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Lamar Advertising Company Announces Second Quarter 2017 Operating Results

Three Month Results

 

  • Net revenue increased 2.5% to $397.1 million
  • Net income was $92.4 million, an increase of 12.8%
  • Adjusted EBITDA increased 3.1% to $181.9 million

           Three Month Acquisition-Adjusted Results

  • Acquisition-adjusted net revenue increased 1.7%
  •  Acquisition-adjusted EBITDA increased 2.4%

/EIN News/ --                                                              

BATON ROUGE, La., Aug. 08, 2017 (GLOBE NEWSWIRE) --  Lamar Advertising Company (Nasdaq:LAMR), a leading owner and operator of outdoor advertising and logo sign displays, announces the Company’s operating results for the second quarter ended June  30, 2017.

“Q2 came in largely as expected, and our team did a good job managing expenses,” said CEO Sean Reilly.  “However, due to what we now see as a sluggish ad environment for the rest of the year, we are reducing our full year 2017 AFFO per share guidance accordingly.”

                                                                        Second Quarter Highlights

  • Consolidated expense growth was held to 1.1%
  • Same unit digital revenue increased 2.3%
  • National revenue increased 4.5%
  • Local revenue increased 1.5%

                                                      

Second Quarter Results
Lamar reported net revenues of $397.1 million for the second quarter of 2017 versus $387.5 million for the second quarter of 2016, a 2.5% increase.  Operating income for the second quarter of 2017 increased $11.1 million to $128.2 million as compared to $117.1 million for the same period in 2016.   Lamar recognized net income of $92.4 million for the second quarter of 2017 compared to net income of $81.9 million for same period in 2016.  Net income per diluted share increased 11.9% to $0.94 from $0.84 for the three months ended June 30, 2017 and 2016, respectively.

Adjusted EBITDA for the second quarter of 2017 was $181.9 million versus $176.4 million for the second quarter of 2016, an increase of 3.1%.

Cash flow provided by operating activities was $160.3 million for the three months ended June 30, 2017, an increase of $0.8 million as compared to the same period in 2016.  Free cash flow for the second quarter of 2017 was $119.2 million as compared to $112.1 million for the same period in 2016, a 6.3% increase. 

For the second quarter of 2017, Funds From Operations, or FFO, was $140.9 million versus $130.2 million for the same period in 2016, an increase of 8.2%. Adjusted Funds From Operations, or AFFO, for the second quarter of 2017 was $136.5 million compared to $133.7 million for the same period in 2016, an increase of 2.1%.   Diluted AFFO per share increased 1.5% to $1.39 for the three months ended June 30, 2017 as compared to $1.37 for the same period in 2016.

Acquisition-Adjusted Three Months Results
Acquisition-adjusted net revenue for the second quarter of 2017 increased 1.7% over Acquisition-adjusted net revenue for the second quarter of 2016.  Acquisition-adjusted EBITDA for the second quarter of 2017 increased 2.4% as compared to Acquisition-adjusted EBITDA for the second quarter of 2016.  Acquisition-adjusted net revenue and Acquisition-adjusted EBITDA include adjustments to the 2016 period for acquisitions and divestitures for the same time frame as actually owned in the 2017 period.  See “Reconciliation of Reported Basis to Acquisition-Adjusted Results”, which provides reconciliations to GAAP for Acquisition-adjusted measures.

Six Months Results
Lamar reported net revenues of $743.4 million for the six months ended June 30, 2017 versus $726.1 million for the same period in 2016, a 2.4% increase.  Operating income for the six months ended June 30, 2017 was $203.6 million as compared to $203.9 million for the same period in 2016.  Lamar recognized net income of $134.2 million for the six months ended June 30, 2017 as compared to net income of $133.2 million for the same period in 2016.  Net income per diluted share remained unchanged at $1.36 for the six months ended June 30, 2017 and 2016.  In addition, Adjusted EBITDA for the six months ended June 30, 2017 was $310.2 million versus $306.6 million for the same period in 2016, a 1.2% increase.

Liquidity
As of June 30, 2017, Lamar had $452.8 million in total liquidity that consisted of $409.9 million available for borrowing under its revolving senior credit facility and approximately $42.9 million in cash and cash equivalents.

Revised Guidance
Due to current market conditions, the Company is revising its 2017 full year guidance for Earnings per share and AFFO per share.  Net income per diluted share is expected to be between $3.09 and $3.19.  Previous Diluted earnings per share guidance had been $3.13 to $3.28 per share.  In addition, Lamar expects Diluted AFFO per share for 2017 to be between $4.90 and $5.00.  Previous AFFO per share guidance had been $5.05 to $5.20 per share.  See “Supplemental Schedules Unaudited REIT Measures and Reconciliations to GAAP Measures”, for a reconciliation to GAAP. 

Forward Looking Statements
This press release contains forward-looking statements, including statements regarding sales trends.  These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements.  These risks and uncertainties include, among others: (1) our significant indebtedness; (2) the state of the economy and financial markets generally and the effect of the broader economy on the demand for advertising; (3) the continued popularity of outdoor advertising as an advertising medium; (4) our need for and ability to obtain additional funding for operations, debt refinancing or acquisitions; (5) our ability to continue to qualify as a Real Estate Investment Trust (“REIT”) and maintain our status as a REIT; (6) the regulation of the outdoor advertising industry by federal, state and local governments; (7) the integration of companies that we acquire and our ability to recognize cost savings or operating efficiencies as a result of these acquisitions; (8) changes in accounting principles, policies or guidelines; (9) changes in tax laws applicable to REITs or in the interpretation of those laws; (10) our ability to renew expiring contracts at favorable rates; (11) our ability to successfully implement our digital deployment strategy; and (12) the market for our Class A common stock. For additional information regarding factors that may cause actual results to differ materially from those indicated in our forward-looking statements, we refer you to the risk factors included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as supplemented by any risk factors contained in our Quarterly Reports on Form 10-Q.  We caution 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 we undertake no obligation to update or revise the statements, except as may be required by law.

Use of Non-GAAP Financial Measures
The Company has presented the following measures that are not measures of performance under accounting principles generally accepted in the United States of America (“GAAP”):  Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), Free Cash Flow, Funds From Operations (“FFO”), Adjusted Funds From Operations (“AFFO”), Diluted AFFO per share, Outdoor Operating Income and Acquisition-Adjusted Results.  Our management reviews our performance by focusing on these key performance indicators not prepared in conformity with GAAP. We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for their most directly comparable GAAP financial measures.

Our Non-GAAP financial measures are determined as follows:

  • We define Adjusted EBITDA as net income before income tax expense (benefit), interest expense (income), gain (loss) on extinguishment of debt and investments, stock-based compensation, depreciation and amortization and gain or loss on disposition of assets and investments.
     
  • Free Cash Flow is defined as Adjusted EBITDA less interest, net of interest income and amortization of deferred financing costs, current taxes, preferred stock dividends and total capital expenditures.

  • We use the National Association of Real Estate Investment Trusts definition of FFO, which is defined as net income before gains or losses from the sale or disposal of real estate assets and investments and real estate related depreciation and amortization and including adjustments to eliminate unconsolidated affiliates and non-controlling interest.

  • We define AFFO as FFO before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) non-cash portion of tax provision; (iv) non-real estate related depreciation and amortization; (v) amortization of deferred financing costs; (vi) loss on extinguishment of debt; (vii) non-recurring infrequent or unusual losses (gains); (viii) less maintenance capital expenditures; and (ix) an adjustment for unconsolidated affiliates and non-controlling interest.

  • Diluted AFFO per share is defined as AFFO divided by Weighted average diluted common shares outstanding.  

  • Outdoor Operating Income is defined as Operating Income before corporate expenses, stock-based compensation, depreciation and amortization and gain (loss) on disposition of assets. 

  • Acquisition-Adjusted Results adjusts our net revenue, direct and general and administrative expenses, outdoor operating income, corporate expense and EBITDA for the prior period by adding to, or subtracting from, the corresponding revenue or expense generated by the acquired assets or divested before our acquisition or divestiture of these assets for the same time frame that those assets were owned in the current period. In calculating Acquisition-Adjusted Results, therefore, we include revenue and expenses generated by assets that we did not own in the prior period but acquired in the current period. We refer to the amount of pre-acquisition revenue and expense generated by or subtracted from  the acquired assets during the prior period that corresponds with the current period in which we owned the assets (to the extent within the period to which this report relates) as “Acquisition-Adjusted Results”.

Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results are not intended to replace other performance measures determined in accordance with GAAP.  Free Cash Flow, FFO nor AFFO represent cash flows from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities as a measure of liquidity or of funds available to fund our cash needs, including our ability to make cash distributions. Rather, Adjusted EBITDA, Free Cash Flow, FFO, AFFO, Diluted AFFO per share, Outdoor Operating Income and Acquisition-Adjusted Results are presented as we believe each is a useful indicator of our current operating performance. Specifically, we believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for purposes of decision making and for evaluating our core operating results; (2) Adjusted EBITDA is widely used in the industry to measure operating performance as it excludes the impact of depreciation and amortization, which may vary significantly among companies, depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (3) Adjusted EBITDA, FFO, AFFO and Diluted AFFO per share each provides investors with a meaningful measure for evaluating our period-over-period operating performance by eliminating items that are not operational in nature and reflect the impact on operations from trends in occupancy rates, operating costs, general and administrative expenses and interest costs; (4) Acquisition-Adjusted Results is a supplement to enable investors to compare period-over-period results on a more consistent basis without the effects of acquisitions and divestures, which reflects our core performance and organic growth (if any) during the period in which the assets were owned and managed by us; (5) Free Cash Flow is an indicator of our ability to service debt and generate cash for acquisitions and other strategic investments; (6) Outdoor Operating Income provides investors a measurement of our core results without the impact of fluctuations in stock-based compensation, depreciation and amortization and corporate expenses; and (7) each of our Non-GAAP measures provides investors with a measure for comparing our results of operations to those of other companies.

Our measurement of Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results to the most directly comparable GAAP measures have been included herein.

Conference Call Information
A conference call will be held to discuss the Company’s operating results on Tuesday, August 8, 2017 at 8:00 a.m. central time.  Instructions for the conference call and Webcast are provided below:

Conference Call

All Callers:
Pass Code:
1-334-323-0520 or 1-334-323-9871
Lamar
   
Replay:
Pass Code:
1-334-323-0140 or 1-877-919-4059
96124574
   
Live Webcast:

Available through Tuesday, August 15, 2017 at 11:59 p.m. eastern time    
www.lamar.com 
   
Webcast Replay:

www.lamar.com    
 Available through Tuesday, August 15, 2017 at 11:59 p.m. eastern time
   
Company Contact:


 
Buster Kantrow
Director of Investor Relations
(225) 926-1000
bkantrow@lamar.com 

   

General Information
Founded in 1902, Lamar Advertising (Nasdaq:LAMR) is one of the largest outdoor advertising companies in North America, with more than 330,000 displays across the United States, Canada and Puerto Rico. Lamar offers advertisers a variety of billboard, interstate logo and transit advertising formats, helping both local businesses and national brands reach broad audiences every day. In addition to its more traditional out-of-home inventory, Lamar is proud to offer its customers the largest network of digital billboards in the United States with over 2,600 displays. 




LAMAR ADVERTISING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
    Three months ended
  June 30,
  Six months ended
  June 30,
      2017       2016       2017       2016  
               
Net revenues $ 397,078     $ 387,528     $ 743,440     $ 726,061  
                                 
               
Operating expenses (income)              
  Direct advertising expenses   135,075       132,725       266,919       261,450  
  General and administrative expenses   63,723       63,287       133,572       127,717  
  Corporate expenses   16,363       15,124       32,700       30,311  
  Stock-based compensation   2,565       8,093       5,043       11,292  
  Depreciation and amortization   51,782       51,933       103,207       103,422  
  Gain on disposition of assets   (607 )     (705 )     (1,643 )     (12,032 )
                     
      268,901       270,457       539,798       522,160  
  Operating income   128,177       117,071       203,642       203,901  
                 
Other (income) expense              
  Interest income         (3 )     (4 )     (4 )
  Loss on extinguishment of debt   71       56       71       3,198  
  Interest expense   31,979       31,299       63,462       61,367  
      32,050       31,352       63,529       64,561  
                                 
Income before income tax expense   96,127       85,719       140,113       139,340  
Income tax expense   3,733       3,810       5,932       6,117  
                 
Net income   92,394       81,909       134,181       133,223  
Preferred stock dividends   91       91       182       182  
Net income applicable to common stock $ 92,303     $ 81,818     $ 133,999     $ 133,041  
                                 
               
Earnings per share:              
Basic earnings per share $ 0.94     $ 0.84     $ 1.37     $ 1.37  
Diluted earnings per share $ 0.94     $ 0.84     $ 1.36     $ 1.36  
                               
Weighted average common shares outstanding:
  - basic
  - diluted
  97,941,766
  98,442,860
      97,121,619
  97,731,467
      97,759,636
  98,276,283
      96,956,535
  97,523,379
 
OTHER DATA                
Free Cash Flow Computation:              
Adjusted EBITDA $ 181,917     $ 176,392     $ 310,249     $ 306,583  
Interest, net   (30,704 )     (30,017 )     (60,835 )     (58,702 )

Current tax expense
  (3,348 )     (3,269 )     (5,902 )     (5,758 )
Preferred stock dividend   (91 )     (91 )     (182 )     (182 )
Total capital expenditures   (28,600 )     (30,894 )     (47,836 )     (51,513 )
Free Cash Flow $ 119,174     $ 112,121     $ 195,494     $ 190,428  


  OTHER DATA (continued):              
               
           
Selected Balance Sheet Data:           June 30,
 2017
      December 31,
2016
 
Cash and cash equivalents         $ 42,884     $ 35,530  
Working capital         $ 124,769     $ 36,929  
Total assets         $ 3,946,077     $ 3,898,884  
Total debt, net of deferred financing costs (including current maturities)         $ 2,391,854     $ 2,349,183  
Total stockholders’ equity         $ 1,071,105     $ 1,069,528  
               
               
  Three months ended
  June 30,
  Six months ended
  June 30,
    2017       2016       2017       2016  
Selected Cash Flow Data:              
Cash flows provided by operating activities $ 160,257     $ 159,488     $ 194,753     $ 211,025  
Cash flows used in investing activities $ (37,941 )   $ (33,360 )   $ (73,360 )   $ (550,913 )
Cash flows (used in) provided by financing activities $ (111,665 )   $ (112,888 )   $ (114,837 )   $ 358,115  



SUPPLEMENTAL SCHEDULES
UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES 
(IN THOUSANDS)
 
    Three months ended     Six months ended
    June 30,     June 30,
      2017         2016         2017         2016  
Reconciliation of Free Cash Flow to Cash Flows Provided by              
  Operating Activities:              
Cash flows provided by operating activities $    160,257     $ 159,488     $ 194,753     $ 211,025  
Changes in operating assets and liabilities      (10,424 )       (14,551 )        52,155          34,638  
Total capital expenditures      (28,600 )       (30,894 )        (47,836 )        (51,513 )
Preferred stock dividends      (91 )       (91 )        (182 )       (182 )
Other      (1,968 )        (1,831 )        (3,396 )        (3,540 )
  Free cash flow $ 119,174     $     112,121     $ 195,494     $ 190,428  
                               
               
Reconciliation of  Net Income to Adjusted EBITDA:              
 Net Income $     92,394     $ 81,909     $ 134,181     $ 133,223  
 Interest income     —          (3 )        (4 )        (4 )
 Loss on extinguishment of debt      71          56          71         3,198  
 Interest expense      31,979          31,299          63,462       61,367  
 Income tax expense      3,733          3,810          5,932          6,117  
Operating Income      128,177         117,071          203,642          203,901  
               
Stock-based compensation   2,565       8,093       5,043       11,292  
Depreciation and amortization      51,782          51,933          103,207          103,422   
  Gain on disposition of assets      (607 )        (705 )        (1,643 )        (12,032 )
Adjusted EBITDA $      181,917     $     176,392     $      310,249     $      306,583  
                               
Capital expenditure detail by category:              
  Billboards - traditional $     7,260     $ 16,498     $ 13,539     $ 23,372  
  Billboards - digital      13,376          8,926       20,963          15,474  
  Logo      2,110          1,830          3,911       3,261  
  Transit      65          86          288         216  
  Land and buildings      3,132          1,655          4,514          5,548  
  Operating equipment      2,657          1,899          4,621          3,642  
  Total capital expenditures $     28,600     $     30,894     $     47,836     $    51,513  



SUPPLEMENTAL SCHEDULES
UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES 
(IN THOUSANDS)
 
    Three months ended
   June 30,
 
    2017     2016   % Change
Reconciliation of Reported Basis to Acquisition-Adjusted Results (a):          
 Net revenue $ 397,078   $ 387,528   2.5 %
Acquisitions and divestitures       2,904    
Acquisition-adjusted results-net revenue $ 397,078   $ 390,432   1.7 %
           
Reported direct advertising and G&A expenses $ 198,798   $ 196,012   1.4 %
Acquisitions and divestitures       1,600    
Acquisition-adjusted results-direct advertising and G&A expenses $ 198,798   $ 197,612   0.6 %
           
Outdoor operating income $ 198,280   $ 191,516   3.5 %
Acquisitions and divestitures       1,304    
Acquisition-adjusted results-outdoor operating income $ 198,280   $ 192,820   2.8 %
           
Reported corporate expenses $ 16,363   $ 15,124   8.2 %
Acquisitions and divestitures          
Acquisition-adjusted results-corporate expenses $ 16,363   $ 15,124   8.2 %
           
Adjusted EBITDA $ 181,917   $ 176,392   3.1 %
Acquisitions and divestitures       1,304    
Acquisition-adjusted  EBITDA $ 181,917   $ 177,696   2.4 %
           

 (a)  Acquisition-adjusted net revenue, direct advertising and general and administrative expenses, outdoor operating income, corporate expenses and EBITDA include adjustments to 2016 for acquisitions and divestitures for the same time frame as actually owned in 2017. 

    Three months ended
  June 30,
      2017       2016  
Reconciliation of  Net Income to Outdoor Operating Income:        
         
Net Income   $ 92,394     $ 81,909  
Interest income           (3 )
Loss on extinguishment of debt     71       56  
Interest expense     31,979       31,299  
Income tax expense     3,733       3,810  
Operating Income     128,177       117,071  
         
Corporate expenses     16,363       15,124  
Stock-based compensation     2,565       8,093  
Depreciation and amortization     51,782       51,933  
Gain on disposition of assets     (607 )     (705 )
Outdoor Operating Income   $ 198,280     $ 191,516  

 

 

SUPPLEMENTAL SCHEDULES
UNAUDITED REIT MEASURES
AND RECONCILIATIONS TO GAAP MEASURES
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
Adjusted Funds From Operations:
 
    Three months ended   Six months ended
    June 30,   June 30,
    2017         2016       2017         2016  
               
 Net income $ 92,394     $ 81,909     $ 134,181     $ 133,223  
 Depreciation and amortization related to real estate   48,865       48,300       97,386       96,067  
 Gain from disposition of real estate assets and investments   (568 )     (207 )     (1,407 )     (11,474 )
  Adjustment for unconsolidated affiliates and non-controlling interest   213       170       390       266  
Funds From Operations $ 140,904     $ 130,172     $ 230,550     $ 218,082  
               
 Straight-line (income) expense   (58 )     327       (95 )     277  
 Stock-based compensation expense   2,565       8,093       5,043       11,292  
 Non-cash portion of tax provision   385       541       30       359  
 Non-real estate related depreciation and amortization    2,917       3,633       5,821       7,355  
 Amortization of deferred financing costs    1,275       1,279       2,623       2,661  
 Loss on extinguishment of debt   71       56       71       3,198  
 Capitalized expenditures—maintenance   (11,300 )     (10,245 )     (20,678 )     (16,937 )
 Adjustment for unconsolidated affiliates and non-controlling interest   (213 )     (170 )     (390 )     (266 )
               
Adjusted Funds From Operations $ 136,546     $ 133,686     $ 222,975     $ 226,021  
               
Divided by weighted average diluted common shares outstanding    98,442,860       97,731,467       98,276,283       97,523,379  
Diluted AFFO per share $ 1.39     $ 1.37     $ 2.27     $ 2.32  



SUPPLEMENTAL SCHEDULES
UNAUDITED REIT MEASURES
AND RECONCILIATIONS TO GAAP MEASURES
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
Projected Adjusted Funds From Operations
 
      Year ended December 31, 2017  
      Low   High  
             
 Net income     $     304,000     $    314,000    
  Depreciation and amortization related to real estate         192,000         192,000    
 Gain from disposal of real estate assets and investments         (3,000 )     (3,000 )  
  Adjustment for unconsolidated affiliates and non-controlling interest         700         700    
 Funds From Operations     $     493,700     $     503,700    
             
  Straight-line income         (500 )     (500 )  
  Stock-based compensation expense         12,000         12,000    
 Non-cash portion of tax provision         (600 )        (600 )  
  Non-real estate related depreciation and amortization         14,000         14,000    
Amortization of deferred financing costs          5,500         5,500    
Loss on extinguishment of debt         100         100    
Capitalized expenditures—maintenance       (41,000 )     (41,000 )  
 Adjustment for unconsolidated affiliates and non-controlling interest       (700 )     (700 )  
             
 Adjusted Funds From Operations     $     482,500     $     492,500    
             
             
Weighted average diluted shares outstanding        98,500,000       98,500,000    
             
Diluted earnings per share     $ 3.09     $ 3.19    
             
Diluted AFFO per share     $ 4.90     $ 5.00    
                     

The guidance provided above is based on a number of assumptions that management believes to be reasonable and reflect our expectations as of August 2017.  Actual results may differ materially from these estimates as a result of various factors, and we refer to the cautionary language regarding “forward looking” statements included in the press release when considering this information.

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