Baton Rouge, LA – August 7, 2014 – 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, 2014.
“Our transition from monthly to daily revenue recognition is creating some volatility in our reported quarterly revenue results, but historically, the difference in annual revenue recognized on a daily basis versus a monthly basis has been immaterial,” said chief executive Sean Reilly. “I’m pleased with our second quarter performance. Amidst a sluggish overall ad environment, the performance of our digital platform accelerated, our local sales grew nicely and we showed impressive expense control.”
“As we look out over the rest of 2014, we are encouraged by our pacings and continue to track toward the upper end of our AFFO guidance,” Reilly said. “Meanwhile, our preparations for our formal transformation to a REIT are in progress.”
Q2 Three Months Results
Lamar reported net revenues of $330.4 million for the second quarter of 2014 versus $327.7 million for the second quarter of 2013, a 0.8% increase. Operating income for the second quarter of 2014 was $73.0 million as compared to $73.3 million for the same period in 2013. Lamar recognized net income of $15.4 million for the second quarter of 2014 compared to net income of $23.1 million for same period in 2013. The decrease in net income for the three months ended June 30, 2014, includes a $20.8 million loss on debt extinguishment expense, which was partially offset by a reduction in interest expense as compared to the 2013 period. Net income per basic and diluted share was $0.16 per share and $0.24 per share for the three months ended June 30, 2014 and 2013, respectively.
Adjusted EBITDA for the second quarter of 2014 was $149.7 million versus $151.4 million for the second quarter of 2013, a 1.2% decrease.
Free Cash Flow for the second quarter of 2014 was $85.3 million as compared to $89.8 million for the same period in 2013, a 5.0% decrease.
For the second quarter of 2014, Funds From Operations, or FFO, was $82.0 million versus $90.9 million for the same period of 2013, a 9.8% decrease, primarily due to a $20.8 million loss on debt extinguishment related to the prepayment of Lamar Media’s 7 7/8% Senior Subordinated Notes. In addition, FFO reflects our current status as a regular domestic C Corporation for U.S. Federal Income Tax purposes. Upon electing REIT status, tax expense will be lower than the current 41% effective tax rate. Adjusted Funds From Operations, or AFFO, for second quarter of 2014 was $102.9 million compared to $99.7 million for the same period in 2013, a 3.2% increase. Diluted AFFO per Share, was $1.08 per share and $1.05 per share for the three months ended June 30, 2014 and 2013, respectively.
Q2 Pro Forma Three Month Results
Pro forma adjusted net revenue for the second quarter of 2014 (recognized on a monthly basis) was $334.9 million. This reflects a 2.1% increase over pro forma adjusted net revenue for the second quarter of 2013. The Company’s guidance for adjusted net revenue for the second quarter of 2014 (recognized on a monthly basis) was $331.0 million to $334.0 million, which equated to a 1% to 2% pro forma increase over Q2 2013. Pro forma adjusted EBITDA increased 3.0% as compared to pro forma adjusted EBITDA for the second quarter of 2013. Pro forma adjusted net revenue and pro forma adjusted EBITDA include adjustments to the 2013 period for acquisitions and divestitures for the same time frame as actually owned in the 2014 period. Pro forma adjusted net revenue and pro forma adjusted EBITDA in the 2013 period and adjusted net revenue and Adjusted EBITDA in the 2014 period have been adjusted to reflect revenue recognition on a monthly basis over the term of each advertising contract. See “Reconciliation of Reported Basis to Pro Forma Basis”, which provides reconciliations to GAAP for adjusted and pro forma measures on page 8 of this release.
Q2 Six Months Results
Lamar reported net revenues of $615.4 million for the six months ended June 30, 2014 versus $604.3 million for the same period in 2013, a 1.8% increase. Operating income for the six months ended June 30, 2014 was $104.2 million as compared to $92.4 million for the same period in 2013. Adjusted EBITDA for the six months ended June 30, 2014 was $254.0 million versus $254.6 million for the same period in 2013. In addition, Lamar recognized net income of $10.6 million for the six months ended June 30, 2014 as compared to net income of $12.9 million for the same period in 2013. Net income per basic and diluted share was $0.11 per share and $0.13 per share for the six months ended June 30, 2014 and 2013, respectively.
Free Cash Flow for the six months ended June 30, 2014 increased 2.6% to $136.3 million as compared to $132.9 million for the same period in 2013.
For the six months ended June 30, 2014, FFO was $142.4 million versus $150.2 million for the same period of 2013, a 5.2% decrease. AFFO for the six months ended June 30, 2014 was $161.7 million compared to $149.9 million for the same period in 2013, a 7.9% increase. Diluted AFFO per Share increased to $1.69 per share as compared to $1.58 per share in the comparable period in 2013.
Please refer to “Use of Non GAAP Financial Measures” for definitions of Adjusted EBITDA, Free Cash Flow, Funds From Operations, Adjusted Funds From Operations, Diluted AFFO per Share and outdoor operating income. For additional information, including reconciliations to GAAP measures, please refer to the unaudited selected financial information and supplemental schedules on pages 7 through 9.
As of June 30, 2014, Lamar had $342.4 million in total liquidity that consisted of $308.0 million available for borrowing under its revolving senior credit facility and approximately $34.4 million in cash and cash equivalents.
On June 30, 2014, Lamar Advertising Company made its first regular quarterly distribution of $0.83 per share, or a total of approximately $79.0 million, to common stockholders of record on June 1, 2014. The Company expects to make two additional dividend distributions in 2014 on September 30, 2014 and December 30, 2014, subject to board approval. As previously disclosed, the Company anticipates the total distributions in 2014 to be $2.50 per share.
For the third quarter of 2014, the Company expects adjusted net revenue (recognized on a monthly basis) to be approximately $330.0 million to $334.0 million. On a pro forma adjusted basis this represents an increase of approximately 1.5% to 2.5%. The Company will continue to provide adjusted net revenue guidance for 2014 based on monthly revenue recognition consistent with past practice.
Forward Looking Statements
This press release contains forward-looking statements, including the statements regarding guidance for the third quarter of 2014 and expected future dividend distributions. 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 qualify as a Real Estate Investment Trust (REIT) and maintain our status as a REIT assuming we successfully qualify; (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, 2013, 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, Free Cash Flow, Funds From Operations, Adjusted Funds From Operations, (AFFO), Diluted AFFO per Share, adjusted pro forma results and outdoor operating income. Adjusted EBITDA is defined as net income before income tax expense (benefit), interest expense (income), gain (loss) on extinguishment of debt and investments, non-cash compensation, depreciation and amortization and gain on disposition of assets. Free Cash Flow is defined as Adjusted EBITDA less interest, net of interest income and amortization of financing costs, current taxes, preferred stock dividends and total capital expenditures. Funds From Operations is defined as net income before real estate depreciation and amortization, gains or loss from disposition of real estate assets and investments and an adjustment to eliminate non controlling interest. Adjusted Funds From Operations is defined as Funds From Operations before straight line (revenue) expense, stock based compensation expense, non cash tax expense (benefit), non real estate related depreciation and amortization, amortization of deferred financing and debt issuance costs, loss on extinguishment of debt, non-recurring, infrequent or unusual losses (gains), less maintenance capital expenditures and an adjustment for non controlling interest. Diluted AFFO per Share is defined as AFFO divided by the weighted average diluted common shares outstanding. Outdoor operating income is defined as operating income before corporate expenses, non cash compensation, depreciation and amortization and gain on disposition of assets. These measures are not intended to replace financial performance measures determined in accordance with GAAP and should not be considered alternatives to operating income, net income, cash flows from operating activities, or other GAAP figures as indicators of the Company’s financial performance or liquidity. The Company’s management believes that Adjusted EBITDA, Free Cash Flow, Funds From Operations, Adjusted Funds From Operations, Diluted AFFO per Share, Adjusted pro forma results and Outdoor operating income are useful in evaluating the Company’s performance and provide investors and financial analysts a better understanding of the Company’s core operating results. The pro forma acquisition adjustments are intended to provide information that may be useful for investors when assessing period to period results. Management also deems the presentation of monthly revenue recognition useful to allow investors to see the impact of an immaterial change to its revenue recognition policy and to provide pro forma results that are comparable with prior periods and in line with the Company’s presentation of market guidance. Our presentation of these measures may not be comparable to similarly titled measures used by other similarly situated companies. See “Supplemental Schedules—Unaudited Reconciliation of Non-GAAP Measures”, which provides a reconciliation of each of these measures to the most directly comparable GAAP measure.
Conference Call Information
A conference call will be held to discuss the Company’s operating results on Thursday, August 7, 2014 at 9:00 a.m. central time. Instructions for the conference call and Webcast are provided below:
All Callers: 1-334-323-0520 or 1-334-323-9871
Pass Code: Lamar
Replay: 1-334-323-0140 or 1-877-919-4059
Pass Code: 30699539
Available through Thursday, August 14, 2014 at 11:59 p.m. eastern time
Live Webcast: www.lamar.com
Webcast Replay: www.lamar.com
Available through Thursday, August 14, 2014 at 11:59 p.m. eastern time
Director of Investor Relations
Lamar Advertising Company is a leading outdoor advertising company currently operating over 150 outdoor advertising companies in 44 states, Canada and Puerto Rico, logo businesses in 23 states and the province of Ontario, Canada and over 60 transit advertising franchises in the United States, Canada and Puerto Rico.
Given the Company’s preparation for potential election of REIT status for the taxable year beginning January 1, 2014, two widely recognized metrics of operating performance for REITs, Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO), are presented in this release. The calculation of FFO is based on the definition as set forth by the National Association of Real Estate Investment Trusts (NAREIT). A reconciliation of net income to FFO and the calculation of AFFO, each of which are non GAAP financial measures, are presented above. The measures of FFO and AFFO may not be comparable to those reported by REITs that do not compute these measures in accordance with the NAREIT definitions, or that interpret those definitions differently than the Company does.