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          |                                                                                                                                                              |                                   | Total current liabilities                  |           |           | 74,215    |           |           |           | 322,561   | 
|Long-term debt (note 8)                   |                                                                                                                                                              |                                   | 1,699,819                                  |           |           |           | 1,734,746 |          
|Deferred income tax liabilities (note 10) |                                                                                                                                                              |                                   | 94,542                                     |           |           |           | 114,260   |          
|Asset retirement obligation (note 9)      |                                                                                                                                                              |                                   | 36,857                                     |           |           |           |          |          
|Other liabilities                         |                                                                                                                                                              |                                   | 9,109                                      |           |           |           | 7,366     |          
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          |                                                                                                                                                              |                                   | Total liabilities                          |           |           | 1,914,542 |           |           |           | 2,178,933 | 
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|Stockholders equity (note 12):           |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          | Series AA preferred stock, par value $.001, $63.80 cumulative dividends,
authorized 5,720 shares; 5,719 shares issued and outstanding at 2003 and 2002       |                                   |                                            |          |           |           |           |          |          
|                                          | Class A preferred stock, par value $638, $63.80 cumulative dividends, 10,000
shares authorized, 0 shares issued and outstanding at 2003 and 2002             |                                   |                                            |          |           |           |           |          |          
|                                          | Class A common stock, par value $.001, 175,000,000 shares authorized,
87,266,763 and 85,077,038 shares issued and outstanding at 2003 and 2002,
respectively |                                   |                                            | 87        |           |           |           | 85        |          
|                                          | Class B common stock, par value $.001, 37,500,000 shares authorized,
16,147,073 and 16,417,073 are issued and outstanding at 2003 and 2002,
respectively     |                                   |                                            | 16        |           |           |           | 16        |          
|                                          | Additional paid-in-capital                                                                                                                                   |                                   |                                            | 2,097,555 |           |           |           | 2,036,709 |          
|                                          | Accumulated deficit                                                                                                                                          |                                   |                                            | (374,853  | )         |           |           | (327,637  | )        
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          |                                                                                                                                                              |                                   | Stockholders equity                       |           |           | 1,722,805 |           |           |           | 1,709,173 | 
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          
|                                          |                                                                                                                                                              |                                   | Total liabilities and stockholders equity |           | $         | 3,637,347 |           |           | $         | 3,888,106 | 
|                                          |                                                                                                                                                              |                                   |                                            |           |           |           |           |          

See accompanying notes to consolidated financial statements.

28



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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES




Consolidated Statements of Operations
Years Ended December 31, 2003, 2002 and 2001
(In thousands, except share and per share data)


|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |         |  
|---------------------------------------------------------------------------------------- | ----------------------------------- | - | ----------- | ------- | ---- | - | ----------- | ------- | - | - | ---------- | ------- | -
|                                                                                         |                                     |   | 2003        |         | 2002 |   | 2001       
|                                                                                         |                                     |   |             |         |      |   |            
|Net revenues                                                                             |                                     | $ | 810,139     |         |      | $ | 775,682     |         |   | $ | 729,050    |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Operating expenses (income):                                                             |                                     |   |             |         |      |   |             |         |   |   |            |        
|                                                                                         | Direct advertising expenses         |   |             | 292,017 |      |   |             | 274,772 |   |   |            | 251,483 |  
|                                                                                         | General and administrative expenses |   |             | 145,971 |      |   |             | 139,610 |   |   |            | 124,339 |  
|                                                                                         | Corporate expenses                  |   |             | 25,549  |      |   |             | 27,572  |   |   |            | 26,709  |  
|                                                                                         | Depreciation and amortization       |   |             | 282,273 |      |   |             | 277,893 |   |   |            | 355,529 |  
|                                                                                         | Gain on disposition of assets       |   |             | (748    | )    |   |             | (336    | ) |   |            | (923    | )
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|                                                                                         |                                     |   | 745,062     |         |      |   | 719,511     |         |   |   | 757,137    |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|                                                                                         | Operating income (loss)             |   |             | 65,077  |      |   |             | 56,171  |   |   |            | (28,087 | )
|Other expense (income):                                                                  |                                     |   |             |         |      |   |             |         |   |   |            |        
|                                                                                         | Loss on extinguishment of debt      |   |             | 33,644  |      |   |             | 5,850   |   |   |            |        |  
|                                                                                         | Interest income                     |   |             | (502    | )    |   |             | (929    | ) |   |            | (640    | )
|                                                                                         | Interest expense                    |   |             | 87,750  |      |   |             | 107,272 |   |   |            | 126,861 |  
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|                                                                                         |                                     |   | 120,892     |         |      |   | 112,193     |         |   |   | 126,221    |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Loss before income tax benefit and cumulative effect of
a change in accounting principle |                                     |   | (55,815     | )       |      |   | (56,022     | )       |   |   | (154,308   | )      
|Income tax benefit (note 10)                                                             |                                     |   | (20,643     | )       |      |   | (19,694     | )       |   |   | (45,674    | )      
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Loss before cumulative effect of a change in accounting
principle                        |                                     |   | (35,172     | )       |      |   | (36,328     | )       |   |   | (108,634   | )      
|Cumulative effect of a change in accounting principle,
net of tax benefit of $7,467      |                                     |   | 11,679      |         |      |   |            |         |   |   |           |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Net loss                                                                                 |                                     |   | (46,851     | )       |      |   | (36,328     | )       |   |   | (108,634   | )      
|Preferred stock dividends                                                                |                                     |   | 365         |         |      |   | 365         |         |   |   | 365        |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Net loss applicable to common stock                                                      |                                     | $ | (47,216     | )       |      | $ | (36,693     | )       |   | $ | (108,999   | )      
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Loss per common share:                                                                   |                                     |   |             |         |      |   |             |         |   |   |            |        
|Loss before cumulative effect of a change in accounting
principle                        |                                     | $ | (0.35       | )       |      | $ | (0.36       | )       |   | $ | (1.11      | )      
|Cumulative effect of a change in accounting principle                                    |                                     | $ | (0.11       | )       |      | $ |            |         |   | $ |           |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Net loss                                                                                 |                                     | $ | (0.46       | )       |      | $ | (0.36       | )       |   | $ | (1.11      | )      
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Weighted average common shares outstanding                                               |                                     |   | 102,686,780 |         |      |   | 101,089,215 |         |   |   | 98,566,949 |        
|Incremental common shares from dilutive stock options                                    |                                     |   |            |         |      |   |            |         |   |   |           |        
|Incremental common shares from convertible debt                                          |                                     |   |            |         |      |   |            |         |   |   |           |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        
|Weighted average common shares assuming dilution                                         |                                     |   | 102,686,780 |         |      |   | 101,089,215 |         |   |   | 98,566,949 |        
|                                                                                         |                                     |   |             |         |      |   |             |         |   |   |            |        

See accompanying notes to consolidated financial statements.

29



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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES




Consolidated Statements of Stockholders Equity
Years Ended December 31, 2003, 2002 and 2001
(In thousands, except per share data)


|                           |                                                                              |   |           |   |           |  |         |   |         |  |         |   |         |  |       |    |       |  |           |        |  |  |          |          |   |  |           |          |  
|-------------------------- | ---------------------------------------------------------------------------- | - | --------- | - | --------- |  | ------- | - | ------- |  | ------- | - | ------- |  | ----- | -- | ----- |  | --------- | ------ |  |  | -------- | -------- | - |  | --------- | -------- | -
|                           |                                                                              |   | SERIES    |   |           |  |         |   |         |  |         |   |         |  |       |    | ADDI- |  |           |        |  |  |          |          |  
|                           |                                                                              |   | AA        |   | CLASS A   |  | CLASS A |   | CLASS B |  | TIONAL  |   | ACCUM-  |  |       |    |      
|                           |                                                                              |   | PREFERRED |   | PREFERRED |  | COMMON  |   | COMMON  |  | PAID-IN |   | ULATED  |  |       |    |      
|                           |                                                                              |   | STOCK     |   | STOCK     |  | STOCK   |   | STOCK   |  | CAPITAL |   | DEFICIT |  | TOTAL
|                           |                                                                              |   |           |   |           |  |         |   |         |  |         |   |         |  |      
|Balance, December 31, 2000 |                                                                              | $ |          |   |           |  |        |   |         |  | 80      |   |         |  | 17    |    |       |  | 1,871,303 |        |  |  | (181,945 | )        |   |  | 1,689,455 |         
|                           | Issuance of 725,000 shares of
common stock in acquisitions                   |   |           |  |           |  |         |  |         |  |         | 1 |         |  |       |   |       |  |           | 28,999 |  |  |          |         |   |  |           | 29,000   |  
|                           | Exercise of 425,243 shares of stock
options                                  |   |           |  |           |  |         |  |         |  |         | 1 |         |  |       |   |       |  |           | 12,941 |  |  |          |         |   |  |           | 12,942   |  
|                           | Conversion of 388,165 shares of
Class B common stock to
Class A common stock |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          |         |   |  |           |         |  
|                           | Issuance of 59,599 shares of common
stock through employee purchase
plan     |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           | 1,823  |  |  |          |         |   |  |           | 1,823    |  
|                           | Issuance of 1,200,000 shares of
common stock for cash                        |   |           |  |           |  |         |  |         |  |         | 1 |         |  |       |   |       |  |           | 47,999 |  |  |          |         |   |  |           | 48,000   |  
|                           | Net loss                                                                     |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          | (108,634 | ) |  |           | (108,634 | )
|                           | Dividends ($63.80 per preferred
share)                                       |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          | (365     | ) |  |           | (365     | )
|                           |                                                                              |   |           |   |           |  |         |   |         |  |         |   |         |  |       |    |       |  |           |        |  |  |          |          |   |  |           |         
|Balance, December 31, 2001 |                                                                              | $ |          |   |           |  |        |   |         |  | 83      |   |         |  | 17    |    |       |  | 1,963,065 |        |  |  | (290,944 | )        |   |  | 1,672,221 |         
|                           | Issuance of 1,405,464 shares of
common stock in acquisitions                 |   |           |  |           |  |         |  |         |  |         | 1 |         |  |       |   |       |  |           | 56,099 |  |  |          |         |   |  |           | 56,100   |  
|                           | Exercise of 515,588 shares of
stock options                                  |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           | 15,722 |  |  |          |         |   |  |           | 15,722   |  
|                           | Conversion of 194,762 shares of
Class B common stock to
Class A common stock |   |           |  |           |  |         |  |         |  |         | 1 |         |  |       | (1 | )     |  |           |       |  |  |          |         |   |  |           |         |  
|                           | Issuance of 61,424 shares of common
stock through employee purchase
plan     |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           | 1,823  |  |  |          |         |   |  |           | 1,823    |  
|                           | Net loss                                                                     |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          | (36,328  | ) |  |           | (36,328  | )
|                           | Dividends ($63.80 per preferred
share)                                       |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          | (365     | ) |  |           | (365     | )
|                           |                                                                              |   |           |   |           |  |         |   |         |  |         |   |         |  |       |    |       |  |           |        |  |  |          |          |   |  |           |         
|Balance, December 31, 2002 |                                                                              | $ |          |   |           |  |        |   |         |  | 85      |   |         |  | 16    |    |       |  | 2,036,709 |        |  |  | (327,637 | )        |   |  | 1,709,173 |         
|                           | Issuance of 1,550,095 shares of
common stock in acquisitions                 |   |           |  |           |  |         |  |         |  |         | 2 |         |  |       |   |       |  |           | 50,628 |  |  |          |         |   |  |           | 50,630   |  
|                           | Exercise of 298,105 shares of
stock options                                  |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           | 8,272  |  |  |          |         |   |  |           | 8,272    |  
|                           | Conversion of 270,000 shares of
Class B common stock to Class A
stock        |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          |         |   |  |           |         |  
|                           | Issuance of 72,025 shares of common
stock through employee purchase
plan     |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           | 1,946  |  |  |          |         |   |  |           | 1,946    |  
|                           | Net loss                                                                     |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          | (46,851  | ) |  |           | (46,851  | )
|                           | Dividends ($63.80 per preferred
share)                                       |   |           |  |           |  |         |  |         |  |         |  |         |  |       |   |       |  |           |       |  |  |          | (365     | ) |  |           | (365     | )
|                           |                                                                              |   |           |   |           |  |         |   |         |  |         |   |         |  |       |    |       |  |           |        |  |  |          |          |   |  |           |         
|Balance, December 31, 2003 |                                                                              | $ |          |   |           |  |        |   |         |  | 87      |   |         |  | 16    |    |       |  | 2,097,555 |        |  |  | (374,853 | )        |   |  | 1,722,805 |         
|                           |                                                                              |   |           |   |           |  |         |   |         |  |         |   |         |  |       |    |       |  |           |        |  |  |          |          |   |  |           |         

See accompanying notes to consolidated financial statements.

30



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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES




Consolidated Statements of Cash Flows
Years Ended December 31, 2003, 2002 and 2001
(In thousands)


|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |          |         |          |  
|-------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | -------- | ------- | -------- | ---- | -------- | ------- | -------- | - | -------- | ------- | -------- | -
|                                                   |                                                                                 |                                                       |                                                       |          | 2003    |          | 2002 |          | 2001   
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |        
|Cash flows from operating activities:              |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Net loss                                                                        |                                                       | $                                                     | (46,851  | )       |          | $    | (36,328  | )       |          | $ | (108,634 | )      
|                                                   | Adjustments to reconcile net loss to net cash provided by
operating activities: |                                                       |                                                       |          |         |          |      |          |         |          |   |          |        
|                                                   |                                                                                 | Depreciation and amortization                         |                                                       |          | 282,273 |          |      |          | 277,893 |          |   |          | 355,529 |         
|                                                   |                                                                                 | Gain on disposition of assets                         |                                                       |          | (748    | )        |      |          | (336    | )        |   |          | (923    | )       
|                                                   |                                                                                 | Loss on extinguishment of debt                        |                                                       |          | 33,644  |          |      |          | 5,850   |          |   |          |        |         
|                                                   |                                                                                 | Cumulative effect of a change in accounting principle |                                                       |          | 11,679  |          |      |          |        |          |   |          |        |         
|                                                   |                                                                                 | Deferred income tax benefit                           |                                                       |          | (20,601 | )        |      |          | (15,584 | )        |   |          | (46,387 | )       
|                                                   |                                                                                 | Provision for doubtful accounts                       |                                                       |          | 8,599   |          |      |          | 9,036   |          |   |          | 7,794   |         
|                                                   | Changes in operating assets and liabilities:                                    |                                                       |                                                       |          |         |          |      |          |         |          |   |          |        
|                                                   |                                                                                 | (Increase) decrease in:                               |                                                       |          |         |          |      |          |         |          |   |          |         |         
|                                                   |                                                                                 |                                                       | Receivables                                           |          |         | (7,425   | )    |          |         | (4,359   | ) |          |         | (9,413   | )
|                                                   |                                                                                 |                                                       | Prepaid expenses                                      |          |         | (2,923   | )    |          |         | (2,533   | ) |          |         | (1,321   | )
|                                                   |                                                                                 |                                                       | Other assets                                          |          |         | (3,038   | )    |          |         | 1,704    |   |          |         | 2,192    |  
|                                                   |                                                                                 | Increase (decrease) in:                               |                                                       |          |         |          |      |          |         |          |   |          |         |         
|                                                   |                                                                                 |                                                       | Trade accounts payable                                |          |         | (1,238   | )    |          |         | 3        |   |          |         | 131      |  
|                                                   |                                                                                 |                                                       | Accrued expenses                                      |          |         | 6,450    |      |          |         | 3,551    |   |          |         | (8,287   | )
|                                                   |                                                                                 |                                                       | Other liabilities                                     |          |         | 254      |      |          |         | 1,546    |   |          |         | (49      | )
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                                                 |                                                       | Cash flows provided by operating activities           |          |         | 260,075  |      |          |         | 240,443  |   |          |         | 190,632  |  
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|Cash flows from investing activities:              |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Capital expenditures                                                            |                                                       |                                                       | (78,275  | )       |          |      | (78,390  | )       |          |   | (85,320  | )      
|                                                   | Purchase of new markets                                                         |                                                       |                                                       | (137,595 | )       |          |      | (79,135  | )       |          |   | (302,067 | )      
|                                                   | Increase in notes receivable                                                    |                                                       |                                                       |         |         |          |      | (1,650   | )       |          |   |         |        
|                                                   | Proceeds from sale of property and equipment                                    |                                                       |                                                       | 5,829    |         |          |      | 3,412    |         |          |   | 4,916    |        
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                                                 |                                                       | Cash flows used in investing activities               |          |         | (210,041 | )    |          |         | (155,763 | ) |          |         | (382,471 | )
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|Cash flows from financing activities:              |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Net proceeds from issuance of common stock                                      |                                                       |                                                       | 8,798    |         |          |      | 13,976   |         |          |   | 60,368   |        
|                                                   | Cash from deposits for debt extinguishment                                      |                                                       |                                                       | 266,657  |         |          |      | (266,657 | )       |          |   |         |        
|                                                   | Principle payments on long-term debt                                            |                                                       |                                                       | (771,388 | )       |          |      | (144,126 | )       |          |   | (67,046  | )      
|                                                   | Debt issuance costs                                                             |                                                       |                                                       | (9,899   | )       |          |      | (1,183   | )       |          |   | (573     | )      
|                                                   | Net proceeds from note offerings and new notes payable                          |                                                       |                                                       | 408,350  |         |          |      | 256,400  |         |          |   |         |        
|                                                   | Net borrowing under credit agreements                                           |                                                       |                                                       | 40,000   |         |          |      | 60,000   |         |          |   | 140,000  |        
|                                                   | Dividends                                                                       |                                                       |                                                       | (365     | )       |          |      | (365     | )       |          |   | (365     | )      
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                                                 |                                                       | Cash flows (used in) provided by financing activities |          |         | (57,847  | )    |          |         | (81,955  | ) |          |         | 132,384  |  
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                                                 |                                                       | Net increase (decrease) in cash and cash equivalents  |          |         | (7,813   | )    |          |         | 2,725    |   |          |         | (59,455  | )
|                                                   | Cash and cash equivalents at beginning of period                                |                                                       |                                                       | 15,610   |         |          |      | 12,885   |         |          |   | 72,340   |        
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Cash and cash equivalents at end of period                                      |                                                       | $                                                     | 7,797    |         |          | $    | 15,610   |         |          | $ | 12,885   |        
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|Supplemental disclosures of cash flow information: |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Cash paid for interest                                                          |                                                       | $                                                     | 81,342   |         |          | $    | 104,722  |         |          | $ | 128,434  |        
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Cash paid for state and federal income taxes                                    |                                                       | $                                                     | 825      |         |          | $    | 745      |         |          | $ | 1,189    |        
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Common stock issuance related to acquisitions                                   |                                                       | $                                                     | 50,630   |         |          | $    | 56,100   |         |          | $ | 29,000   |        
|                                                   |                                                                                 |                                                       |                                                       |          |         |          |      |          |         |          |   |         

See accompanying notes to consolidated financial statements.

31



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##### Table of Contents






LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(1) Significant Accounting Policies



| | (a) |  | Nature of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Lamar Advertising Company (the Company) is engaged in the outdoor
advertising business operating over 147,000 outdoor advertising displays
in 43 states. The Companys operating strategy is to be the leading
provider of outdoor advertising services in the markets it serves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | In addition, the Company operates a logo sign business in 20 states
throughout the United States and in one province of Canada and a transit advertising business in 38 markets. Logo signs are
erected pursuant to state-awarded service contracts on public
rights-of-way near highway exits and deliver brand name information on
available gas, food, lodging and camping services. Included in the
Companys logo sign business are tourism signing contracts. The Company provides transit advertising on bus shelters, benches and buses in the markets it serves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (b) |  | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |     |  | The accompanying consolidated financial statements include Lamar
Advertising Company, its wholly owned subsidiary, Lamar Media Corp. (Lamar
Media), and its majority-owned subsidiaries. All intercompany transactions
and balances have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (c) |  | Property, Plant and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | Property, plant and equipment are stated at cost. Depreciation is
calculated using accelerated and straight-line methods over the estimated
useful lives of the assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (d) |  | Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |     |  | Goodwill represents the excess of costs over fair value of assets of
businesses acquired in accordance with Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations, which was adopted for
all business combinations consummated after June 30, 2001 as well as
certain provisions of SFAS No. 142, Goodwill and Other Intangible
Assets. The Company fully adopted the provisions of SFAS No. 142, as of
January 1, 2002. Goodwill and other intangible assets acquired in a
purchase business combination and determined to have an indefinite useful
life are not amortized, but instead tested for impairment at least
annually in accordance with the provisions of SFAS No. 142. SFAS No. 142
also requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with SFAS No.
144, Accounting for Impairment or Disposal of Long-Lived Assets.                                                                                                                                                             
|
| |     |  | In connection with SFAS No. 142s transitional goodwill impairment
evaluation, SFAS No. 142 required the Company to perform an assessment of
whether there was an indication that goodwill is impaired as of the date
of adoption. To accomplish this, the Company was required to identify its
reporting units and determine the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of January 1, 2002. The
Company was required to determine the fair value of each reporting unit
and compare it to the carrying amount of the reporting unit. To the
extent the carrying amount of a reporting unit exceeded the fair value of
the reporting unit, the Company would be required to perform the second
step of the impairment test, as this is an indication that the reporting
unit goodwill may be impaired. The fair value of each reporting unit
exceeded its carrying amount at adoption on January 1, 2002 and at its
annual impairment test dates on December 31, 2002 and December 31, 2003
and the Company was not required to recognize an impairment loss.
|
| |     |  | Prior to the adoption of SFAS No. 142, goodwill was amortized on a
straight-line basis over the expected periods to be benefited, generally
15 years, and assessed for recoverability by determining whether the
amortization of the goodwill balance over its remaining life could be
recovered through undiscounted future operating cash flows of the acquired
operation before interest expense. The amount of goodwill and other
intangible asset impairment, if any, was measured based on projected
discounted future operating cash flows using a discount rate reflecting
the Companys average cost of funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |     |  | Intangible assets, consisting primarily of site locations, customer lists
and contracts, and non-competition agreements are amortized using the
straight-line method over the assets estimated useful lives, generally
from 5 to 15 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | Debt issuance costs are deferred and amortized over the terms of the
related credit facilities using the interest method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

32



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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)



| | (e) |  | Impairment of Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | SFAS No. 144 provides a single accounting model for long-lived assets to
be disposed of. SFAS No. 144 also changes the criteria for classifying an
asset as held for sale; and broadens the scope of businesses to be
disposed of that qualify for reporting as discontinued operations and
changes the timing of recognizing losses on such operations. The Company
adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did
not affect the Companys financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | In accordance with SFAS No. 144, long-lived assets, such as property,
plant and equipment, and purchased intangibles subject to amortization,
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to estimated undiscounted future cash
flows expected to be generated by the asset before interest expense. If
the carrying amount of an asset exceeds its estimated future cash flows,
an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Assets to be
disposed of would be separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less costs to
sell, and are no longer depreciated. The assets and liabilities of a
disposed group classified as held for sale would be presented separately
in the appropriate asset and liability sections of the balance sheet.
|
| |     |  | Prior to the adoption of SFAS No. 144, the Company accounted for
long-lived assets in accordance with SFAS No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | (f) |  | Deferred Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |     |  | Deferred income consists principally of advertising revenue received in
advance and gains resulting from the sale of                      certain
assets to related parties. Deferred advertising revenue is recognized in
income as services are provided over the term of the contract. Deferred
gains are recognized in income in the consolidated financial statements at
the time the assets are sold to an unrelated party or otherwise disposed
of.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (g) |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |     |  | The Company recognizes revenue, net of agency commissions, if any, on an
accrual basis ratably over the term of the contracts, as services are
provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |     |  | The Company engages in barter transactions where the Company trades
advertising space for goods and services. The Company recognizes revenues
and expenses from barter transactions at fair value which is determined
based on the Companys own historical practice of receiving cash for
similar advertising space from buyers unrelated to the party in the barter
transaction. The amount of revenue and expense recognized for advertising
barter transactions is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                                    |  |      |       |      |  |      |       |  |  |  |       | 
|----------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                    |  | 2003 |       | 2002 |  | 2001
|                                    |  |      |       |      |  |     
|Net revenues                        |  | $    | 6,360 |      |  |      | 3,677 |  |  |  | 1,315 | 
|Direct advertising expenses         |  |      | 2,780 |      |  |      | 691   |  |  |  | 500   | 
|General and administrative expenses |  |      | 3,197 |      |  |      | 2,557 |  |  |  | 208   | 



| | (h) |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date.

33



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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)



| | (i) |  | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Earnings per share are computed in accordance with SFAS No. 128, Earnings
Per Share. The calculation of basic earnings per share excludes any
dilutive effect of stock options and convertible debt, while diluted
earnings per share includes the dilutive effect of stock options and
convertible debt. The number of potentially dilutive shares excluded from
the calculation because of their anti-dilutive effect are 6,726,508,
6,762,452 and 6,834,065 for the years ended December 31, 2003, 2002 and
2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (j) |  | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | The Company accounts for its stock option plan under the intrinsic value
method in accordance with the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense is recorded on the
date of grant only if the current market price of the underlying stock
exceeds the exercise price. SFAS No. 123, Accounting for Stock-Based
Compensation and FASB Statement No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of FASB Statement
No. 123, established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting standards, the
Company has elected to continue to apply the intrinsic-value-based methods
of accounting described above, and has adopted only the disclosure
requirements of Statement 123, as amended. The following table
illustrates the effect on net income if the fair-value-based method had
been applied to all outstanding and unvested awards in each period.

|                                                                                                                                            |  |      |         |      |  |      |         |   |  |  |          |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | -------- | -
|                                                                                                                                            |  | 2003 |         | 2002 |  | 2001
|                                                                                                                                            |  |      |         |      |  |     
|Net loss applicable to common stock, as reported                                                                                            |  | $    | (47,216 | )    |  |      | (36,693 | ) |  |  | (108,999 | )
|Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects |  |      | (3,472  | )    |  |      | (6,614  | ) |  |  | (16,552  | )
|                                                                                                                                            |  |      |         |      |  |      |         |   |  |  |          |  
|Pro forma net loss applicable to common stock                                                                                               |  | $    | (50,688 | )    |  |      | (43,307 | ) |  |  | (125,551 | )
|                                                                                                                                            |  |      |         |      |  |      |         |   |  |  |          |  

|                                        |                     |  |      |       |      |  |      |       |   |  |  |       |  
|--------------------------------------- | ------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                        |                     |  | 2003 |       | 2002 |  | 2001
|                                        |                     |  |      |       |      |  |     
|Net loss per common share  as reported |                     |  |      |       |      |  |      |       |   |  |  |      
|                                        | (basic and diluted) |  | $    | (0.46 | )    |  |      | (0.36 | ) |  |  | (1.11 | )
|                                        |                     |  |      |       |      |  |      |       |   |  |  |       |  
|Net loss per common share  pro forma   |                     |  |      |       |      |  |      |       |   |  |  |      
|                                        | (basic and diluted) |  | $    | (0.49 | )    |  |      | (0.43 | ) |  |  | (1.27 | )
|                                        |                     |  |      |       |      |  |      |       |   |  |  |       |  



| | (k) |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company considers all highly-liquid investments with original
maturities of three months or less to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                     
|
| | (l) |  | Reclassification of Prior Year Amounts                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | Certain amounts in the prior years consolidated financial statements have
been reclassified to conform to the current year presentation. These
reclassifications had no effect on previously reported net loss.                                                                                                                                                                                                                                                                 
|
| | (m) |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |     |  | The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

34



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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)



|    | (n) |              | Asset Retirement Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --- | ------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |     |              | In 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations (Statement 143). Statement 143 requires companies
to record the present value of obligations associated with the retirement
of tangible long-lived assets in the period in which it is incurred. The
liability is capitalized as part of the related long-lived assets
carrying amount. Over time, accretion of the liability is recognized as
an operating expense and the capitalized cost is depreciated over the
expected useful life of the related asset. The Companys asset retirement
obligations relate primarily to the dismantlement, removal, site
reclamation and similar activities of its properties. The Company adopted
Statement 143 effective January 1, 2003, using the cumulative effect
approach to recognize transition amounts for asset retirement obligations,
asset retirement costs and accumulated depreciation. Prior to adoption of
this statement, the Company expensed these costs at the date of
retirement.
|   
|(2) |     | Acquisitions

Year Ended December 31, 2003

On March 3, 2003, the Company purchased the stock of Delite Outdoor, Inc. for
$18,000. The purchase price consisted of 588,543 shares of Lamar
Advertising Class A common stock valued at $18,000.

On May 1, 2003, the Company purchased the assets of Outdoor Media Group, Inc.
for $40,000. The purchase price consisted of 307,134 shares of Lamar
Advertising Class A common stock as well as approximately $30,000 cash.

On June 2, 2003, the Company purchased the stock of Adams Outdoor, Inc. for
approximately $40,137. The purchase price included 501,626 shares of Lamar
Advertising Class A common stock and approximately $22,637 cash.

During the year ended December 31, 2003, the Company completed additional
acquisitions of outdoor advertising assets for a total purchase price of
approximately $91,426, which consisted of the issuance of 152,792 shares of
Lamar Advertising Class A common stock and $86,296 cash.

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 market value at the dates of
acquisition. The following is a summary of the preliminary allocation of the
acquisition costs in the above transactions.

|                              |  |         |        |         |  |             |        |       |  |       |        |  |  |  |        |  |  |  |         | 
|----------------------------- |  | ------- | ------ | ------- |  | ----------- | ------ | ----- |  | ----- | ------ |  |  |  | ------ |  |  |  | ------- | 
|                              |  | Delite  |        | Adams   |  | Outdoor     |        |       |  |       |        |  |  | 
|                              |  | Outdoor |        | Outdoor |  | Media       |        |       |  |       |        |  |  | 
|                              |  | Inc.    |        | Inc.    |  | Group, Inc. |        | Other |  | Total
|                              |  |         |        |         |  |             |        |       |  |      
|Current assets                |  | $       | 911    |         |  |             | 1,327  |       |  |       | 19     |  |  |  | 180    |  |  |  | 2,437   | 
|Property, plant and equipment |  |         | 4,580  |         |  |             | 2,307  |       |  |       | 2,793  |  |  |  | 18,409 |  |  |  | 28,089  | 
|Goodwill                      |  |         | 43     |         |  |             | 24,246 |       |  |       | 17,111 |  |  |  | 20,447 |  |  |  | 61,847  | 
|Site locations                |  |         | 10,048 |         |  |             | 16,221 |       |  |       | 16,335 |  |  |  | 41,245 |  |  |  | 83,849  | 
|Non-competition agreements    |  |         | 145    |         |  |             |       |       |  |       |       |  |  |  | 496    |  |  |  | 641     | 
|Customer lists and contracts  |  |         | 2,732  |         |  |             | 3,716  |       |  |       | 3,742  |  |  |  | 6,948  |  |  |  | 17,138  | 
|Other assets                  |  |         |       |         |  |             |       |       |  |       |       |  |  |  | 6,666  |  |  |  | 6,666   | 
|Current liabilities           |  |         | 108    |         |  |             | 403    |       |  |       |       |  |  |  | 445    |  |  |  | 956     | 
|Long-term liabilities         |  |         | 351    |         |  |             | 7,277  |       |  |       |       |  |  |  | 2,520  |  |  |  | 10,148  | 
|                              |  |         |        |         |  |             |        |       |  |       |        |  |  |  |        |  |  |  |         | 
|                              |  | $       | 18,000 |         |  |             | 40,137 |       |  |       | 40,000 |  |  |  | 91,426 |  |  |  | 189,563 | 
|                              |  |         |        |         |  |             |        |       |  |       |        |  |  |  |        |  |  |  |         | 

Total acquired intangible assets for the year ended December 31, 2003 was
$163,475, of which $61,847 was assigned to goodwill which is not subject to
amortization. The remaining $101,628 of acquired intangible assets have a
weighted average useful life of approximately 14 years. The intangible assets
include customer lists and contracts of $17,138 (7 year weighted average useful
life), site locations of $83,849 (15 year weighted average useful life), and
non-competition agreements of $641 (10 year weighted average useful life).
Approximately $35,878 of the $61,847 of goodwill is expected to be fully
deductible for tax purposes. The aggregate amortization expense related to the
2003 acquisitions for the year ended December 31, 2003 was approximately
$6,481.

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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

The following unaudited pro forma financial information for the Company gives
effect to the 2003 and 2002 acquisitions as if they had occurred on January 1,
2002. These pro forma results do not purport to be indicative of the results of
operations which actually would have resulted had the acquisitions occurred on
such date or to project the Companys results of operations for any future
period.

|                                              |  |      |         |      |  |  |         |  
|--------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | -
|                                              |  | 2003 |         | 2002
|                                              |  |      |         |     
|Net revenues                                  |  | $    | 818,417 |      |  |  | 803,237 |  
|                                              |  |      |         |      |  |  |         |  
|Net loss applicable to common stock           |  |      | (48,681 | )    |  |  | (43,930 | )
|                                              |  |      |         |      |  |  |         |  
|Net loss per common share (basic and diluted) |  | $    | (0.47   | )    |  |  | (0.43   | )
|                                              |  |      |         |      |  |  |         |  

Year Ended December 31, 2002

On January 1, 2002, the Company purchased the stock of Delite Outdoor of Ohio
Holdings, Inc. for $38,000. The purchase price consisted of 963,488 shares of
Lamar Advertising Class A common stock.

On January 8, 2002, the Company purchased the assets of MC Partners for a cash
purchase price of approximately $15,313.

On May 31, 2002, the Company purchased the assets of American Outdoor
Advertising, Inc. for $15,725. The purchase price consisted of 349,376 shares
of Lamar Advertising Class A common stock, as well as approximately $725 in
cash.

During the year ended December 31, 2002, the Company completed 72 additional
acquisitions of outdoor advertising assets for a cash purchase price of
approximately $63,160 and the issuance of 92,600 shares of Lamar Advertising
Class A common stock valued at $3,100.

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

|                             |  |            |        |          |  |              |        |          |  |       |        |  |  |  |        |  |  |  |         | 
|---------------------------- |  | ---------- | ------ | -------- |  | ------------ | ------ | -------- |  | ----- | ------ |  |  |  | ------ |  |  |  | ------- | 
|                             |  | Delite     |        |          |  |              |        | American |  |       |        |  |  |  |        | 
|                             |  | Outdoor of |        |          |  |              |        | Outdoor  |  |       |        |  |  |  |        | 
|                             |  | Ohio       |        | MC       |  | Advertising, |        |          |  |       |        |  |  | 
|                             |  | Holdings   |        | Partners |  | Inc.         |        | Other    |  | Total
|                             |  |            |        |          |  |              |        |          |  |      
|Current Assets               |  | $          | 961    |          |  |              | 245    |          |  |       | 725    |  |  |  | 790    |  |  |  | 2,721   | 
|Property, Plant & Equipment  |  |            | 9,807  |          |  |              | 2,563  |          |  |       | 8,388  |  |  |  | 12,449 |  |  |  | 33,207  | 
|Goodwill                     |  |            | 12,704 |          |  |              | 5,523  |          |  |       |       |  |  |  | 25,441 |  |  |  | 43,668  | 
|Site Locations               |  |            | 17,430 |          |  |              | 7,310  |          |  |       | 5,356  |  |  |  | 25,498 |  |  |  | 55,594  | 
|Non-competition agreements   |  |            | 102    |          |  |              | 330    |          |  |       |       |  |  |  | 172    |  |  |  | 604     | 
|Customer lists and contracts |  |            | 4,108  |          |  |              | 1,723  |          |  |       | 1,256  |  |  |  | 5,546  |  |  |  | 12,633  | 
|Other Assets                 |  |            |       |          |  |              |       |          |  |       |       |  |  |  | 29     |  |  |  | 29      | 
|Current Liabilities          |  |            | 1,602  |          |  |              | 40     |          |  |       |       |  |  |  | 640    |  |  |  | 2,282   | 
|Long-term Liabilities        |  |            | 5,510  |          |  |              | 2,341  |          |  |       |       |  |  |  | 3,025  |  |  |  | 10,876  | 
|                             |  |            |        |          |  |              |        |          |  |       |        |  |  |  |        |  |  |  |         | 
|                             |  |            | 38,000 |          |  |              | 15,313 |          |  |       | 15,725 |  |  |  | 66,260 |  |  |  | 135,298 | 
|                             |  |            |        |          |  |              |        |          |  |       |        |  |  |  |        |  |  |  |         | 

Year Ended December 31, 2001

On January 1, 2001, the Company purchased the assets of two outdoor advertising
companies, American Outdoor Advertising, LLC and Appalachian Outdoor
Advertising Co., Inc. for a total cash purchase price of approximately $31,500
and $20,000, respectively.

On February 1, 2001, the Company purchased all of the outstanding common stock
of Bowlin Outdoor Advertising and Travel Centers, Inc. for a total purchase
price of approximately $45,650. The purchase price consisted of approximately
$16,650 cash and the issuance of 725,000 shares of Lamar Advertising Company
Class A common stock valued at $29,000.

On April 1, 2001, the Company purchased all of the outstanding common stock of
DeLite Outdoor Advertising, LLC and DeLite Outdoor Advertising, Inc. for a cash
purchase price of approximately $43,000.

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

On April 1, 2001, the Company purchased certain assets of PNE Media, LLC for a
cash purchase price of approximately $21,000.

On August 2, 2001, the Company purchased the assets of Capital Outdoor, Inc.
for a cash purchase price of approximately $30,000.

During the year ended December 31, 2001, the Company completed 101 additional
acquisitions of outdoor advertising and transit assets for an aggregate cash
purchase price of approximately $138,750.

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

|                             |  |          |        |             |  |         |        |     |  |             |        |         |  |       |        |       |  |  |        |  |  |  |        |  |  |  |         |  |  |  |         | 
|---------------------------- |  | -------- | ------ | ----------- |  | ------- | ------ | --- |  | ----------- | ------ | ------- |  | ----- | ------ | ----- |  |  | ------ |  |  |  | ------ |  |  |  | ------- |  |  |  | ------- | 
|                             |  | American |        | Appalachian |  | Bowlin  |        |     |  |             |        | Delite  |  |       |        |       |  |  |        |  |  |  |        | 
|                             |  | Outdoor  |        | Outdoor     |  | Outdoor |        | PNE |  | Group, Inc. |        | Capital |  | Other |        | Total
|                             |  |          |        |             |  |         |        |     |  |             |        |         |  |       |        |      
|Current Assets               |  | $        | 557    |             |  |         | 325    |     |  |             | 1,699  |         |  |       | 180    |       |  |  | 1,159  |  |  |  | 197    |  |  |  | 2,139   |  |  |  | 6,256   | 
|Property, Plant & Equipment  |  |          | 1,185  |             |  |         | 5,822  |     |  |             | 30,171 |         |  |       | 4,879  |       |  |  | 10,864 |  |  |  | 5,761  |  |  |  | 34,567  |  |  |  | 93,249  | 
|Goodwill                     |  |          | 18,662 |             |  |         | 2,666  |     |  |             | 2,731  |         |  |       | 4,500  |       |  |  | 20,033 |  |  |  | 12,530 |  |  |  | 50,674  |  |  |  | 111,796 | 
|Site Locations               |  |          | 8,993  |             |  |         | 9,316  |     |  |             | 19,333 |         |  |       | 9,180  |       |  |  | 15,728 |  |  |  | 9,476  |  |  |  | 43,812  |  |  |  | 115,838 | 
|Customer Lists and Contracts |  |          | 2,119  |             |  |         | 2,196  |     |  |             | 4,557  |         |  |       | 2,164  |       |  |  | 3,707  |  |  |  | 2,233  |  |  |  | 12,311  |  |  |  | 29,287  | 
|Non-Competition Agreements   |  |          | 20     |             |  |         |       |     |  |             | 1,380  |         |  |       |       |       |  |  |       |  |  |  |       |  |  |  | 1,211   |  |  |  | 2,611   | 
|Other Assets                 |  |          |       |             |  |         |       |     |  |             |       |         |  |       |       |       |  |  |       |  |  |  |       |  |  |  | 700     |  |  |  | 700     | 
|Current Liabilities          |  |          |       |             |  |         | 325    |     |  |             | 563    |         |  |       |       |       |  |  | 543    |  |  |  | 87     |  |  |  | 1,127   |  |  |  | 2,645   | 
|Long-term Liabilities        |  |          |       |             |  |         |       |     |  |             | 13,663 |         |  |       |       |       |  |  | 7,968  |  |  |  |       |  |  |  | 5,537   |  |  |  | 27,168  | 
|                             |  |          |        |             |  |         |        |     |  |             |        |         |  |       |        |       |  |  |        |  |  |  |        |  |  |  |         |  |  |  |         | 
|                             |  |          | 31,536 |             |  |         | 20,000 |     |  |             | 45,645 |         |  |       | 20,903 |       |  |  | 42,980 |  |  |  | 30,110 |  |  |  | 138,750 |  |  |  | 329,924 | 
|                             |  |          |        |             |  |         |        |     |  |             |        |         |  |       |        |       |  |  |        |  |  |  |        |  |  |  |         |  |  |  |         | 

(3) Noncash Financing and Investing Activities

A summary of significant noncash financing and investing activities for the
years ended December 31, 2003, 2002 and 2001 follows:

|                                                 |  |      |        |      |  |      |        |  |  |  |        | 
|------------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                                 |  | 2003 |        | 2002 |  | 2001
|                                                 |  |      |        |      |  |     
|Issuance of Class A common stock in acquisitions |  | $    | 50,630 |      |  |      | 56,100 |  |  |  | 29,000 | 
|Debt issuance costs                              |  |      | 8,807  |      |  |      | 3,640  |  |  |  |       | 

(4) Property, Plant and Equipment

Major categories of property, plant and equipment at December 31, 2003 and 2002
are as follows:

|                               |  |                |         |      |  |      |           |  |  |  |           | 
|------------------------------ |  | -------------- | ------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                               |  | Estimated Life |         |      |  |      |           |  |  | 
|                               |  | (Years)        |         | 2003 |  | 2002
|                               |  |                |         |      |  |     
|Land                           |  |                |        |      |  | $    | 75,556    |  |  |  | 67,241    | 
|Building and improvements      |  |                | 10  39 |      |  |      | 64,650    |  |  |  | 58,883    | 
|Advertising structures         |  |                | 15      |      |  |      | 1,715,849 |  |  |  | 1,652,189 | 
|Automotive and other equipment |  |                | 3  7   |      |  |      | 76,948    |  |  |  | 72,344    | 
|                               |  |                |         |      |  |      |           |  |  |  |           | 
|                               |  |                |         |      |  | $    | 1,933,003 |  |  |  | 1,850,657 | 
|                               |  |                |         |      |  |      |           |  |  |  |           | 

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(5) Goodwill and Other Intangible Assets

The following is a summary of intangible assets at December 31, 2003 and
December 31, 2002.

|                                 |  |           |        |                |  |              |           |                |  |              |         |  |  |   |           |  |  |   |         | 
|-------------------------------- |  | --------- | ------ | -------------- |  | ------------ | --------- | -------------- |  | ------------ | ------- |  |  | - | --------- |  |  | - | ------- | 
|                                 |  |           |        |                |  | 2003         |           | 2002          
|                                 |  | Estimated |        |                |  |             
|                                 |  | Life      |        | Gross Carrying |  | Accumulated  |           | Gross Carrying |  | Accumulated 
|                                 |  | (Years)   |        | Amount         |  | Amortization |           | Amount         |  | Amortization
|                                 |  |           |        |                |  |              |           |                |  |             
|Amortizable Intangible Assets:   |  |           |        |                |  |              |           |                |  |              |         |  |  |   |           |  |  |   |         | 
|Debt issuance costs and fees     |  |           | 7  10 |                |  | $            | 49,138    |                |  | $            | 20,783  |  |  | $ | 52,202    |  |  | $ | 27,533  | 
|Customer lists and contracts     |  |           | 7  10 |                |  |              | 388,791   |                |  |              | 248,617 |  |  |   | 371,787   |  |  |   | 196,084 | 
|Non-competition agreements       |  |           | 3  15 |                |  |              | 57,664    |                |  |              | 46,197  |  |  |   | 57,023    |  |  |   | 39,458  | 
|Site locations                   |  |           | 15     |                |  |              | 1,021,037 |                |  |              | 243,170 |  |  |   | 937,773   |  |  |   | 177,016 | 
|Other                            |  |           | 5  15 |                |  |              | 17,578    |                |  |              | 8,443   |  |  |   | 15,997    |  |  |   | 5,738   | 
|                                 |  |           |        |                |  |              |           |                |  |              |         |  |  |   |           |  |  |   |         | 
|                                 |  |           |        |                |  |              | 1,534,208 |                |  |              | 567,210 |  |  |   | 1,434,782 |  |  |   | 445,829 | 
|Unamortizable Intangible Assets: |  |           |        |                |  |              |           |                |  |              |         |  |  |   |           |  |  |   |         | 
|Goodwill                         |  |           |        |                |  | $            | 1,493,910 |                |  | $            | 253,635 |  |  | $ | 1,432,063 |  |  | $ | 253,635 | 

The changes in the carrying amount of goodwill for the year ended December 31,
2003 are as follows:

|                                  |  |   |           | 
|--------------------------------- |  | - | --------- | 
|Balance as of December 31, 2002   |  | $ | 1,432,063 | 
|Goodwill acquired during the year |  |   | 61,847    | 
|Impairment losses                 |  |   |          | 
|                                  |  |   |           | 
|Balance as of December 31, 2003   |  | $ | 1,493,910 | 
|                                  |  |   |           | 

The following is a summary of the estimated amortization expense for the next
five years:

|                             |  |   |         | 
|---------------------------- |  | - | ------- | 
|Year ended December 31, 2004 |  | $ | 128,299 | 
|Year ended December 31, 2005 |  | $ | 118,481 | 
|Year ended December 31, 2006 |  | $ | 105,303 | 
|Year ended December 31, 2007 |  | $ | 84,688  | 
|Year ended December 31, 2008 |  | $ | 77,995  | 

In accordance with SFAS No. 142, the Company was required to evaluate its
existing intangible assets and goodwill that were acquired in purchase business
combinations, and to make any necessary reclassifications in order to conform
with the new classification criteria in SFAS No. 141 for recognition separate
from goodwill. The Company was required to reassess the useful lives and
residual values of all intangible assets acquired, and make any necessary
amortization period adjustments. If an intangible asset is identified as
having an indefinite useful life, the Company was required to test the
intangible asset for impairment in accordance with the provisions of SFAS No.
142. Impairment of an intangible asset is measured as the excess of carrying
value over the fair value. Based upon the Companys review, no impairment
charge was required upon the adoption of SFAS No. 142 or at its annual tests
for impairment on December 31, 2002 and December 31, 2003.

The following table illustrates the effect of the adoption of SFAS No. 142 on
prior periods and its effect on the Companys earnings per share:

|                                                 |  |                          |          |      |  |      |         |   |  |   |          |  
|------------------------------------------------ |  | ------------------------ | -------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                                                 |  | Years ended December 31,
|                                                 |  | 2003                     |          | 2002 |  | 2001
|                                                 |  |                          |          |      |  |     
|Reported net loss applicable to common stock     |  | $                        | (47,216  | )    |  | $    | (36,693 | ) |  | $ | (108,999 | )
|Add: goodwill amortization, net of tax           |  |                          |         |      |  |      |        |   |  |   | 70,463   |  
|                                                 |  |                          |          |      |  |      |         |   |  |   |          |  
|Adjusted net loss applicable to common stock     |  | $                        | ( 47,216 | )    |  | $    | (36,693 | ) |  | $ | (38,536  | )
|                                                 |  |                          |          |      |  |      |         |   |  |   |          |  
|Earnings per common share  basic and diluted    |  |                          |          |      |  |      |         |   |  |   |          |  
|Reported net loss per common share               |  | $                        | (0.46    | )    |  | $    | (0.36   | ) |  | $ | (1.11    | )
|Add: goodwill amortization per share, net of tax |  |                          |         |      |  |      |        |   |  |   | 0.72     |  
|                                                 |  |                          |          |      |  |      |         |   |  |   |          |  
|Adjusted net loss per common share               |  | $                        | (0.46    | )    |  | $    | (0.36   | ) |  | $ | (0.39    | )
|                                                 |  |                          |          |      |  |      |         |   |  |   |          |  

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(6) Leases

The Company is party to various operating leases for production facilities and
sites upon which advertising structures are built. The leases expire at various
dates, generally during the next five years, and have varying options to renew
and to cancel. The following is a summary of minimum annual rental payments
required under those operating leases that have original or remaining lease
terms in excess of one year as of December 31, 2003:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2004       |  | $ | 112,218 | 
|2005       |  |   | 96,163  | 
|2006       |  |   | 83,559  | 
|2007       |  |   | 73,821  | 
|2008       |  |   | 63,313  | 
|Thereafter |  |   | 409,703 | 

Rental expense related to the Companys operating leases was $146,684,
$135,944 and $124,734 for the years ended December 31, 2003, 2002 and 2001,
respectively.

(7) Accrued Expenses

The following is a summary of accrued expenses at December 31, 2003 and 2002:

|                   |  |      |        |      |  |  |        | 
|------------------ |  | ---- | ------ | ---- |  |  | ------ | 
|                   |  | 2003 |        | 2002
|                   |  |      |        |     
|Payroll            |  | $    | 7,698  |      |  |  | 7,686  | 
|Interest           |  |      | 19,428 |      |  |  | 13,020 | 
|Insurance benefits |  |      | 8,150  |      |  |  | 8,297  | 
|Other              |  |      | 10,710 |      |  |  | 9,878  | 
|                   |  |      |        |      |  |  |        | 
|                   |  | $    | 45,986 |      |  |  | 38,881 | 
|                   |  |      |        |      |  |  |        | 

(8) Long-term Debt

Long-term debt consists of the following at December 31, 2003 and 2002:

|                                              |  |      |           |      |  |  |           |  
|--------------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | -
|                                              |  | 2003 |           | 2002
|                                              |  |      |           |     
|9
5/8% Senior subordinated notes (1996 Notes) |  | $    |          |      |  |  | 255,000   |  
|8 5/8% Senior subordinated notes (1997 Notes) |  |      |          |      |  |  | 199,230   |  
|Bank Credit Agreement                         |  |      | 1,015,000 |      |  |  | 975,500   |  
|5 1/4% Convertible notes                      |  |      |          |      |  |  | 287,500   |  
|2 7/8% Convertible notes                      |  |      | 287,500   |      |  |  |          |  
|8% Unsecured subordinated notes               |  |      | 5,333     |      |  |  | 7,333     |  
|7 1/4% Senior subordinated notes              |  |      | 389,387   |      |  |  | 260,000   |  
|Other notes with various rates and terms      |  |      | 7,643     |      |  |  | 9,870     |  
|                                              |  |      |           |      |  |  |           |  
|                                              |  |      | 1,704,863 |      |  |  | 1,994,433 |  
|Less current maturities                       |  |      | (5,044    | )    |  |  | (259,687  | )
|                                              |  |      |           |      |  |  |           |  
|Long-term debt, excluding current maturities  |  | $    | 1,699,819 |      |  |  | 1,734,746 |  
|                                              |  |      |           |      |  |  |           |  

Long-term debt matures as follows:

|            |  |   |           | 
|----------- |  | - | --------- | 
|2004        |  | $ | 5,044     | 
|2005        |  |   | 57,160    | 
|2006        |  |   | 69,067    | 
|2007        |  |   | 82,568    | 
|2008        |  |   | 82,612    | 
|Later years |  |   | 1,408,412 | 

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

In November 1996, the Company issued $255,000 in principal amount of 9 5/8%
Senior Subordinated Notes due 2006 (the 1996 Notes), with interest payable
semi-annually on June 1 and December 1 of each year.

In September 1997, the Company issued $200,000 in principal amount of 8 5/8%
Senior Subordinated Notes due 2007 (the 1997 Notes) with interest payable
semi-annually on March 15 and September 15 of each year, commencing March 15,
1998. The 1997 Notes were issued at a discount for $198,676. The Company used
the effective interest method to recognize the discount over the life of the
1997 Notes.

On August 10, 1999, Lamar Advertising Company, completed an offering of
$287,500 5 1/4% Convertible Notes due 2006. The net proceeds of approximately
$279,594 of the convertible notes were used to pay down existing bank debt.
The Notes were convertible, into shares of Lamar Advertising Company Class A
common stock at any time prior to their maturity or redemption by Lamar
Advertising Company. The conversion rate was 21.6216 shares per $1 in
principle amount of notes.

On October 25, 2002, Lamar Media Corp. redeemed all of the outstanding 9 1/4%
Senior Subordinated Notes due 2007 in aggregate principle amount of $74,073 for
a redemption price equal to 104.625% of the principle amount thereof plus
accrued interest to the redemption date of approximately $1,300. In the fourth
quarter of 2002, the Company recorded $5,850 as an expense related to the
prepayment of those notes. In accordance with SFAS No. 145, Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections, the extinguishment of this debt has not been reflected
in the Statement of Operations as an extraordinary item.

On December 23, 2002, Lamar Media Corp. completed an offering of $260,000 7
1/4% Senior Subordinated Notes due 2013. These notes are unsecured senior
subordinated obligations and will be subordinated to all of Lamar Medias
existing and future senior debt, rank equally with all of Lamar Medias
existing and future senior subordinated debt and rank senior to any future
subordinated debt of Lamar Media. The net proceeds from the issuance and sale
of these notes, together with additional cash, was used to redeem all of the
outstanding $255,000 principal amount of Lamar Medias 9 5/8% Senior
Subordinated Notes due 2006 on January 22, 2003 at a redemption price equal to
103.208% of the aggregate principal amount thereof plus accrued interest to the
redemption date of approximately $3,500 for a total redemption price of
approximately $266,657. The Company recorded a loss on the extinguishment of
debt of $11,173 in the first quarter of 2003.

On June 12, 2003, Lamar Media Corp. issued $125,000 7 1/4% Senior Subordinated
Notes due 2013 as an add on to the $260,000 issued in December 2002. The issue
price of the $125,000 7 1/4% Notes was 103.661% of the principal amount of the
notes, which yields an effective rate of 6 5/8% . The proceeds of the issuance
were used to redeem approximately $100,000 of Lamar Medias 8 5/8% senior
subordinated notes for a redemption price equal to 104.313% of the principal
amount of the notes. The Company recorded a loss on extinguishment of debt of
$5,754 in the second quarter of 2003 related to this prepayment. The remaining
$100,000 in aggregate principal amount of Lamar Medias 8 5/8% notes
outstanding following this redemption were redeemed for a redemption price
equal to 102.875% of the principle amount of the notes in December 2003. As a
result of this redemption, the Company recorded a loss on extinguishment of
debt of $4,151 related to the prepayment of the notes and associated debt
issuance costs.

On June 16, 2003, the Company issued $287,500 2 7/8% Convertible Notes due
2010. The net proceeds from these notes together with additional cash were
used on July 16, 2003 to redeem all of the Companys outstanding 5 1/4%
convertible notes due 2006 in aggregate principal amount of approximately
$287,500 for a redemption price equal to 103.0% of the principal amount of
notes. The Company recorded a loss on extinguishment of debt in the third
quarter of 2003 of $12,566 related to this redemption.

The Companys obligations with respect to its publicly issued notes are not
guaranteed by the Companys direct or indirect wholly owned subsidiaries.
Certain obligations of the Companys wholly-owned subsidiary, Lamar Media Corp.
are guaranteed by its subsidiaries.

Lamar Media Corps prior bank credit facility, for which JPMorgan Chase Bank
serves as administrative agent, consisted of (1) a $350,000 revolving bank
credit facility, (2) a $650,000 term facility with two tranches, a $450,000
Term A facility and a $200,000 Term B facility, and (3) a $750,000 incremental
facility of which $450,000 has been funded in four tranches, a $20,000 Series
A-1 facility, a $130,000 Series A-2 facility, a $100,000 B-1 facility, and a
$200,000 Series C facility.

40



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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

Beginning on March 31, 2002, the amount available for borrowing under the then
existing revolving bank credit facility reduced quarterly in annual increments
of 10%, 10%, 30% and 35% of the original commitment with a final payment of 15%
on March 31, 2006. The Term A loans, the Term B loans and the Series A-1, A-2
and B-1 began amortizing on September 30, 2001. The Series C loans would have
begun amortizing on March 31, 2003.

On March 7, 2003, the Companys wholly owned subsidiary Lamar Media, replaced
its existing bank credit facility. The current bank credit facility, for which
JPMorgan Chase Bank acts as administrative agent, is comprised of a $225,000
revolving bank credit facility and $975,000 term facility with two tranches, a
$300,000 Tranche A term facility and a $675,000 Tranche B term facility. This
bank credit facility also includes a $500,000 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 $500,000. 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. The credit agreement modified the repayment terms to extend the
maturities of the debt. The balance sheet as of December 31, 2002 was adjusted
to reflect the terms of the March 7, 2003 credit agreement.

Availability under the revolving credit facility terminates on June 30, 2009
and is not subject to commitment reduction prior to that date. As of December
31, 2003, the Company had $40,000 outstanding under the revolving line of
credit.

The March 7, 2003 Term Facility amortizes quarterly in the following quarterly
amounts:

|                                       |  |           |        |           |  |   |         | 
|-------------------------------------- |  | --------- | ------ | --------- |  | - | ------- | 
|                                       |  | Tranche A |        | Tranche B
|                                       |  |           |        |          
|March 31, 2005 - December 31, 2005     |  | $         | 11,250 |           |  | $ | 1,687.5 | 
|March 31, 2006 - December 31, 2006     |  |           | 15,000 |           |  |   | 1,687.5 | 
|March 31, 2007 - December 31, 2008     |  |           | 18,750 |           |  |   | 1,687.5 | 
|March 31, 2009 - June 30, 2009         |  |           | 22,500 |           |  |   | 1,687.5 | 
|September 30, 2009 - December 31, 2009 |  |           |       |           |  |   | 1,687.5 | 
|March 31, 2010 - June 30, 2010         |  |           |       |           |  |   | 320,625 | 

On February 6, 2004, Lamar Media amended its credit agreement dated March 7,
2003 whereby it changed its $975,000 term facility to include a $425,000
Tranche A facility and a $550,000 Tranche C facility. The proceeds were used
to pay off the Tranche B lenders and the total debt outstanding remained
unchanged. The amortization of this amended facility is as follows:

|                                       |  |           |          |           |  |           |   |  |  |   |         | 
|-------------------------------------- |  | --------- | -------- | --------- |  | --------- | - |  |  | - | ------- | 
|                                       |  | Tranche A |          | Tranche B |  | Tranche C
|                                       |  |           |          |           |  |          
|March 31, 2005 - December 31, 2005     |  | $         | 15,937.5 |           |  | $         |  |  |  | $ | 1,375   | 
|March 31, 2006 - December 31, 2006     |  |           | 21,250.0 |           |  |           |  |  |  |   | 1,375   | 
|March 31, 2007 - December 31, 2008     |  |           | 26,562.5 |           |  |           |  |  |  |   | 1,375   | 
|March 31, 2009 - June 30, 2009         |  |           | 31,875.0 |           |  |           |  |  |  |   | 1,375   | 
|September 30, 2009 - December 31, 2009 |  |           |         |           |  |           |  |  |  |   | 1,375   | 
|March 31, 2010 - June 30, 2010         |  |           |         |           |  |           |  |  |  |   | 261,250 | 

Revolving credit loans may be requested under the revolving credit facility at
any time prior to maturity. The loans bear interest, at the Companys option,
at the LIBOR Rate or JPMorgan Chase Prime Rate plus applicable margins, such
margins being set from time to time based on the Companys ratio of debt to
trailing twelve month EBITDA, as defined in the agreement. 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:



| |  |  | dispose of assets;   
| | - |  | ---------------------
|
| |  |  | incur or repay debt; 
|
| |  |  | create liens;        
|
| |  |  | make investments; and
|
| |  |  | pay dividends.       

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

Lamar Medias ability to make distributions to Lamar Advertising is also
restricted under the terms of these agreements. Under Lamar Medias credit
facility the Company must maintain specified financial ratios and levels
including:



| |  |  | interest coverage;     
| | - |  | -----------------------
|
| |  |  | fixed charges ratios;  
|
| |  |  | senior debt ratios; and
|
| |  |  | total debt ratios.     

Lamar Advertising and Lamar Media were in compliance with all of the terms of
all of the indentures and the bank credit agreement during the periods
presented.

(9) Asset Retirement Obligation

Effective January 1, 2003, the Company adopted Statement 143, and recorded a
loss of $11,679 as the cumulative effect of a change in accounting principle,
which is net of an income tax benefit of $7,467. Prior to its adoption of
Statement 143, the Company expensed these costs at the date of retirement.
Also, as of January 1, 2003, the Company recorded additions to property, plant
and equipment totaling $23,114 and accumulated depreciation totaling $8,793
under the provisions of Statement 143.

All of the Companys asset retirement obligations relate to the Companys
structure inventory that it considers would be retired upon dismantlement of
the advertising structure. The following table reflects information related to
our asset retirement obligations:

|                                          |  |   |        |  
|----------------------------------------- |  | - | ------ | -
|Balance at December 31, 2002              |  |   |       |  
|Net impact at initial adoption            |  | $ | 33,467 |  
|                                          |  |   |        |  
|Balance at January 1, 2003                |  | $ | 33,467 |  
|Additions to asset retirement obligations |  |   | 1,487  |  
|Accretion expense                         |  |   | 2,350  |  
|Liabilities settled                       |  |   | (447   | )
|                                          |  |   |        |  
|Balance at December 31, 2003              |  | $ | 36,857 |  
|                                          |  |   |        |  

The pro forma asset retirement obligation at December 31, 2002 and 2001 would
have been $33,467 and $30,854, respectively. The following pro forma data
summarizes the Companys net loss and net loss per common share as if the
Company had adopted the provisions of Statement 143 on December 31, 2000,
including an associated pro forma asset retirement obligation on that date of
$25,702.

|                                                                       |  |                   |         |                   |  |   |          |  
|---------------------------------------------------------------------- |  | ----------------- | ------- | ----------------- |  | - | -------- | -
|                                                                       |  | Year ended        |         | Year Ended       
|                                                                       |  | December 31, 2002 |         | December 31, 2001
|                                                                       |  |                   |         |                  
|Net loss applicable to common stock, as reported                       |  | $                 | (36,693 | )                 |  | $ | (108,999 | )
|Pro forma adjustments to reflect retroactive adoption
of Statement 143 |  |                   | (2,306  | )                 |  |   | (2,217   | )
|                                                                       |  |                   |         |                   |  |   |          |  
|Pro forma net loss applicable to common stock                          |  | $                 | (38,999 | )                 |  | $ | (111,216 | )
|                                                                       |  |                   |         |                   |  |   |          |  
|Net loss per common share  basic and diluted:                         |  |                   |         |                   |  |   |          |  
|Net loss, as reported                                                  |  | $                 | (0.36   | )                 |  | $ | (1.11    | )
|Net loss, pro forma                                                    |  | $                 | (0.39   | )                 |  | $ | (1.13    | )

42



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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(10) Income Taxes

Income tax expense (benefit) for the years ended December 31, 2003, 2002 and
2001, consists of:

|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|----------------------------- | --------------- | - | ------- | ------ | -------- |  | ------- | ------- | - |  | ------- | ------- | -
|                              |                 |   | Current |        | Deferred |  | Total  
|                              |                 |   |         |        |          |  |        
|Year ended December 31, 2003: |                 |   |         |        |          |  |         |         |   |  |         |        
|                              | U.S. federal    |   | $       |       |          |  |         | (17,176 | ) |  |         | (17,176 | )
|                              | State and local |   |         | (42    | )        |  |         | (4,090  | ) |  |         | (4,132  | )
|                              | Foreign         |   |         |       |          |  |         | 665     |   |  |         | 665     |  
|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|                              |                 | $ | (42     | )      |          |  | (20,601 | )       |   |  | (20,643 | )      
|                              |                 |   |         |        |          |  |         |         |   |  |         |        
|Year ended December 31, 2002: |                 |   |         |        |          |  |         |         |   |  |         |        
|                              | U.S. federal    |   | $       | (5,068 | )        |  |         | (12,951 | ) |  |         | (18,019 | )
|                              | State and local |   |         | 869    |          |  |         | (3,084  | ) |  |         | (2,215  | )
|                              | Foreign         |   |         | 89     |          |  |         | 451     |   |  |         | 540     |  
|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|                              |                 | $ | (4,110  | )      |          |  | (15,584 | )       |   |  | (19,694 | )      
|                              |                 |   |         |        |          |  |         |         |   |  |         |        
|Year ended December 31, 2001: |                 |   |         |        |          |  |         |         |   |  |         |        
|                              | U.S. federal    |   | $       |       |          |  |         | (37,102 | ) |  |         | (37,102 | )
|                              | State and local |   |         | 713    |          |  |         | (8,834  | ) |  |         | (8,121  | )
|                              | Foreign         |   |         |       |          |  |         | (451    | ) |  |         | (451    | )
|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|                              |                 | $ | 713     |        |          |  | (46,387 | )       |   |  | (45,674 | )      
|                              |                 |   |         |        |          |  |         |         |   |  |         |        

Income tax benefit attributable to continuing operations for the years ended
December 31, 2003, 2002 and 2001, differs from the amounts computed by applying
the U.S. federal income tax rate of 34 percent to loss before income taxes as
follows:

|                                                     |                                                                 |   |         |        |      |  |         |        |   |  |         |        |  
|---------------------------------------------------- | --------------------------------------------------------------- | - | ------- | ------ | ---- |  | ------- | ------ | - |  | ------- | ------ | -
|                                                     |                                                                 |   | 2003    |        | 2002 |  | 2001   
|                                                     |                                                                 |   |         |        |      |  |        
|Computed expected tax benefit                        |                                                                 | $ | (18,977 | )      |      |  | (19,048 | )      |   |  | (52,465 | )     
|Increase (reduction) in income taxes resulting from: |                                                                 |   |         |        |      |  |         |        |   |  |         |       
|                                                     | Book expenses not deductible for tax purposes                   |   |         | 1,150  |      |  |         | 689    |   |  |         | 590    |  
|                                                     | Amortization of non-deductible goodwill                         |   |         | (14    | )    |  |         | (26    | ) |  |         | 13,546 |  
|                                                     | State and local income taxes, net of federal
income tax
benefit |   |         | (2,727 | )    |  |         | (1,490 | ) |  |         | (5,360 | )
|                                                     | Other differences, net                                          |   |         | (75    | )    |  |         | 181    |   |  |         | (1,985 | )
|                                                     |                                                                 |   |         |        |      |  |         |        |   |  |         |       
|                                                     |                                                                 | $ | (20,643 | )      |      |  | (19,694 | )      |   |  | (45,674 | )     
|                                                     |                                                                 |   |         |        |      |  |         |        |   |  |         |       

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2003
and 2002 are presented below:

|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |          |          |          |         | 
|------------------------------------- | ------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------- | -------- | ------- | -------- | -------- | -------- | ------- | 
|                                      |                                                   |                                                                                                                                          |                                 |         | 2003     |         | 2002    
|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |         
|Current deferred tax assets:          |                                                   |                                                                                                                                          |                                 |         |          |         |          |         
|                                      |                                                   | Receivables, principally due to allowance for doubtful accounts                                                                          |                                 | $       | 1,916    |         |          |          | 1,916    |        
|                                      |                                                   | Accrued liabilities not deducted for tax purposes                                                                                        |                                 |         | 1,584    |         |          |          | 2,142    |        
|                                      |                                                   | Other                                                                                                                                    |                                 |         | 2,551    |         |          |          | 2,370    |        
|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |          |          |          |        
|                                      |                                                   | Net current deferred tax asset                                                                                                           |                                 |         | 6,051    |         |          |          | 6,428    |        
|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |          |         
|Non-current deferred tax liabilities: |                                                   |                                                                                                                                          |                                 |         |          |         |          |         
|                                      |                                                   | Plant and equipment, principally due to differences in depreciation                                                                      |                                 | $       | (11,738  | )       |          |          | (10,821  | )      
|                                      |                                                   | Intangibles, due to differences in amortizable lives                                                                                     |                                 |         | (245,270 | )       |          |          | (243,971 | )      
|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |          |         
|                                      |                                                   |                                                                                                                                          | (257,008                        | )       |          |         | (254,792 | )       
|Non-current deferred tax assets:      |                                                   |                                                                                                                                          |                                 |         |          |         |          |         
|                                      |                                                   | Plant and equipment, due to basis differences on acquisitions and
costs
capitalized for tax purposes                                     |                                 |         | 48,479   |         |          |          | 51,780   |        
|                                      |                                                   | Investment in affiliates and plant and equipment, due to gains
recognized for tax purposes and deferred for financial reporting
purposes |                                 |         | 941      |         |          |          | 941      |        
|                                      | Accrued liabilities not deducted for tax purposes |                                                                                                                                          |                                 | 2,900   |          |         |          | 3,062    |         
|                                      | Net operating loss carryforward                   |                                                                                                                                          |                                 | 100,350 |          |         |          | 84,119   |         
|                                      | Asset retirement obligation                       |                                                                                                                                          |                                 | 8,923   |          |         |          |         |         
|                                      | Other, net                                        |                                                                                                                                          |                                 | 873     |          |         |          | 630      |         
|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |          |         
|                                      |                                                   |                                                                                                                                          | Non-current deferred tax assets |         |          | 162,466 |          |          |          | 140,532 | 
|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |          |         
|                                      | Net non-current deferred tax liability            |                                                                                                                                          | $                               | (94,542 | )        |         |          | (114,260 | )       
|                                      |                                                   |                                                                                                                                          |                                 |         |          |         |          |          |          |        

As of December 31, 2003, the Company had gross net operating losses of
$258,336, which expire through 2023. In assessing the realizability of
deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible.

Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences. The amount of the
deferred tax assets considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced.

(11) Related Party Transactions

Affiliates, as used within these statements, are persons or entities that are
affiliated with Lamar Advertising Company or its subsidiaries through common
ownership and directorate control.

In October 1995 and in March 1996, the Company repurchased 3.6% and 12.9%,
respectively, of its then outstanding Class A common stock (1,220,500 and
3,617,884 shares, respectively) from certain of its existing stockholders,
directors and employees for an aggregate purchase price of approximately
$4,000. The term of the March 1996 repurchase entitled the selling
stockholders to receive additional consideration from the Company in the event
that the Company consummated a public offering of its Class A common stock at a
higher price within 24 months of the repurchase. In satisfaction of that
obligation, upon completion of the Companys initial public offering, the
Company paid the selling stockholders an aggregate of $5,000 in cash from the
proceeds and issued them $20,000 aggregate principal amount of ten year
subordinated notes. As of December 31, 2003 and 2002, the outstanding balance
of the ten year subordinated notes was $5,333 and $7,333, respectively. The
Companys current executive officers do not hold any of the ten year
subordinated notes described above. Interest expense during the years ended
December 31, 2003, 2002 and 2001, related to the ten year subordinated notes
and the Companys debentures that were paid off during the year ended December
31, 2001, was $513, $673, and $855, respectively.

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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

Prior to 1996, the Company entered into various related party transactions for
the purchase and sale of advertising structures whereby any resulting gains
were deferred at that date. As of December 31, 2003 and 2002, the deferred
gains related to these transactions were $1,001 and are included in deferred
income on the balance sheets. No gains related to these transactions have been
realized in the Statement of Operations for the years ended December 31, 2003,
2002 and 2001.

In addition, the Company had receivables from employees of $342 and $400 at
December 31, 2003 and 2002, respectively. These receivables are primarily
relocation loans for employees. The Company does not have any receivables from
its current executive officers.

Interstate Highway Signs Corp., (IHS) is a wholly owned subsidiary of Sign
Acquisition Corp. Prior to December 16, 2003, Kevin P. Reilly, Jr. had voting
control over a majority of the outstanding shares of Sign Acquisition Corp.
through a voting trust. Mr. Reillys interest was sold on December 16, 2003.
The Company purchased approximately $1,229, $1,236 and $1,842 of highway signs
and transit bus shelters from IHS which represented approximately 13%, 12% and
13% of total capitalized expenditures for its logo sign and transit advertising
businesses during the years ended December 31, 2003, 2002 and 2001,
respectively. The Company does not use IHS exclusively for its highway sign
and transit bus shelter purchases.

Effective July 1, 1996, the Lamar Texas Limited Partnership, one of the
Companys subsidiaries, and Reilly Consulting Company, L.L.C., which Kevin P.
Reilly, Sr. controls, entered into a consulting agreement which was amended January 1, 2004. This consulting
agreement as amended, has a term through December 31, 2008 with
automatic renewals for successive one year periods after that date unless either party provides written terminations to the other.
The amended agreement provides for an annual consulting fee of $190 for the five year period commencing on January 1, 2004 and an annual consulting fee of $150 for
any subsequent one year renewal terms.
The agreement also contains a non-disclosure provision and a non-competition
restriction which extends for two years beyond the termination agreement.

The Company also has a lease arrangement with Reilly Enterprises, LLC, which
Kevin P. Reilly Sr. controls for the use of an airplane. The Company pays a
monthly fee plus expenses which entitles the Company to 6.67 hours of flight
time, with any unused portion carried over into the next succeeding month.
Total fees paid under this arrangement for fiscal 2003, 2002 and 2001 were
approximately $55, $75 and $42, respectively.

As of December 31, 2003, the Company had a receivable of $959 for premiums paid
on split-dollar life insurance arrangements for Kevin P. Reilly, Sr. that were
entered into in 1990 and 1995 as a component of his compensation as our Chief
Executive
Officer and his continuing retirement benefits thereafter. In accordance with
the terms of the arrangements, we will recover all of the cumulative premiums
paid by us upon the termination, surrender or cancellation of the policies or
upon the death of the insured. In February 2004, the obligation to the Company
was repaid and the split dollar agreements were terminated.

Kevin P. Reilly, Sr. is the father of Kevin P. Reilly, Jr., the Companys
President, Chief Executive Officer and Director, and Sean E. Reilly, the
Companys Chief Operating Officer.

The Company has made two loans to Live Oak Living Centers, LLC. One loan was
for $61 at an interest rate of 7.5% and the second loan was for $112 at an
interest rate of 6%. Kevin P. Reilly, Jr. has a 15% ownership interest in the
LLC. Sean E. Reilly, Kevin P. Reilly, Jr.s brother and also one of the
Companys Directors at that time, has a 7.5% ownership interest in the LLC. Both loans,
totaling $208 in outstanding principal and interest, were repaid in full in
September 2002.

On September 6, 2002, the Company entered into an agreement with Charles W.
Lamar III, its director, to settle Mr. Lamars obligation to reimburse the
Company for premiums that it had paid under a split-dollar life insurance
policy. These premiums had been paid under an original policy, which was
subsequently surrendered to a new insurer for a new policy. The Company paid
no further premiums under the new policy but the new policy replaced the
surrendered policy as collateral for the $90 in aggregate premiums paid by the
Company under the old policy. In exchange for the right to receive the death
proceeds from the new policy at some indeterminate future date, the Company
accepted stock of the original insurer, which was issued in connection with its
demutualization, and cash with a value of approximately $53, in full
satisfaction of this obligation.

45



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##### Table of Contents



LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(12) Stockholders Equity

On July 16, 1999, the Board of Directors amended the preferred stock of the
Company by designating 5,720 shares of the 1,000,000 shares of previously
undesignated preferred stock, par value $.001 as Series AA preferred stock.
The previously issued Class A preferred stock par value $638 was exchanged for
the new Series AA preferred stock and no shares of Class A preferred stock are
currently outstanding. The new Series AA preferred stock and the Class A
preferred stock rank senior to the
Class A common stock and Class B common stock with respect to dividends and
upon liquidation. Holders of Series AA preferred stock and Class A preferred
stock are entitled to receive, on a pari passu basis, dividends at the rate of
$15.95 per share per quarter when, as and if declared by the Board of
Directors. The Series AA preferred stock and the Class A preferred stock are
also entitled to receive, on a pari pasu basis, $638 plus a further amount
equal to any dividend accrued and unpaid to the date of distribution before any
payments are made or assets distributed to the Class A common stock or Class B
stock upon voluntary or involuntary liquidation, dissolution or winding up of
the Company. The liquidation value of the outstanding Series AA preferred
stock at December 31, 2003 was $3,649. The Series AA preferred stock and the
Class A preferred stock are identical, except that the Series AA preferred
stock is entitled to one vote per share and the Class A preferred stock is not
entitled to vote.

All of the outstanding shares of common stock are fully paid and nonassessable.
In the event of the liquidation or dissolution of the Company, following any
required distribution to the holders of outstanding shares of preferred stock,
the holders of common stock are entitled to share pro rata in any balance of
the corporate assets available for distribution to them. The Company may pay
dividends if, when and as declared by the Board of Directors from funds legally
available therefore, subject to the restrictions set forth in the Companys
existing indentures and the senior credit facility. Subject to the
preferential rights of the holders of any class of preferred stock, holders of
shares of common stock are entitled to receive such dividends as may be
declared by the Companys Board of Directors out of funds legally available for
such purpose. No dividend may be declared or paid in cash or property on any
share of either class of common stock unless simultaneously the same dividend
is declared or paid on each share of the other class of common stock, provided
that, in the event of stock dividends, holders of a specific class of common
stock shall be entitled to receive only additional shares of such class.

The rights of the Class A and Class B common stock are equal in all respects,
except holders of Class B common stock have ten votes per share on all matters
in which the holders of common stock are entitled to vote and holders of Class
A common stock
have one vote per share on such matters. The Class B common stock will convert
automatically into Class A common stock upon the sale or transfer to persons
other than permitted transferees (as defined in the Companys certificate of
incorporation, as amended).

(13)  Benefit Plans

Equity Incentive Plan
In 1996, the Company adopted the 1996 Equity Incentive Plan (the 1996 Plan).
The purpose of the 1996 Plan is to attract and retain key employees and
consultants of the Company. The 1996 Plan authorizes the grant of stock
options, stock appreciation rights and restricted stock to employees and
consultants of the Company capable of contributing to the Companys
performance. Options granted under the 1996 Plan generally become exercisable
over a five-year period and expire 10 years from the date of grant unless
otherwise authorized by the Board. As of December 31, 2002, the Company had
reserved an aggregate of 8,000,000 shares of Class A common stock for awards
under the 1996 Plan.

In August 2000, the Board of Directors voted to amend the 1996 Plan to (i)
authorize grants to members of the Companys board of directors (ii) provide
the Committee with more flexibility in determining the exercise price of awards
made under the 1996 Plan (iii) allow for grants of unrestricted stock and (iv)
set forth performance criteria that the Committee may establish for the
granting of stock awards. These amendments were approved by the Companys
stockholders in May 2001.

In February 2004, the Board of Directors voted, subject to stockholder
approval, to amend the 1996 plan to increase the aggregate number of shares of
the Companys Class A Common Stock available for issuance under the 1996 Plan
by 2,000,000 shares so that the aggregate number of shares of Common Stock
available for issuance under the Plan is increased from 8,000,000 shares to
10,000,000 million shares.

46



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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used:

|           |  |                |   |                     |  |                         |    |                |  |  |   |   |  |  |   | 
|---------- |  | -------------- | - | ------------------- |  | ----------------------- | -- | -------------- |  |  | - | - |  |  | - | 
|Grant Year |  | Dividend Yield |   | Expected Volatility |  | Risk Free Interest Rate |    | Expected Lives
|           |  |                |   |                     |  |                         |    |               
|2003       |  |                | 0 | %                   |  |                         | 46 | %              |  |  | 4 | % |  |  | 6 | 
|2002       |  |                | 0 | %                   |  |                         | 51 | %              |  |  | 5 | % |  |  | 9 | 
|2001       |  |                | 0 | %                   |  |                         | 53 | %              |  |  | 5 | % |  |  | 9 | 

Information regarding the 1996 Plan for the years ended December 31, 2003, 2002
and 2001, is as follows:

|                                                               |  |        |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 
|-------------------------------------------------------------- |  | ------ | --------- | ----- |  | -------- | ----- | ----- |  | ------ | --------- | -------- |  | - | ----- |  |  | -------- | --------- | - |  | - | ----- | 
|                                                               |  | 2003   |           | 2002  |  | 2001    
|                                                               |  |        |           |       |  |         
|                                                               |  |        |           |       |  | Weighted |       |       |  |        |           | Weighted |  |   |       |  |  | Weighted
|                                                               |  |        |           |       |  | Average  |       |       |  |        |           | Average  |  |   |       |  |  | Average 
|                                                               |  |        |           |       |  | Exercise |       |       |  |        |           | Exercise |  |   |       |  |  | Exercise
|                                                               |  | Shares |           | Price |  | Shares   |       | Price |  | Shares |           | Price   
|                                                               |  |        |           |       |  |          |       |       |  |        |           |         
|Outstanding, beginning of year                                 |  |        | 4,067,365 |       |  |          | 29.83 |       |  |        | 4,517,653 |          |  | $ | 29.11 |  |  |          | 2,865,647 |   |  | $ | 30.48 | 
|Granted                                                        |  |        | 117,500   |       |  |          | 31.55 |       |  |        | 142,000   |          |  |   | 35.01 |  |  |          | 2,195,500 |   |  |   | 27.02 | 
|Exercised                                                      |  |        | (298,105  | )     |  |          | 23.03 |       |  |        | (515,088  | )        |  |   | 23.74 |  |  |          | (425,243  | ) |  |   | 24.80 | 
|Canceled                                                       |  |        | (64,050   | )     |  |          | 38.06 |       |  |        | (77,200   | )        |  |   | 36.36 |  |  |          | (118,251  | ) |  |   | 42.42 | 
|                                                               |  |        |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 
|Outstanding, end of year                                       |  |        | 3,822,710 |       |  |          | 30.27 |       |  |        | 4,067,365 |          |  | $ | 29.83 |  |  |          | 4,517,653 |   |  | $ | 29.08 | 
|                                                               |  |        |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 
|Price for exercised shares                                     |  | $      | 23.03     |       |  |          |       |       |  | $      | 23.74     |          |  |   |       |  |  | $        | 24.80     |   |  |   |       | 
|Shares available for grant,
end of year                        |  |        | 1,317,759 |       |  |          |       |       |  |        | 1,371,209 |          |  |   |       |  |  |          | 1,436,009 |   |  |   |       | 
|Weighted average fair value of
options granted during the year |  | $      | 15.00     |       |  |          |       |       |  | $      | 22.48     |          |  |   |       |  |  | $        | 13.26     |   |  |   |       | 

The following table summarizes information about fixed-price stock options
outstanding at December 31, 2003:

|               |  |                   |           |             |  |          |      |                   |  |          |       |  |  |          |           |  |  |   |       | 
|-------------- |  | ----------------- | --------- | ----------- |  | -------- | ---- | ----------------- |  | -------- | ----- |  |  | -------- | --------- |  |  | - | ----- | 
|               |  |                   |           |             |  | Weighted |      |                   |  |          |       |  |  |          |           |  |  |  
|               |  |                   |           |             |  | Average  |      | Weighted          |  |          |       |  |  | Weighted
|Range of       |  | Number            |           | Remaining   |  | Average  |      | Number            |  | Average 
|Exercise       |  | Outstanding at    |           | Contractual |  | Exercise |      | Exercisable at    |  | Exercise
|Prices         |  | December 31, 2003 |           | Life        |  | Price    |      | December 31, 2003 |  | Price   
|               |  |                   |           |             |  |          |      |                   |  |         
|$10.67  26.17 |  |                   | 389,786   |             |  |          | 2.94 |                   |  | $        | 12.85 |  |  |          | 389,786   |  |  | $ | 12.85 | 
|26.42  26.69  |  |                   | 1,437,924 |             |  |          | 7.40 |                   |  |          | 26.45 |  |  |          | 1,437,924 |  |  |   | 26.45 | 
|29.34  33.38  |  |                   | 1,187,500 |             |  |          | 5.54 |                   |  |          | 31.86 |  |  |          | 1,030,500 |  |  |   | 32.05 | 
|34.16  60.63  |  |                   | 807,500   |             |  |          | 6.37 |                   |  |          | 43.16 |  |  |          | 139,600   |  |  |   | 41.37 | 

No stock appreciation rights or restricted stock authorized by the 1996 Plan
have been granted.

Employee Stock Purchase Plan
On May 25, 2000, the stockholders approved the 2000 Employee Stock Purchase
Plan whereby 500,000 shares of the Companys Class A common stock have been
reserved for issuance under the Plan. Under this plan, eligible employees may
purchase stock at 85% of the fair market value of a share on the offering
commencement date or the respective purchase date whichever is lower.
Purchases are limited to ten percent of an employees total compensation. The
initial offering under the Plan commenced on April 1, 2000 with a single
purchase date on June 30, 2000. Subsequent offerings shall commence each year
on July 1 with a termination date of December 31 and purchase dates on
September 30 and December 31; and on January 1 with a termination date on June
30 and purchase dates on March 31 and June 30.

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

Health Insurance Plan

The Company sponsors a partially self-insured group health insurance program.
The Company is obligated to pay all claims under the program, which are in
excess of premiums, up to program limits of $150 per employee, per claim, per
year. The Company is also self-insured with respect to its income disability
benefits and against casualty losses on advertising structures. Amounts for
expected losses, including a provision for losses incurred but not reported, is
included in accrued expenses in the accompanying consolidated financial
statements. As of December 31, 2003, the Company maintained $4,202 in letters
of credit with a bank to meet requirements of the Companys workers
compensation and general liability insurance carrier.

Profit Sharing Plan

The Company sponsors The Lamar Corporation Savings and Profit Sharing Plan
covering employees who have completed one year of service and are at least 21
years of age. The Company matches 50% of employees contributions up to 5% of
related compensation. Employees can contribute up to 15% of compensation. Full
vesting on the Companys matched contributions occurs after five years for
contributions made prior to January 1, 2002 and three years for contributions
made after January 1, 2002. Annually, at the Companys discretion, an
additional profit sharing contribution may be made on behalf of each eligible
employee. In total, for the years ended December 31, 2003, 2002 and 2001, the
Company contributed $2,804, $2,709 and $2,422, respectively.

Deferred Compensation Plan

The Company sponsors a Deferred Compensation Plan for the benefit of certain of
its senior management who meet specific age and years of service criteria.
Employees who have attained the age of 30 and have a minimum of 10 years of
service are eligible for annual contributions to the Plan generally ranging
from $3 to $8, depending on the employees length of service. The Companys
contributions to the Plan are maintained in a rabbi trust and, accordingly, the
assets and liabilities of the Plan are reflected in the balance sheet of the
Company. Upon termination, death or disability, participating employees are
eligible to receive an amount equal to the fair market value of the assets in
the employees deferred compensation account. The Company has contributed $668,
$619 and $550 to the Plan during the years ended December 31, 2003, 2002 and
2001, respectively. Contributions to the Deferred Compensation Plan are
discretionary and are determined by the Board of Directors.

(14)  Commitment and Contingencies

In August 2002, a jury verdict was rendered in a lawsuit filed against the
Company in the amount of $32 in compensatory damages and $2,245 in punitive
damages. As a result of the verdict, the Company recorded a $2,277 charge in
its operating expenses during the quarter ended September 30, 2002. In May
2003, the Court ordered a reduction to the punitive damage award, which was
subject to the plaintiffs consent. The plaintiff rejected the reduced award
and the Court ordered a new trial. Based on legal analysis, management
believes the best estimate of the Companys potential liability related to this
claim is currently $1,277. The $1,000 reduction in the reserve for this
liability was recorded as a reduction of corporate expenses in the second
quarter of 2003.

The Company is involved in various other claims and legal actions arising in
the ordinary course of business. In the opinion of management , the ultimate
disposition of the these matters will not have a material adverse effect on the
Companys consolidated financial position, results of operations, or liquidity.

(15)  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
subsidiary that is not a guarantor is considered to be 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 December 31, 2003 and 2002, 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 $1,937,244 and $1,915,035,
respectively.

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(16) Disclosures About Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of
the Companys financial instruments at December 31, 2003 and 2002. The fair
value of the financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties.

|               |  |          |           |            |  |          |           |            |  |   |           |  |  |   |           | 
|-------------- |  | -------- | --------- | ---------- |  | -------- | --------- | ---------- |  | - | --------- |  |  | - | --------- | 
|               |  | 2003     |           | 2002      
|               |  |          |           |           
|               |  | Carrying |           | Estimated  |  | Carrying |           | Estimated 
|               |  | Amount   |           | Fair Value |  | Amount   |           | Fair Value
|               |  |          |           |            |  |          |           |           
|Long-term debt |  | $        | 1,699,819 |            |  | $        | 1,735,925 |            |  | $ | 1,734,746 |  |  | $ | 1,758,380 | 

The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies as
follows:



| |  | The carrying amounts of cash and cash equivalents, prepaids,
receivables, trade accounts payable, accrued expenses, and deferred
income approximate fair value because of the short term nature of
these items.                                        
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The fair value of long-term debt is based upon market quotes obtained
from dealers where available and by discounting future cash flows at
rates currently available to the Company for similar instruments when
quoted market rates are not available.

Fair value estimates are subject to inherent limitations. Estimates of fair
values are made at a specific point in time, based on relevant market
information and information about the financial instrument. The estimated fair
values of financial instruments presented above are not necessarily indicative
of amounts the Company might realize in actual market transactions. Estimates
of fair value are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.

(17) Quarterly Financial Data (Unaudited)

|                                              |  |                    |         |         |  |              |         |             |  |   |         |   |  |   |         |  
|--------------------------------------------- |  | ------------------ | ------- | ------- |  | ------------ | ------- | ----------- |  | - | ------- | - |  | - | ------- | -
|                                              |  | Year 2003 Quarters
|                                              |  | March 31           |         | June 30 |  | September 30 |         | December 31
|                                              |  |                    |         |         |  |              |         |            
|Net revenues                                  |  | $                  | 184,221 |         |  | $            | 208,178 |             |  | $ | 211,720 |   |  | $ | 206,020 |  
|Net revenues less direct advertising expenses |  |                    | 112,664 |         |  |              | 134,817 |             |  |   | 137,149 |   |  |   | 133,492 |  
|Net loss applicable to common stock           |  |                    | (32,363 | )       |  |              | (2,292  | )           |  |   | (6,599  | ) |  |   | (5,962  | )
|Net loss per common share (basic and diluted) |  |                    | (0.32   | )       |  |              | (0.02   | )           |  |   | (0.06   | ) |  |   | (0.06   | )

|                                              |  |                    |         |         |  |              |         |             |  |   |         |   |  |   |         |  
|--------------------------------------------- |  | ------------------ | ------- | ------- |  | ------------ | ------- | ----------- |  | - | ------- | - |  | - | ------- | -
|                                              |  | Year 2002 Quarters
|                                              |  | March 31           |         | June 30 |  | September 30 |         | December 31
|                                              |  |                    |         |         |  |              |         |            
|Net revenues                                  |  | $                  | 176,538 |         |  | $            | 202,529 |             |  | $ | 201,918 |   |  | $ | 194,697 |  
|Net revenues less direct advertising expenses |  |                    | 109,311 |         |  |              | 135,897 |             |  |   | 130,233 |   |  |   | 125,469 |  
|Net loss applicable to common stock           |  |                    | (16,254 | )       |  |              | (399    | )           |  |   | (6,079  | ) |  |   | (13,961 | )
|Net loss per common share (basic and diluted) |  |                    | (0.16   | )       |  |              |        |             |  |   | (0.06   | ) |  |   | (0.14   | )

(18) New Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullified Emerging Issues Task Force (EITF) Issue 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity.
The provisions of this Statement are effective for exit or disposal activities
that are initiated after December 31, 2002, with early application encouraged.
The adoption of SFAS No. 146 did not have an effect on the Companys financial
statements.

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LAMAR ADVERTISING COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

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 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 did not have an effect on the Companys financial
statements.

In December 2003, the FASB issued Interpretation No. 46 (revised December
2003), 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 interest
entities obtained after January 31, 2003. The application of this
Interpretation did not have an effect on the Companys financial statements as
the Company has no variable interest entities.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under FASB Statement No.
133, Accounting for Derivative Instruments and Hedging Activities. The
Company adopted SFAS No. 149 for all contracts entered into or modified after
June 30, 2003. The adoption of SFAS No. 149 did not have an impact on its
consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. Statement
150 affects the issuers accounting for three types of freestanding financial
instruments. One type is mandatory redeemable shares, which the issuing
company is obligated to buy back in exchange for cash or other assets. A
second type, which includes put options and forward purchase contracts,
involves instruments that do or may require the issuer to buy back some of its
shares in exchange for cash or other assets. The third type of instruments
that are liabilities under this Statement is obligations that can be settled
with shares, the monetary value of which is fixed, tied solely or predominately
to a variable such as a market index, or varies inversely with the value of the
issuers shares. Statement 150 does not apply to features embedded in a
financial instrument that is not a derivative in its entirety. Most of the
guidance in Statement 150 is effective for all financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of
the first interim period beginning after June 15, 2003. The Company currently
does not have any financial instruments that are within the scope of SFAS No.
150.

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##### Table of Contents



SCHEDULE 2

Lamar Advertising Company
Valuation and Qualifying Accounts
Years Ended December 31, 2003, 2002 and 2001
(in thousands)

|                             |                                                                                           |  |            |         |            |  |            |         |        |  |            |        |  |  |  |         | 
|---------------------------- | ----------------------------------------------------------------------------------------- |  | ---------- | ------- | ---------- |  | ---------- | ------- | ------ |  | ---------- | ------ |  |  |  | ------- | 
|                             |                                                                                           |  | Balance at |         | Charged to |  |            |         |        |  | Balance at
|                             |                                                                                           |  | Beginning  |         | Costs and  |  |            |         |        |  | End of    
|                             |                                                                                           |  | of Period  |         | Expenses   |  | Deductions |         | Period
|                             |                                                                                           |  |            |         |            |  |            |         |       
|Year ended December 31, 2003 |                                                                                           |  |            |         |            |  |            |         |        |  |            |        |  |  |  |        
|                             | Deducted in balance sheet from trade
accounts
receivable: Allowance for doubtful accounts |  | $          | 4,914   |            |  |            | 8,599   |        |  |            | 8,599  |  |  |  | 4,914   | 
|                             | Deducted in balance sheet from intangible
assets: Amortization of intangible assets       |  | $          | 699,464 |            |  |            | 134,168 |        |  |            | 12,787 |  |  |  | 820,845 | 
|Year ended December 31, 2002 |                                                                                           |  |            |         |            |  |            |         |        |  |            |        |  |  |  |        
|                             | Deducted in balance sheet from trade
accounts
receivable: Allowance for doubtful accounts |  | $          | 4,914   |            |  |            | 9,036   |        |  |            | 9,036  |  |  |  | 4,914   | 
|                             | Deducted in balance sheet from intangible
assets: Amortization of intangible assets       |  | $          | 569,322 |            |  |            | 130,142 |        |  |            |       |  |  |  | 699,464 | 
|Year ended December 31, 2001 |                                                                                           |  |            |         |            |  |            |         |        |  |            |        |  |  |  |        
|                             | Deducted in balance sheet from trade
accounts
receivable: Allowance for doubtful accounts |  | $          | 4,914   |            |  |            | 7,794   |        |  |            | 7,794  |  |  |  | 4,914   | 
|                             | Deducted in balance sheet from intangible
assets: Amortization of intangible assets       |  | $          | 356,725 |            |  |            | 212,597 |        |  |            |       |  |  |  | 569,322 | 

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LAMAR MEDIA CORP.
AND SUBSIDIARIES

|                                                                                                     |  |  |         | 
|---------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Independent Auditors Report                                                                         |  |  | 53      | 
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                         |  |  | 54      | 
|Consolidated Statements of Operations for the years ended December 31,
2003, 2002 and 2001           |  |  | 55      | 
|Consolidated Statements of Stockholders Equity for the years ended
December 31, 2003, 2002 and 2001 |  |  | 56      | 
|Consolidated Statements of Cash Flows for the years ended December 31,
2003, 2002 and 2001           |  |  | 57      | 
|Notes to Consolidated Financial Statements                                                           |  |  | 58  62 | 
|Schedule 2  Valuation and Qualifying Accounts for the years ended
December 31, 2003, 2002 and 2001  |  |  | 63      | 

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Independent Auditors Report

Board of Directors
Lamar Media Corp.:

We have audited the consolidated financial statements of Lamar Media Corp. and
subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lamar Media Corp.
and subsidiaries as of December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

As discussed in Note 1(d) to the consolidated financial statements of Lamar
Advertising Company, effective July 1, 2001, the Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and certain provisions of SFAS No. 142, Goodwill and Other
Intangible Assets, as required for goodwill and intangible assets resulting
from business combinations consummated after June 30, 2001. The provisions of
SFAS No. 142 were fully adopted on January 1, 2002. As discussed in Note 9 to
the consolidated financial statements of Lamar Advertising Company, the Company
adopted the provisions of SFAS Statement No. 143, Accounting for Asset
Retirement Obligations on January 1, 2003.

|            
|------------
|/s/ KPMG LLP
|            
|KPMG LLP    

New Orleans, Louisiana
February 9, 2004

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2003 and 2002
(In thousands, except share and per share data)

|                                         |                                                                                                                        |                                            |           |           |           |  |           |           |           |  | 
|---------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | --------- | --------- |  | --------- | --------- | --------- |  | 
|                                         |                                                                                                                        |                                            |           |           | 2003      |  | 2002     
|                                         |                                                                                                                        |                                            |           |           |           |  |          
|ASSETS                                   |                                                                                                                        |                                            |           |           |           |  |           |          
|Current assets:                          |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         | Cash and cash equivalents                                                                                              |                                            | $         | 7,797     |           |  | $         | 15,610    |          
|                                         | Cash on deposit for debt extinguishment                                                                                |                                            |           |          |           |  |           | 266,657   |          
|                                         | Receivables, net of allowance for doubtful accounts of $4,914 in
2003 and 2002                                         |                                            |           | 90,413    |           |  |           | 92,295    |          
|                                         | Prepaid expenses                                                                                                       |                                            |           | 32,377    |           |  |           | 30,091    |          
|                                         | Deferred income tax assets                                                                                             |                                            |           | 6,051     |           |  |           | 6,428     |          
|                                         | Other current assets                                                                                                   |                                            |           | 7,324     |           |  |           | 14,293    |          
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         |                                                                                                                        | Total current assets                       |           |           | 143,962   |  |           |           | 425,374   | 
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|Property, plant and equipment            |                                                                                                                        |                                            | 1,933,003 |           |           |  | 1,850,657 |          
|                                         | Less accumulated depreciation and amortization                                                                         |                                            |           | (679,205  | )         |  |           | (566,889  | )        
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         |                                                                                                                        | Net property, plant and equipment          |           |           | 1,253,798 |  |           |           | 1,283,768 | 
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|Goodwill (note 3)                        |                                                                                                                        |                                            | 1,232,857 |           |           |  | 1,171,595 |          
|Intangible assets (note 3)               |                                                                                                                        |                                            | 952,347   |           |           |  | 975,998   |          
|Other assets                             |                                                                                                                        |                                            | 50,744    |           |           |  | 18,174    |          
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         |                                                                                                                        | Total assets                               |           | $         | 3,633,708 |  |           | $         | 3,874,909 | 
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY     |                                                                                                                        |                                            |           |           |           |  |           |          
|Current liabilities:                     |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         | Trade accounts payable                                                                                                 |                                            | $         | 8,813     |           |  | $         | 10,051    |          
|                                         | Current maturities of long-term debt (note 5)                                                                          |                                            |           | 5,044     |           |  |           | 4,687     |          
|                                         | Current maturities related to debt extinguishment                                                                      |                                            |           |          |           |  |           | 255,000   |          
|                                         | Accrued expenses (note 4)                                                                                              |                                            |           | 38,068    |           |  |           | 25,981    |          
|                                         | Deferred income                                                                                                        |                                            |           | 14,372    |           |  |           | 13,942    |          
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         |                                                                                                                        | Total current liabilities                  |           |           | 66,297    |  |           |           | 309,661   | 
|Long-term debt (note 5)                  |                                                                                                                        |                                            | 1,412,319 |           |           |  | 1,447,246 |          
|Deferred income tax liabilities (note 6) |                                                                                                                        |                                            | 121,440   |           |           |  | 129,924   |          
|Asset retirement obligation              |                                                                                                                        |                                            | 36,857    |           |           |  |          |          
|Other liabilities                        |                                                                                                                        |                                            | 9,109     |           |           |  | 7,366     |          
|                                         |                                                                                                                        |                                            |           |           |           |  |           |           |          
|                                         |                                                                                                                        | Total liabilities                          |           |           | 1,646,022 |  |           |           | 1,894,197 | 
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|Stockholders equity:                    |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         | Common stock, $.01 par value, authorized 3,000 shares; 100
shares issued
and outstanding at December 31, 2003 and 2002 |                                            |           |          |           |  |           |          |          
|                                         | Additional paid-in capital                                                                                             |                                            |           | 2,333,951 |           |  |           | 2,281,901 |          
|                                         | Accumulated deficit                                                                                                    |                                            |           | (346,265  | )         |  |           | (301,189  | )        
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         |                                                                                                                        | Stockholders equity                       |           |           | 1,987,686 |  |           |           | 1,980,712 | 
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          
|                                         |                                                                                                                        | Total liabilities and stockholders equity |           | $         | 3,633,708 |  |           | $         | 3,874,909 | 
|                                         |                                                                                                                        |                                            |           |           |           |  |           |          

See accompanying notes to consolidated financial statements.

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 2003, 2002 and 2001
(In thousands)

|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |         |  
|---------------------------------------------------------------------------------------- | ----------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | -------- | ------- | -
|                                                                                         |                                     |   | 2003    |         | 2002 |   | 2001   
|                                                                                         |                                     |   |         |         |      |   |        
|Net revenues                                                                             |                                     | $ | 810,139 |         |      | $ | 775,682 |         |   | $ | 729,050  |        
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        
|Operating expenses (income):                                                             |                                     |   |         |         |      |   |         |         |   |   |          |        
|                                                                                         | Direct advertising expenses         |   |         | 292,017 |      |   |         | 274,772 |   |   |          | 251,483 |  
|                                                                                         | General and administrative expenses |   |         | 145,971 |      |   |         | 139,610 |   |   |          | 124,339 |  
|                                                                                         | Corporate expenses                  |   |         | 25,229  |      |   |         | 27,285  |   |   |          | 26,447  |  
|                                                                                         | Depreciation and amortization       |   |         | 279,033 |      |   |         | 274,644 |   |   |          | 351,754 |  
|                                                                                         | Gain on disposition of assets       |   |         | (748    | )    |   |         | (336    | ) |   |          | (923    | )
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        
|                                                                                         |                                     |   | 741,502 |         |      |   | 715,975 |         |   |   | 753,100  |        
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        
|                                                                                         | Operating income (loss)             |   |         | 68,637  |      |   |         | 59,707  |   |   |          | (24,050 | )
|Other expense (income):                                                                  |                                     |   |         |         |      |   |         |         |   |   |          |        
|                                                                                         | Loss on extinguishment of debt      |   |         | 21,077  |      |   |         | 5,850   |   |   |          |        |  
|                                                                                         | Interest income                     |   |         | (502    | )    |   |         | (929    | ) |   |          | (640    | )
|                                                                                         | Interest expense                    |   |         | 75,055  |      |   |         | 92,178  |   |   |          | 113,026 |  
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        
|                                                                                         |                                     |   | 95,630  |         |      |   | 97,099  |         |   |   | 112,386  |        
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        
|Loss before income tax benefit and cumulative effect of a
change in accounting principle |                                     |   | (26,993 | )       |      |   | (37,392 | )       |   |   | (136,436 | )      
|Income tax benefit (note 6)                                                              |                                     |   | (9,408  | )       |      |   | (12,434 | )       |   |   | (38,870  | )      
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        
|Loss before cumulative effect of a change in accounting
principle                        |                                     |   | (17,585 | )       |      |   | (24,958 | )       |   |   | (97,566  | )      
|Cumulative affect of a change in accounting principle
net of tax benefit of $7,467       |                                     |   | 11,679  |         |      |   |        |         |   |   |         |        
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        
|Net loss                                                                                 |                                     | $ | (29,264 | )       |      | $ | (24,958 | )       |   | $ | (97,566  | )      
|                                                                                         |                                     |   |         |         |      |   |         |         |   |   |          |        

See accompanying notes to consolidated financial statements.

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity
Years Ended December 31, 2003, 2002 and 2001
(In thousands, except share and per share data)

|                           |                          |   |        |   |         |  |             |         |       |  |          |         |   |  |           |         |  
|-------------------------- | ------------------------ | - | ------ | - | ------- |  | ----------- | ------- | ----- |  | -------- | ------- | - |  | --------- | ------- | -
|                           |                          |   |        |   |         |  | ADDITIONAL  |         |       |  |          |         |   |  |          
|                           |                          |   | COMMON |   | PAID-IN |  | ACCUMULATED |         |       |  |         
|                           |                          |   | STOCK  |   | CAPITAL |  | DEFICIT     |         | TOTAL
|                           |                          |   |        |   |         |  |             |         |      
|Balance, December 31, 2000 |                          | $ |       |   |         |  | 1,855,421   |         |       |  | (178,665 | )       |   |  | 1,676,756 |        
|                           | Contribution from parent |   |        |  |         |  |             | 366,896 |       |  |          |        |   |  |           | 366,896 |  
|                           | Net loss                 |   |        |  |         |  |             |        |       |  |          | (97,566 | ) |  |           | (97,566 | )
|                           |                          |   |        |   |         |  |             |         |       |  |          |         |   |  |           |        
|Balance, December 31, 2001 |                          | $ |       |   |         |  | 2,222,317   |         |       |  | (276,231 | )       |   |  | 1,946,086 |        
|                           | Contribution from parent |   |        |  |         |  |             | 59,584  |       |  |          |        |   |  |           | 59,584  |  
|                           | Net loss                 |   |        |  |         |  |             |        |       |  |          | (24,958 | ) |  |           | (24,958 | )
|                           |                          |   |        |   |         |  |             |         |       |  |          |         |   |  |           |        
|Balance, December 31, 2002 |                          | $ |       |   |         |  | 2,281,901   |         |       |  | (301,189 | )       |   |  | 1,980,712 |        
|                           | Dividend to parent       |   |        |   |         |  |             |        |       |  |          | (15,812 | ) |  |           | (15,812 | )
|                           | Contribution from parent |   |        |  |         |  |             | 52,050  |       |  |          |        |   |  |           | 52,050  |  
|                           | Net loss                 |   |        |  |         |  |             |        |       |  |          | (29,264 | ) |  |           | (29,264 | )
|                           |                          |   |        |   |         |  |             |         |       |  |          |         |   |  |           |        
|Balance, December 31, 2003 |                          | $ |       |   |         |  | 2,333,951   |         |       |  | (346,265 | )       |   |  | 1,987,686 |        
|                           |                          |   |        |   |         |  |             |         |       |  |          |         |   |  |           |        

See accompanying notes to consolidated financial statements.

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2003, 2002 and 2001
(In thousands)

|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |          |         |          |  
|-------------------------------------------------- | --------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | -------- | ------- | -------- | ---- | -------- | ------- | -------- | - | -------- | ------- | -------- | -
|                                                   |                                                           |                                                       |                                                       |          | 2003    |          | 2002 |          | 2001   
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |        
|Cash flows from operating activities:              |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Net loss                                                  |                                                       | $                                                     | (29,264  | )       |          | $    | (24,958  | )       |          | $ | (97,566  | )      
|                                                   | Adjustments to reconcile net loss to net cash provided by |                                                       |                                                       |          |         |          |      |          |         |          |   |          |        
|                                                   |                                                           | operating activities:                                 |                                                       |          |         |          |      |          |         |          |   |          |         |         
|                                                   |                                                           | Depreciation and amortization                         |                                                       |          | 279,033 |          |      |          | 274,644 |          |   |          | 351,754 |         
|                                                   |                                                           | Gain on disposition of assets                         |                                                       |          | (748    | )        |      |          | (336    | )        |   |          | (923    | )       
|                                                   |                                                           | Loss on extinguishment of debt                        |                                                       |          | 21,077  |          |      |          | 5,850   |          |   |          |        |         
|                                                   |                                                           | Cumulative effect of a change in accounting principle |                                                       |          | 11,679  |          |      |          |        |          |   |          |        |         
|                                                   |                                                           | Deferred income tax benefit                           |                                                       |          | (9,366  | )        |      |          | (8,325  | )        |   |          | (39,582 | )       
|                                                   |                                                           | Provision for doubtful accounts                       |                                                       |          | 8,599   |          |      |          | 9,036   |          |   |          | 7,794   |         
|                                                   | Changes in operating assets and liabilities:              |                                                       |                                                       |          |         |          |      |          |         |          |   |          |        
|                                                   |                                                           | (Increase) decrease in:                               |                                                       |          |         |          |      |          |         |          |   |          |         |         
|                                                   |                                                           |                                                       | Receivables                                           |          |         | (7,360   | )    |          |         | (6,451   | ) |          |         | (9,810   | )
|                                                   |                                                           |                                                       | Prepaid expenses                                      |          |         | (2,923   | )    |          |         | (2,533   | ) |          |         | (1,322   | )
|                                                   |                                                           |                                                       | Other assets                                          |          |         | (6,318   | )    |          |         | 2,804    |   |          |         | 2,916    |  
|                                                   |                                                           | Increase (decrease) in:                               |                                                       |          |         |          |      |          |         |          |   |          |         |         
|                                                   |                                                           |                                                       | Trade accounts payable                                |          |         | (1,238   | )    |          |         | 3        |   |          |         | 131      |  
|                                                   |                                                           |                                                       | Accrued expenses                                      |          |         | 11,431   |      |          |         | 1,965    |   |          |         | (14,641  | )
|                                                   |                                                           |                                                       | Other liabilities                                     |          |         | 254      |      |          |         | 1,546    |   |          |         | (49      | )
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                           |                                                       | Cash flows provided by operating activities           |          |         | 274,856  |      |          |         | 253,245  |   |          |         | 198,702  |  
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|Cash flows from investing activities:              |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Capital expenditures                                      |                                                       |                                                       | (78,275  | )       |          |      | (78,390  | )       |          |   | (85,320  | )      
|                                                   | Purchase of new markets                                   |                                                       |                                                       | (135,319 | )       |          |      | (78,326  | )       |          |   | (298,134 | )      
|                                                   | Increase in notes receivable                              |                                                       |                                                       |         |         |          |      | (1,650   | )       |          |   |         |        
|                                                   | Proceeds from sale of property and equipment              |                                                       |                                                       | 5,829    |         |          |      | 3,412    |         |          |   | 4,916    |        
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                           |                                                       | Cash flows used in investing activities               |          |         | (207,765 | )    |          |         | (154,954 | ) |          |         | (378,538 | )
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|Cash flows from financing activities:              |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Contribution from parent                                  |                                                       |                                                       |         |         |          |      |         |         |          |   | 48,000   |        
|                                                   | Proceeds from issuance of long-term debt                  |                                                       |                                                       | 128,038  |         |          |      | 256,400  |         |          |   |         |        
|                                                   | Deposits for debt extinguishment                          |                                                       |                                                       | 266,657  |         |          |      | (266,657 | )       |          |   |         |        
|                                                   | Principal payments on long-term debt                      |                                                       |                                                       | (483,888 | )       |          |      | (144,126 | )       |          |   | (67,046  | )      
|                                                   | Debt issuance costs                                       |                                                       |                                                       | (9,899   | )       |          |      | (1,183   | )       |          |   | (573     | )      
|                                                   | Dividends                                                 |                                                       |                                                       | (15,812  | )       |          |      |         |         |          |   |         |        
|                                                   | Net borrowing under credit agreements                     |                                                       |                                                       | 40,000   |         |          |      | 60,000   |         |          |   | 140,000  |        
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                           |                                                       | Cash flows (used in) provided by financing activities |          |         | (74,904  | )    |          |         | (95,566  | ) |          |         | 120,381  |  
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   |                                                           |                                                       | Net (decrease) increase in cash and cash equivalents  |          |         | (7,813   | )    |          |         | 2,725    |   |          |         | (59,455  | )
|                                                   | Cash and cash equivalents at beginning of period          |                                                       |                                                       | 15,610   |         |          |      | 12,885   |         |          |   | 72,340   |        
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Cash and cash equivalents at end of period                |                                                       | $                                                     | 7,797    |         |          | $    | 15,610   |         |          | $ | 12,885   |        
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|Supplemental disclosures of cash flow information: |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Cash paid for interest                                    |                                                       | $                                                     | 64,245   |         |          | $    | 94,729   |         |          | $ | 119,000  |        
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         
|                                                   | Cash paid for state and federal income taxes              |                                                       | $                                                     | 825      |         |          | $    | 745      |         |          | $ | 1,189    |        
|                                                   |                                                           |                                                       |                                                       |          |         |          |      |          |         |          |   |         

See accompanying notes to consolidated financial statements.

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(1) Significant Accounting Policies

(a) Nature of Business

Lamar Media Corp. is a wholly owned subsidiary of Lamar Advertising Company.
Lamar Media Corp. is engaged in the outdoor advertising business operating
approximately 147,000 outdoor advertising displays in 43 states. Lamar Medias
operating strategy is to be the leading provider of outdoor advertising
services in the markets it serves.

In addition, Lamar Media operates a logo sign business in 20 states throughout
the United States and in one province of Canada. Logo signs are erected
pursuant to state-awarded service contracts on public rights-of-way near
highway exits and deliver brand name information on available gas, food,
lodging and camping services. Included in the Companys logo sign business are
tourism signing contracts.

Certain footnotes are not provided for the accompanying financial statements as
the information in notes 2, 4, 6, 9, 12 through 16 and 18 and portions of notes
1, 8 and 10 to the consolidated financial statements of Lamar Advertising
Company included elsewhere in this Annual Report are substantially equivalent
to that required for the consolidated financial statements of Lamar Media Corp.
Earnings per share data is not provided for the operating results of Lamar
Media Corp. as it is a wholly owned subsidiary of Lamar Advertising Company.

(b)  Principles of Consolidation

The accompanying consolidated financial statements include Lamar Media Corp.,
its wholly owned subsidiaries, The Lamar Company, LLC, Lamar Central Outdoor,
Inc., Lamar Oklahoma Holding Co., Inc., Lamar Advertising Southwest, Inc.,
Lamar DOA Tennessee Holdings, Inc., and Interstate Logos, LLC. and their
majority-owned subsidiaries. All intercompany transactions and balances have
been eliminated in consolidation.

(2)  Noncash Financing and Investing Activities

A summary of significant noncash financing and investing activities for the
years ended December 31, 2003, 2002 and 2001:

|                                                  |  |      |        |      |  |      |        |  |  |  |         | 
|------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------- | 
|                                                  |  | 2003 |        | 2002 |  | 2001
|                                                  |  |      |        |      |  |     
|Parent company stock contributed for acquisitions |  | $    | 50,630 |      |  |      | 56,100 |  |  |  | 29,000  | 
|Note payable converted to contributed capital     |  |      |       |      |  |      |       |  |  |  | 287,000 | 
|Debt issuance costs                               |  |      | 1,619  |      |  |      | 3,640  |  |  |  |        | 

(3) Goodwill and Other Intangible Assets

The following is a summary of intangible assets at December 31, 2003 and
December 31, 2002.

|                                 |  |           |        |                |  |              |           |                |  |              |         |  |  |   |           |  |  |   |         | 
|-------------------------------- |  | --------- | ------ | -------------- |  | ------------ | --------- | -------------- |  | ------------ | ------- |  |  | - | --------- |  |  | - | ------- | 
|                                 |  |           |        |                |  | 2003         |           | 2002          
|                                 |  | Estimated |        |                |  |             
|                                 |  | Life      |        | Gross Carrying |  | Accumulated  |           | Gross Carrying |  | Accumulated 
|                                 |  | (Years)   |        | Amount         |  | Amortization |           | Amount         |  | Amortization
|                                 |  |           |        |                |  |              |           |                |  |             
|Amortizable Intangible Assets:   |  |          
|Debt issuance costs and fees     |  |           | 7  10 |                |  | $            | 26,150    |                |  | $            | 11,865  |  |  | $ | 29,304    |  |  | $ | 16,992  | 
|Customer lists and contracts     |  |           | 7  10 |                |  |              | 388,791   |                |  |              | 248,617 |  |  |   | 371,787   |  |  |   | 196,084 | 
|Non-competition agreements       |  |           | 3  15 |                |  |              | 57,664    |                |  |              | 46,197  |  |  |   | 57,023    |  |  |   | 39,458  | 
|Site locations                   |  |           | 15     |                |  |              | 1,021,037 |                |  |              | 243,170 |  |  |   | 937,773   |  |  |   | 177,016 | 
|Other                            |  |           | 5  15 |                |  |              | 16,980    |                |  |              | 8,426   |  |  |   | 15,399    |  |  |   | 5,738   | 
|                                 |  |           |        |                |  |              |           |                |  |              |         |  |  |   |           |  |  |   |         | 
|                                 |  |           |        |                |  |              | 1,510,622 |                |  |              | 558,275 |  |  |   | 1,411,286 |  |  |   | 435,288 | 
|Unamortizable Intangible Assets: |  |           |        |                |  |              |           |                |  |              |         |  |  |   |           |  |  |   |         | 
|Goodwill                         |  |           |        |                |  | $            | 1,485,623 |                |  | $            | 252,766 |  |  | $ | 1,424,361 |  |  | $ | 252,766 | 

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

The changes in the carrying amount of goodwill for the year ended December 31,
2003 are as follows:

|                                  |  |   |           | 
|--------------------------------- |  | - | --------- | 
|Balance as of December 31, 2002   |  | $ | 1,424,361 | 
|Goodwill acquired during the year |  |   | 61,262    | 
|Impairment losses                 |  |   |          | 
|                                  |  |   |           | 
|Balance as of December 31, 2003   |  | $ | 1,485,623 | 
|                                  |  |   |           | 

In accordance with SFAS No. 142, Lamar Media is required to evaluate its
existing intangible assets and goodwill that were acquired in purchase business
combinations, and to make any necessary reclassifications in order to conform
with the new classification criteria in SFAS No. 141 for recognition separate
from goodwill. Lamar Media is required to reassess the useful lives and
residual values of all intangible assets acquired, and make any necessary
amortization period adjustments. If an intangible asset is identified as
having an indefinite useful life, Lamar Media will be required to test the
intangible asset for impairment in accordance with the provisions of SFAS No.
142. Impairment is measured as the excess of carrying value over the fair
value of an intangible asset with an indefinite life. Based upon its review,
no impairment charge was required upon the adoption of SFAS No. 142 or at its
annual tests for impairment on December 31, 2002 and December 31, 2003.

The following table illustrates the effect of the adoption of SFAS No. 142 on
prior periods:

|                                       |  |                          |          |      |  |      |         |   |  |   |         |  
|-------------------------------------- |  | ------------------------ | -------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                       |  | Years ended December 31,
|                                       |  | 2003                     |          | 2002 |  | 2001
|                                       |  |                          |          |      |  |     
|Reported net loss                      |  | $                        | (29,264  | )    |  | $    | (24,958 | ) |  | $ | (97,566 | )
|Add: goodwill amortization, net of tax |  |                          |         |      |  |      |        |   |  |   | 70,463  |  
|                                       |  |                          |          |      |  |      |         |   |  |   |         |  
|Adjusted net loss                      |  | $                        | ( 29,264 | )    |  | $    | (24,958 | ) |  | $ | (27,103 | )
|                                       |  |                          |          |      |  |      |         |   |  |   |         |  

(4) Accrued Expenses

The following is a summary of accrued expenses at December 31, 2003 and 2002:

|         |  |      |        |      |  |  |        | 
|-------- |  | ---- | ------ | ---- |  |  | ------ | 
|         |  | 2003 |        | 2002
|         |  |      |        |     
|Payroll  |  | $    | 7,698  |      |  |  | 7,686  | 
|Interest |  |      | 19,428 |      |  |  | 8,618  | 
|Other    |  |      | 10,941 |      |  |  | 9,677  | 
|         |  |      |        |      |  |  |        | 
|         |  | $    | 38,067 |      |  |  | 25,981 | 
|         |  |      |        |      |  |  |        | 

(5) Long-term Debt

Long-term debt consists of the following at December 31, 2003 and 2002:

|                                              |  |      |           |      |  |  |           |  
|--------------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | -
|                                              |  | 2003 |           | 2002
|                                              |  |      |           |     
|7 1/4% Senior subordinated notes              |  | $    | 389,387   |      |  |  | 260,000   |  
|9 5/8% Senior subordinated notes (1996 Notes) |  |      |          |      |  |  | 255,000   |  
|8 5/8% Senior subordinated notes (1997 Notes) |  |      |          |      |  |  | 199,230   |  
|Bank Credit Agreement                         |  |      | 1,015,000 |      |  |  | 975,500   |  
|8% Unsecured subordinated notes               |  |      | 5,333     |      |  |  | 7,333     |  
|Other notes with various rates and terms      |  |      | 7,643     |      |  |  | 9,870     |  
|                                              |  |      |           |      |  |  |           |  
|                                              |  |      | 1,417,363 |      |  |  | 1,706,933 |  
|Less current maturities                       |  |      | (5,044    | )    |  |  | (259,687  | )
|                                              |  |      |           |      |  |  |           |  
|Long-term debt excluding current maturities   |  | $    | 1,412,319 |      |  |  | 1,447,246 |  
|                                              |  |      |           |      |  |  |           |  

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

Long-term debt matures as follows:

|            |  |   |           | 
|----------- |  | - | --------- | 
|2004        |  | $ | 5,044     | 
|2005        |  |   | 57,160    | 
|2006        |  |   | 69,067    | 
|2007        |  |   | 82,568    | 
|2008        |  |   | 82,612    | 
|Later years |  |   | 1,120,912 | 

(6) Income Taxes

Income tax benefit for the years ended December 31, 2003, 2002 and 2001,
consists of:

|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|----------------------------- | --------------- | - | ------- | ------ | -------- |  | ------- | ------- | - |  | ------- | ------- | -
|                              |                 |   | Current |        | Deferred |  | Total  
|                              |                 |   |         |        |          |  |        
|Year ended December 31, 2003: |                 |   |         |        |          |  |         |         |   |  |         |        
|                              | U.S. federal    |   | $       |       |          |  |         | (8,126  | ) |  |         | (8,126  | )
|                              | State and local |   |         | (42    | )        |  |         | (1,905  | ) |  |         | (1,947  | )
|                              | Foreign         |   |         |       |          |  |         | 665     |   |  |         | 665     |  
|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|                              |                 | $ | (42     | )      |          |  | (9,366  | )       |   |  | (9,408  | )      
|                              |                 |   |         |        |          |  |         |         |   |  |         |        
|Year ended December 31, 2002: |                 |   |         |        |          |  |         |         |   |  |         |        
|                              | U.S. federal    |   | $       | (5,068 | )        |  |         | (7,090  | ) |  |         | (12,158 | )
|                              | State and local |   |         | 870    |          |  |         | (1,685  | ) |  |         | (815    | )
|                              | Foreign         |   |         | 89     |          |  |         | 450     |   |  |         | 539     |  
|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|                              |                 | $ | (4,109  | )      |          |  | (8,325  | )       |   |  | (12,434 | )      
|                              |                 |   |         |        |          |  |         |         |   |  |         |        
|Year ended December 31, 2001: |                 |   |         |        |          |  |         |         |   |  |         |        
|                              | U.S. federal    |   | $       |       |          |  |         | (31,618 | ) |  |         | (31,618 | )
|                              | State and local |   |         | 712    |          |  |         | (7,513  | ) |  |         | (6,801  | )
|                              | Foreign         |   |         |       |          |  |         | (451    | ) |  |         | (451    | )
|                              |                 |   |         |        |          |  |         |         |   |  |         |         |  
|                              |                 | $ | 712     |        |          |  | (39,582 | )       |   |  | (38,870 | )      
|                              |                 |   |         |        |          |  |         |         |   |  |         |        

Income tax expense (benefit) attributable to continuing operations for the
years ended December 31, 2003, 2002 and 2001, differs from the amounts computed
by applying the U.S. federal income tax rate of 34 percent to loss before
income taxes as follows:

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

|                                                     |                                                                 |   |        |        |      |  |         |      |   |  |         |        |  
|---------------------------------------------------- | --------------------------------------------------------------- | - | ------ | ------ | ---- |  | ------- | ---- | - |  | ------- | ------ | -
|                                                     |                                                                 |   | 2003   |        | 2002 |  | 2001   
|                                                     |                                                                 |   |        |        |      |  |        
|Computed expected tax benefit                        |                                                                 | $ | (9,178 | )      |      |  | (12,713 | )    |   |  | (46,388 | )     
|Increase (reduction) in income taxes resulting from: |                                                                 |   |        |        |      |  |         |      |   |  |         |       
|                                                     | Book expenses not deductible for tax purposes                   |   |        | 1,149  |      |  |         | 689  |   |  |         | 590    |  
|                                                     | Amortization of non-deductible goodwill                         |   |        | (19    | )    |  |         | (31  | ) |  |         | 13,402 |  
|                                                     | State and local income taxes, net of federal
income tax
benefit |   |        | (1,285 | )    |  |         | (560 | ) |  |         | (4,488 | )
|                                                     | Other differences, net                                          |   |        | (75    | )    |  |         | 181  |   |  |         | (1,986 | )
|                                                     |                                                                 |   |        |        |      |  |         |      |   |  |         |       
|                                                     |                                                                 | $ | (9,408 | )      |      |  | (12,434 | )    |   |  | (38,870 | )     
|                                                     |                                                                 |   |        |        |      |  |         |      |   |  |         |       

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2002
and 2001 are presented below:

|                                       |                                                                                                                                          |   |          |          |      |  |          |          |  
|-------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | -------- | ---- |  | -------- | -------- | -
|                                       |                                                                                                                                          |   | 2003     |          | 2002
|                                       |                                                                                                                                          |   |          |          |     
|Current deferred tax assets:           |                                                                                                                                          |   |          |          |      |  |          |         
|                                       | Receivables, principally due to allowance for doubtful accounts                                                                          |   | $        | 1,916    |      |  | $        | 1,916    |  
|                                       | Accrued liabilities not deducted for tax purposes                                                                                        |   |          | 1,584    |      |  |          | 2,142    |  
|                                       | Other                                                                                                                                    |   |          | 2,551    |      |  |          | 2,370    |  
|                                       |                                                                                                                                          |   |          |          |      |  |          |          |  
|                                       | Net current deferred tax asset                                                                                                           |   |          | 6,051    |      |  |          | 6,428    |  
|                                       |                                                                                                                                          |   |          |          |      |  |          |         
|                                       | Non-current deferred tax liabilities:                                                                                                    |   |          |          |      |  |          |          |  
|                                       | Plant and equipment, principally due to differences in depreciation                                                                      |   |          | (11,738  | )    |  |          | (10,821  | )
|                                       | Intangibles, due to differences in amortizable lives                                                                                     |   |          | (244,880 | )    |  |          | (243,680 | )
|                                       |                                                                                                                                          |   |          |          |      |  |          |         
|                                       |                                                                                                                                          |   | (256,618 | )        |      |  | (254,501 | )       
|                                       | Non-current deferred tax assets:                                                                                                         |   |          |          |      |  |          |          |  
|                                       | Plant and equipment, due to basis differences on acquisitions and costs
capitalized for tax purposes                                     |   |          | 48,479   |      |  |          | 51,780   |  
|                                       | Investment in affiliates and plant and equipment, due to gains
recognized for tax purposes and deferred for financial reporting
purposes |   |          | 941      |      |  |          | 941      |  
|                                       | Accrued liabilities not deducted for tax purposes                                                                                        |   |          | 2,900    |      |  |          | 3,062    |  
|                                       | Net operating loss carryforward                                                                                                          |   |          | 73,061   |      |  |          | 68,164   |  
|                                       | Asset retirement obligation                                                                                                              |   |          | 8,923    |      |  |          |         |  
|                                       | Other, net                                                                                                                               |   |          | 874      |      |  |          | 630      |  
|                                       |                                                                                                                                          |   |          |          |      |  |          |         
|                                       |                                                                                                                                          |   | 135,178  |          |      |  | 124,577  |         
|                                       |                                                                                                                                          |   |          |          |      |  |          |          |  
|Net non-current deferred tax liability |                                                                                                                                          | $ | (121,440 | )        |      |  | (129,924 | )       
|                                       |                                                                                                                                          |   |          |          |      |  |          |         

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not that Lamar Media
will realize the benefits of these deductible differences. The amount of the
deferred tax assets considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced.

(7) Related Party Transactions

Affiliates, as used within these statements, are persons or entities that are
affiliated with Lamar Media Corp. or its subsidiaries through common ownership
and directorate control.

As of December 31, 2003 and 2002, there was a receivable from Lamar Advertising
Company, its parent, in the amount of $22,152 and $6,978, respectively.

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LAMAR MEDIA CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share data)

(8) Quarterly Financial Data (Unaudited)

|                                              |  |                    |         |         |  |              |         |             |  |   |         |  |  |   |         |  
|--------------------------------------------- |  | ------------------ | ------- | ------- |  | ------------ | ------- | ----------- |  | - | ------- |  |  | - | ------- | -
|                                              |  | Year 2003 Quarters
|                                              |  | March 31           |         | June 30 |  | September 30 |         | December 31
|                                              |  |                    |         |         |  |              |         |            
|Net revenues                                  |  | $                  | 184,221 |         |  | $            | 208,178 |             |  | $ | 211,720 |  |  | $ | 206,020 |  
|Net revenues less direct
advertising expenses |  |                    | 112,664 |         |  |              | 134,817 |             |  |   | 137,149 |  |  |   | 133,492 |  
|Net (loss) income applicable to
common stock  |  |                    | (29,445 | )       |  |              | 936     |             |  |   | 3,371   |  |  |   | (4,126  | )

|                                              |  |                    |         |         |  |              |         |             |  |   |         |   |  |   |         |  
|--------------------------------------------- |  | ------------------ | ------- | ------- |  | ------------ | ------- | ----------- |  | - | ------- | - |  | - | ------- | -
|                                              |  | Year 2002 Quarters
|                                              |  | March 31           |         | June 30 |  | September 30 |         | December 31
|                                              |  |                    |         |         |  |              |         |            
|Net revenues                                  |  | $                  | 176,538 |         |  | $            | 202,529 |             |  | $ | 201,918 |   |  | $ | 194,697 |  
|Net revenues less direct
advertising expenses |  |                    | 109,311 |         |  |              | 135,897 |             |  |   | 130,233 |   |  |   | 125,469 |  
|Net (loss) income applicable to
common stock  |  |                    | (13,331 | )       |  |              | 2,542   |             |  |   | (3,145  | ) |  |   | (11,024 | )

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SCHEDULE 2

Lamar Media Corp.
and Subsidiaries
Valuation and Qualifying Accounts
Years Ended December 31, 2003, 2002 and 2001
(in thousands)

|                             |                                                                                           |  |              |         |            |  |            |         |           |  |         |       |  |  |  |         | 
|---------------------------- | ----------------------------------------------------------------------------------------- |  | ------------ | ------- | ---------- |  | ---------- | ------- | --------- |  | ------- | ----- |  |  |  | ------- | 
|                             |                                                                                           |  | Balance at   |         | Charged to |  |            |         |           |  | Balance
|                             |                                                                                           |  | Beginning of |         | Costs and  |  |            |         |           |  | at end 
|                             |                                                                                           |  | Period       |         | Expenses   |  | Deductions |         | of Period
|                             |                                                                                           |  |              |         |            |  |            |         |          
|Year Ended December 31, 2003 |                                                                                           |  |              |         |            |  |            |         |           |  |         |       |  |  |  |        
|                             | Deducted in balance sheet from trade
accounts
receivable: Allowance for doubtful accounts |  | $            | 4,914   |            |  |            | 8,599   |           |  |         | 8,599 |  |  |  | 4,914   | 
|                             | Deducted in balance sheet from intangible
assets: Amortization of intangible assets       |  | $            | 688,054 |            |  |            | 130,376 |           |  |         | 7,389 |  |  |  | 811,041 | 
|Year Ended December 31, 2002 |                                                                                           |  |              |         |            |  |            |         |           |  |         |       |  |  |  |        
|                             | Deducted in balance sheet from trade
accounts
receivable: Allowance for doubtful accounts |  | $            | 4,914   |            |  |            | 9,036   |           |  |         | 9,036 |  |  |  | 4,914   | 
|                             | Deducted in balance sheet from intangible
assets: Amortization of intangible assets       |  | $            | 561,096 |            |  |            | 126,958 |           |  |         |      |  |  |  | 688,054 | 
|Year Ended December 31, 2001 |                                                                                           |  |              |         |            |  |            |         |           |  |         |       |  |  |  |        
|                             | Deducted in balance sheet from trade
accounts
receivable: Allowance for doubtful accounts |  | $            | 4,914   |            |  |            | 7,794   |           |  |         | 7,794 |  |  |  | 4,914   | 
|                             | Deducted in balance sheet from intangible
assets: Amortization of intangible assets       |  | $            | 352,314 |            |  |            | 208,782 |           |  |         |      |  |  |  | 561,096 | 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

Lamar Advertising Company
None

Lamar Media Corp.
None




ITEM 9A. CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures.

The Companys and Lamar Medias management, with the participation of the
principal executive officer and principal financial officer of the Company and
Lamar Media, have evaluated the effectiveness of the design and operation of
the Companys and Lamar Medias disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended) as of the end of the period covered by this annual report. Based
on this evaluation, the principal executive officer and principal financial
officer of the Company and Lamar Media concluded that these disclosure controls
and procedures are effective and designed to ensure that the information
required to be disclosed in the Companys and Lamar Medias reports filed or
submitted under the Securities Exchange Act of 1934 is recorded, processed,
summarized and
reported within the requisite time periods.

b) Changes in internal controls.

There was no change in the internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of
1934, as amended) of the Company and Lamar Media identified in connection with
the evaluation of the Companys and Lamar Medias internal control performed
during the fourth fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Companys and Lamar Medias internal control
over financial reporting.

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PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Portions of the response to this item are contained in part under the caption
Executive Officers of the Registrant in Part I, Item 1A hereof and additional
information is incorporated herein by reference from the discussion responsive
thereto under the captions Election of Directors and Nominees for Director,
Election of Directors  Family Relationships, Election of Directors  Board
and Committee Meetings and Section 16(a) Beneficial Ownership Reporting
Compliance in the Companys Proxy Statement relating to the 2004 Annual
Meeting of Stockholders (the 2004 Proxy Statement).

We have adopted a Code of Business Conduct and Ethics (the code of ethics)
that applies to all of our directors, officers and employees. The code of
ethics is filed as an exhibit to this report. In addition, if we make any
substantive amendments to the code of ethics or grant any wavier, including any
implicit wavier, from a provision of the code to any of our executive officers
or directors, we will disclose the nature of such amendment or waiver in a
report on Form 8-K.




ITEM 11. EXECUTIVE COMPENSATION

The response to this item is incorporated herein by reference from the
discussion responsive thereto under the following captions in the 2004 Proxy
Statement: Election of Directors - Director Compensation, Election of
Directors - Executive Compensation and Election of Directors - Compensation
Committee Interlocks and Insider Participation.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The response to this item regarding security ownership is incorporated herein
by reference from the discussion responsive thereto under the caption Share
Ownership in the 2004 Proxy Statement.

This response to this item with respect to our equity compensation plans as of
December 31, 2003 is incorporated herein by reference from the discussion
responsive thereto under the caption Equity Compensation Plan Information in
the 2004 Proxy Statement.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption Certain Relationships and
Related Transactions in the 2004 Proxy Statement.




ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption Information Concerning
Auditors in the 2004 Proxy Statement.




PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)  1. FINANCIAL STATEMENTS

The financial statements are listed under Part II, Item 8 of this Report.

2.     FINANCIAL STATEMENT SCHEDULES

The financial statement schedules are included under Part II, Item 8 of this
Report.

3.     EXHIBITS

The exhibits filed as part of this report are listed on the Exhibit Index
immediately following the signature page hereto, which Exhibit Index is
incorporated herein by reference.

(B)  REPORTS ON FORM 8-K

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Reports on Form 8-K were filed with the Commission during the fourth quarter of
2003 to report the following items as of the dates indicated:

On November 5, 2003, Lamar Advertising Company furnished a Current Report on
Form 8-K to the Commission with its earnings press release for the third
quarter ended September 30, 2003.

(C)  Exhibits required by Item 601 of Regulation S-K are listed on the
Exhibit Index immediately following the signature page hereto.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

LAMAR ADVERTISING COMPANY

|              |  |                                       |  | 
|------------- |  | ------------------------------------- |  | 
|March 9, 2004 |  | By: /s/ Kevin P. Reilly, Jr.         
|              |  |                                       | 
|              |  | Kevin P. Reilly, Jr.                 
|              |  | President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|                          |  |                                                 |  |       
|------------------------- |  | ----------------------------------------------- |  | ------
|Signature                 |  | Title                                           |  | Date  
|                          |  |                                                 |  |       
|/s/ Kevin P. Reilly, Jr.  |  | President, Chief Executive Officer and Director |  | 3/9/04
|                          |  | (Principal Executive Officer)                   |  |       
|Kevin P. Reilly, Jr.      |  |                                                 |  |       
|                          |  |                                                 |  |       
|/s/ Keith A. Istre        |  | Chief Financial Officer                         |  | 3/9/04
|                          |  | (Principal Financial and Accounting Officer)    |  |       
|Keith A. Istre            |  |                                                 |  |       
|                          |  |                                                 |  |       
|/s/ Charles W. Lamar, III |  | Director                                        |  | 3/9/04
|                          |  |                                                 |  |       
|Charles W. Lamar, III     |  |                                                 |  |       
|                          |  |                                                 |  |       
|/s/ Stephen P. Mumblow    |  | Director                                        |  | 3/9/04
|                          |  |                                                 |  |       
|Stephen P. Mumblow        |  |                                                 |  |       
|                          |  |                                                 |  |       
|/s/ John Maxwell Hamilton |  | Director                                        |  | 3/9/04
|                          |  |                                                 |  |       
|John Maxwell Hamilton     |  |                                                 |  |       
|                          |  |                                                 |  |       
|/s/ Thomas Reifenheiser   |  | Director                                        |  | 3/9/04
|                          |  |                                                 |  |       
|Thomas Reifenheiser       |  |                                                 |  |       
|                          |  |                                                 |  |       
|/s/ Anna Reilly Cullinan  |  | Director                                        |  | 3/9/04
|                          |  |                                                 |  |       
|Anna Reilly Cullinan      |  |                                                 |  |       
|                          |  |                                                 |  |       
|/s/ Robert M. Jelenic     |  | Director                                        |  | 3/9/04
|Robert M. Jelenic         |  |                                                 |  |       

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

LAMAR MEDIA CORP.

|              |  |                                       |  | 
|------------- |  | ------------------------------------- |  | 
|March 9, 2004 |  | By: /s/ Kevin P. Reilly, Jr.         
|              |  |                                       | 
|              |  | Kevin P. Reilly, Jr.                 
|              |  | President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|                                           |  |                                              |  |       
|------------------------------------------ |  | -------------------------------------------- |  | ------
|Signature                                  |  | Title                                        |  | Date  
|                                           |  |                                              |  |       
|/s/ Kevin P. Reilly, Jr.                   |  | Chief Executive Officer and Director         |  | 3/9/04
|                                           |  | (Principal Executive Officer)                |  |       
|Kevin P. Reilly, Jr.                       |  |                                              |  |       
|                                           |  |                                              |  |       
|/s/ Sean E. Reilly                         |  | Chief Operating Officer, Vice President      |  | 3/9/04
|                                           |  | and Director                                 |  |       
|Sean E. Reilly                             |  |                                              |  |       
|                                           |  |                                              |  |       
|/s/ Keith A. Istre                         |  | Chief Financial and Accounting Officer       |  | 3/9/04
|                                           |  | and Director                                 |  |       
|Keith A. Istre                             |  | (Principal Financial and Accounting Officer) |  |       
|                                           |  |                                              |  |       
|/s/ T. Everett Stewart, Jr.                |  | Director                                     |  | 3/9/04
|                                           |  |                                              |  |       
|T. Everett Stewart, Jr.                    |  |                                              |  |       
|                                           |  |                                              |  |       
|/s/ Gerald H. Marchand

Gerald H. Marchand |  | Director                                     |  | 3/9/04

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INDEX TO EXHIBITS

|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                            
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|2.1     |  | Agreement and Plan of Merger dated as of July 20, 1999 among Lamar Media
Corp., Lamar New Holding Co., and Lamar Holdings Merge Co. Previously
filed as exhibit 2.1 to the Companys Current Report on Form 8-K filed on
July 22, 1999 (File No. 0-30242) and incorporated herein by reference.                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|3.1     |  | Certificate of Incorporation of Lamar New Holding Co. Previously filed as
exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period
ended June 30, 1999 (File No. 0-20833) filed on August 16, 1999 and
incorporated herein by reference.                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|3.2     |  | Certificate of Amendment of Certificate of Incorporation of Lamar New
Holding Co. (whereby the name of Lamar New Holding Co. was changed to
Lamar Advertising Company). Previously filed as exhibit 3.2 to the
Companys Quarterly Report on Form 10-Q for the period ended June 30, 1999
(File No. 0-20833) filed on August 16, 1999 and incorporated herein by
reference.
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|3.3     |  | Certificate of Amendment of Certificate of Incorporation of Lamar
Advertising Company. Previously filed as Exhibit 3.3 to the Companys
Quarterly Report on Form 10-Q for the period ended June 30, 2000 (Filed
No. 0-30242) filed on August 11, 2000 and incorporated herein by
reference.                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|3.4     |  | Certificate of Correction of Certificate of Incorporation of Lamar
Advertising Company. Previously filed as Exhibit 3.4 to the Companys
Quarterly Report on Form 10-Q for the period ended September 30, 2000
(File No. 0-30242) filed on November 14, 2000 and incorporated herein by
reference.                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|3.5     |  | Amended and Restated Bylaws of the Company. Previously filed as Exhibit
3.3 to the Companys Quarterly Report on Form 10-Q for the period ended
June 30, 1999 (File No. 0-20833) filed on August 16, 1999 and incorporated
herein by reference.                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|3.6     |  | Amended and Restated Bylaws of Lamar Media Corp. Previously filed as
Exhibit 3.1 to Lamar Medias Quarterly Report on Form 10-Q for the period
ended September 30, 1999 (File No. 1-12407) filed on November 12, 1999 and
incorporated herein by reference.                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|4.1     |  | Specimen certificate for the shares of Class A common stock of the
Company. Previously filed as Exhibit 4.1 to the Companys Registration
Statement on Form S-1 (File No. 333-05479), and incorporated herein by
reference.                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|4.2     |  | Senior Secured Note dated May 19, 1993. Previously filed as Exhibit 4.1
to the Companys Registration Statement on Form S-1 (File No. 33-59624),
and incorporated herein by reference.                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|4.3     |  | Indenture dated as of September 24, 1986 relating to the Companys 8%
Unsecured Subordinated Debentures. Previously filed as Exhibit 10.3 to the
Companys Registration Statement on Form S-1 (File No. 33-59624), and
incorporated herein by reference.                                                                                                                   
|4.4     |  | Indenture dated May 15, 1993 relating to the Companys 11% Senior Secured
Notes due May 15, 2003. Previously filed as Exhibit 4.3 to the Companys
Registration Statement on Form S-1 (File No. 33-59624), and incorporated
herein by reference.                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|4.5     |  | First Supplemental Indenture dated July 30, 1996 relating to the
Companys 11% Senior Secured Notes due May 15, 2003. Previously filed as
Exhibit 4.5 to the Companys Registration Statement on Form S-1(File No.
333-05479), and incorporated herein by reference.                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|4.6     |  | Form of Second Supplemental Indenture in the form of an Amended and
Restated Indenture dated November 8, 1996 relating to the Companys 11%
Senior Secured Notes due May 15, 2003. Previously filed as Exhibit 4.1 to
the Companys Current Report on Form 8-K filed on November 15, 1996 (File
No. 1-12407), and incorporated herein by reference.                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                            
|4.7     |  | Notice of Trustee dated November 8, 1996 with respect to the release of
the security interest in the Trustee on behalf of the holders of the
Companys 11% Senior Secured Notes due May 15, 2003. Previously filed as
Exhibit 4.2 to the Companys Current Report on Form 8-K filed on 15, 1996
(File No. 1-12407), and                                                    

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  | incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.8     |  | Form of Subordinated Note. Previously filed as Exhibit 4.8 to the
Registration Statement on Form S-1 (File No. 333-05479), and incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.9     |  | Indenture dated as of December 23, 2002 among Lamar Media Corp., certain
subsidiaries of Lamar Media Corp., as guarantors and Wachovia Bank of
Delaware, National, as trustee. Filed as Exhibit 4.1 to Lamar Medias
Current Report on Form 8-K filed on December 27, 2002 (File No. 0-20833)
and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.10    |  | Supplemental Indenture to the Indenture dated December 23, 2002 among
Lamar Media Corp., certain of its subsidiaries and Wachovia Bank of
Delaware, National Association, as Trustee, dated June 9, 2003. Previously
filed as Exhibit 4.31 to Lamar Medias Registration Statement on Form S-4
(File No. 333-107427) filed on July 29, 2003 and incorporated herein by
reference.                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.11    |  | Supplemental Indenture to the Indenture dated December 23, 2002 among
Lamar Media Corp., certain of its subsidiaries and Wachovia Bank of
Delaware, National Association, as Trustee, dated October 7, 2003.
Previously filed as Exhibit 4.1 to Lamar Medias Quarterly Report on Form
10-Q for the period ended September 30, 2003 (File No. 1-12407) filed on
November 5, 2003 and incorporated herein by reference.                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.12    |  | Form of 7 1/4% Notes Due 2013. Filed as Exhibit 4.2 to Lamar Medias
Current Report on Form 8-K filed on December 27, 2002 (File No. 0-20833)
and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.13    |  | Form of Exchange Note. Filed as Exhibit 4.29 to Lamar Medias
Registration Statement on Form S-4 (File No. 333-102634) and incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.14    |  | Indenture dated June 16, 2003 between Lamar Advertising Company and
Wachovia Bank of Delaware, National Association, as Trustee. Previously
filed as Exhibit 4.4 to Lamar Medias Quarterly Report on Form 10-Q for
the period ended June 30, 2003 (File No. 1-12407) filed on August 13, 2003
and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.15    |  | First Supplemental Indenture dated June 16, 2003 between Lamar
Advertising Company and Wachovia Bank of Delaware, National Association,
as Trustee. Previously filed as Exhibit 4.5 to Lamar Medias Quarterly
Report on Form 10-Q for the period ended June 30, 2003 (File No. 1-12407)
filed on August 13, 2003 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.1*   |  | The Lamar Savings and Profit Sharing Plan Trust. Previously filed as
Exhibit 10.4 to the Companys Registration Statement on Form S-1 (File No.
33-59624), and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.2    |  | Trust under The Lamar Corporation, its Affiliates and Subsidiaries
Deferred Compensation Plan dated October 3, 1993. Previously filed as
Exhibit 10.11 to the Companys Annual Report on Form 10-K for the fiscal
year ended October 31, 1995 (File No. 33-59624), and incorporated herein
by reference.                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.3*   |  | 1996 Equity Incentive Plan. Previously filed as Exhibit 10.2 to the
Companys Quarterly Report on Form 10-Q (File No. 0-30242), for the period
ended June 30, 2000 filed on August 11, 2000 and incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.4    |  | Stock Purchase Agreement dated as of October 1, 1998, between the Company
and the stockholders of Outdoor Communications, Inc. named therein.
Previously filed as Exhibit 2.1 to the Companys Current Report on Form
8-K filed on October 15, 1998 (File No. 0-20833), and incorporated herein
by reference.                                                                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.5    |  | Second Amended and Restated Stock Purchase Agreement dated as of August
11, 1999 among the Company, Lamar Media Corp., Chancellor Media
Corporation of Los Angeles and Chancellor Mezzanine Holdings
Corporation. Previously filed as Appendix A to the Companys
Schedule 14C Information Statement filed on August 13, 1999 and
incorporated herein by reference. Pursuant to Item 601(b)(2) of
Regulation S-K, the Schedules and Annexes A and B referred to in the
Second Amended and Restated Stock Purchase Agreement are omitted.
The Company hereby undertakes to furnish supplementary a copy of any
omitted Schedule or Annex to the Commission upon request.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.6*   |  | 2000 Employee Stock Purchase Plan. Previously filed as Exhibit 10.3 to
Lamar Advertising Companys Quarterly Report on Form 10-Q for the period
ended June 30, 2000 (File No. 0-30242) filed on August 11, 2000 and
incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.7    |  | Credit Agreement dated as of March 7, 2003 between Lamar Media Corp. and
the Subsidiary Guarantors party thereto, the Lenders party thereto, and
JPMorgan Chase Bank, as Administrative Agent. Previously filed as Exhibit
10.38 to Lamar Media Corp.s Registration Statement on Form S-4/A (File
No. 333-102634) on March 18, 2003 and incorporated herein by reference.                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.8    |  | Joinder Agreement dated as of October 7, 2003 to Credit Agreement dated
as of March 7, 2003 between Lamar Media Corp. and the Subsidiary
Guarantors party thereto, the Lenders party thereto, and JPMorgan Chase
Bank, as Administrative Agent by Premere Outdoor, Inc. Previously filed
as Exhibit 10.1 to Lamar Medias Quarterly Report on Form 10-Q for the
period ended September 30, 2003 (File No. 1-12407) on November 5, 2003 and
incorporated herein by reference.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|11.1    |  | Statement regarding computation of per share earnings. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|14.1    |  | Lamar Advertising Company Code of Business Conduct and Ethics. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|21.1    |  | Subsidiaries of the Company. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|23.1    |  | Consent of KPMG LLP. Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|31.1    |  | Certification of the Chief Executive Officer of Lamar Advertising Company
and Lamar Media Corp. pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. Filed herewith.                                                                                                                                                                                                                     
|31.2    |  | Certification of the Chief Financial Officer of Lamar Advertising Company
and Lamar Media Corp. pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. Filed herewith.                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|32.1    |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                                                                                                                                                     

* Management contract or compensatory plan or arrangement in which the
executive officers or directors of the Company participate.

71