Lamar Advertising Company Announces Third Quarter 2016 Operating Results

Three Month Results
  • Net revenue increased 10.5% to $387.5 million
  • Net income was $85.1 million
  • Adjusted EBITDA increased 11.5% to $177.3 million

        Three Month Acquisition-Adjusted Results
  •   Acquisition-adjusted net revenue increased 3.6%
  •   Acquisition-adjusted EBITDA increased 3.9%

BATON ROUGE, La., Nov. 03, 2016 (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 third quarter ended September 30, 2016.

"We are very pleased with the third quarter results, which turned out better than we had anticipated, thanks in part to a pick up in political spending and continued strength in our digital platform," said Lamar CEO Sean Reilly. "We expect to finish the year at the upper end of our previously provided AFFO guidance of $4.85 to $5.00 per share."

Third Quarter Highlights
  • Same unit digital revenue increased 6.6%
  • FFO increased $7.4 million
  • AFFO increased $11.3 million
  • Diluted AFFO per share increased 7.9%

Third Quarter Results Lamar reported net revenues of $387.5 million for the third quarter of 2016 versus $350.7 million for the third quarter of 2015, a 10.5% increase. Operating income for the third quarter of 2016 was $119.8 million as compared to $111.6 million for the same period in 2015. Lamar recognized net income of $85.1 million for the third quarter of 2016 compared to net income of $86.0 million for same period in 2015. Net income per diluted share was $0.87 and $0.89 for the three months ended September 30, 2016 and 2015, respectively.

Adjusted EBITDA for the third quarter of 2016 was $177.3 million versus $159.0 million for the third quarter of 2015, an increase of 11.5%.

Cash flow provided by operating activities increased 1.2% to $126.8 million for the three months ended September 30, 2016 as compared to the same period in 2015. Free cash flow for the third quarter of 2016 was $116.0 million as compared to $108.7 million for the same period in 2015, a 6.7% increase. 

For the third quarter of 2016, Funds From Operations, or FFO, was $130.9 million versus $123.5 million for the same period in 2015, an increase of 6.0%. Adjusted Funds From Operations, or AFFO, for the third quarter of 2016 was $134.0 million compared to $122.6 million for the same period in 2015, a 9.2% increase. Diluted AFFO per share increased 7.9% to $1.37 for the three months ended September 30, 2016 as compared to $1.27 for the same period in 2015.

Acquisition-Adjusted Three Months Results Acquisition-adjusted net revenue for the third quarter of 2016 increased 3.6% over Acquisition-adjusted net revenue for the third quarter of 2015. Acquisition-adjusted EBITDA increased 3.9% as compared to Acquisition-adjusted EBITDA for the third quarter of 2015. Acquisition-adjusted net revenue and Acquisition-adjusted EBITDA include adjustments to the 2015 period for acquisitions and divestitures for the same time frame as actually owned in the 2016 period. See "Reconciliation of Reported Basis to Acquisition-Adjusted Results", which provides reconciliations to GAAP for Acquisition-adjusted measures.

Nine Months Results Lamar reported net revenues of $1.1 billion for the nine months ended September 30, 2016 versus $997.4 million for the same period in 2015, an 11.6% increase. Operating income for the nine months ended September 30, 2016 was $323.7 million as compared to $278.2 million for the same period in 2015. Lamar recognized net income of $218.3 million for the nine months ended September 30, 2016 as compared to net income of $186.0 million for the same period in 2015. Net income per diluted share was $2.23 and $1.93 for the nine months ended September 30, 2016 and 2015, respectively. In addition, Adjusted EBITDA for the nine months ended September 30, 2016 was $483.8 million versus $432.9 million for the same period in 2015, an 11.8% increase.

Cash flow provided by operating activities increased to $337.8 million for the nine months ended September 30, 2016, as compared to $313.5 million in the same period in 2015. Free cash flow for the nine months ended September 30, 2016 increased 12.3% to $306.4 million as compared to $272.7 million for the same period in 2015.

For the nine months ended September 30, 2016, FFO was $349.0 million versus $312.5 million for the same period in 2015, an 11.7% increase. AFFO for the nine months ended September 30, 2016 was $360.0 million compared to $319.5 million for the same period in 2015, a 12.7% increase. Diluted AFFO per share increased to $3.69 for the nine months ended September 30, 2016, as compared to $3.32 in the comparable period in 2015, an increase of 11.1%.

Liquidity As of September 30, 2016, Lamar had $222.4 million in total liquidity that consisted of $184.9 million available for borrowing under its revolving senior credit facility and approximately $37.5 million in cash and cash equivalents. 

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, 2015, 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 non-controlling interest.
  • We define AFFO as FFO before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) non-cash tax expense (benefit); (iv) non-real estate related depreciation and amortization; (v) amortization of deferred financing and debt issuance 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 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 provide investors with a meaningful measure for evaluating our period-over-period operating performance because they eliminate 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 measure, have been included herein.

Conference Call Information A conference call will be held to discuss the Company's operating results on Thursday, November 3, 2016 at 8:00 a.m. central time. Instructions for the conference call and Webcast are provided below:

Conference Call
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: 40026121
  Available through Thursday, November 10, 2016 at 11:59 p.m. eastern time
   
Live Webcast: www.lamar.com
Webcast Replay: www.lamar.com
  Available through Thursday, November 10, 2016 at 11:59 p.m. eastern time

General Information

Founded in 1902, Lamar Advertising (Nasdaq:LAMR) is one of the largest outdoor advertising companies in North America, with more than 325,000 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 2,500 displays.

LAMAR ADVERTISING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

    Three months ended   September 30,   Nine months ended   September 30,
      2016       2015       2016       2015  
               
Net revenues $    387,516     $    350,701     $   1,113,577     $    997,427  
                 
               
Operating expenses (income)              
  Direct advertising expenses      131,778         121,676         393,228         350,859  
  General and administrative expenses     64,087         57,096         191,804         171,239  
  Corporate expenses      14,401         12,926          44,712          42,411  
  Stock-based compensation     8,358          6,121          19,650         17,508  
  Depreciation and amortization     49,307         46,441          152,729          144,396  
  Gain on disposition of assets      (189 )        (5,203 )        (12,221 )        (7,230 )
                 
         267,742          239,057          789,902           719,183  
                 
  Operating income     119,774          111,644         323,675             278,244  
                 
Other (income) expense              
  Interest income     (2 )        (2 )        (6 )        (28 )
  Loss on extinguishment of debt                  3,198        
  Interest expense      31,102          24,709           92,469          73,953  
         31,100          24,707          95,661          73,925  
                 
Income before income tax expense     88,674          86,937         228,014         204,319  
Income tax expense      3,613          972          9,730         18,278  
                 
Net income     85,061         85,965         218,284         186,041   
Preferred stock dividends      91          91          273          273  
Net income applicable to common stock $      84,970     $    85,874     $    218,011      $    185,768  
                 
               
Earnings per share:              
  Basic earnings per share $     0.87     $    0.89     $    2.25        $   1.93  
  Diluted earnings per share $     0.87     $    0.89     $    2.23      $   1.93  
               
Weighted average common shares outstanding:                               
- basic   97,254,125       96,541,766       97,056,456       96,220,306  
- diluted   97,881,878       96,602,429       97,631,606       96,284,482  
OTHER DATA              
Free Cash Flow Computation:              
Adjusted EBITDA $    177,250     $    159,003     $    483,833     $    432,918  
Interest, net   (29,768 )     (23,533 )     (88,470 )     (70,427 )
Current tax expense   (4,122 )     (2,278 )     (9,880 )     (8,706 )
Preferred stock dividends   (91 )     (91 )     (273 )     (273 )
Total capital expenditures      (27,312 )        (24,399 )        (78,825 )       (80,764 )
Free Cash Flow $      115,957      $    108,702     $    306,385     $    272,748  
                               

OTHER DATA (continued):              
               
            September 30,       December 31,  
Selected Balance Sheet Data:            2016       2015  
Cash and cash equivalents         $     37,479     $     22,327  
Working capital         $      96,151      $   44,902  
Total assets         $   3,902,520     $  3,363,744  
Total debt, net of deferred financing costs (including current maturities)         $   2,380,022     $  1,891,450  
Total stockholders' equity         $   1,056,306     $  1,021,059  
               
               
    Three months ended  September 30,   Nine months ended  September 30,
      2016       2015       2016       2015  
Selected Cash Flow Data:              
Cash flows provided by operating activities $    126,801     $  125,253     $      337,826      $    313,470  
Cash flows used in investing activities $     (46,172 )   $   (85,637 )   $     (597,085 )   $   (195,714 )
Cash flows (used in) provided by financing activities $      (84,619 )   $   (36,797 )   $    273,496     $    (112,677 )
               

SUPPLEMENTAL SCHEDULES UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES (IN THOUSANDS)
    Three months ended     Nine months ended
    September 30,     September 30,
      2016         2015         2016         2015  
Reconciliation of Free Cash Flow to Cash Flows Provided by Operating Activities:              
Cash flows provided by operating activities $      126,801     $    125,253     $    337,826     $    313,470  
Changes in operating assets and liabilities      18,850         8,798          53,488            45,160  
Total capital expenditures     (27,312 )       (24,399 )        (78,825 )        (80,764 )
Preferred stock dividends      (91 )       (91 )       (273 )        (273 )
Other      (2,291 )        (859 )        (5,831 )        (4,845 )
Free cash flow $      115,957     $      108,702     $     306,385     $      272,748  
               
               
               
Reconciliation of  Adjusted EBITDA to Net Income:              
Adjusted EBITDA $      177,250      $      159,003     $    483,833     $    432,918  
Less:                
Stock-based compensation      8,358         6,121          19,650          17,508  
Depreciation and amortization      49,307          46,441          152,729          144,396  
Gain on disposition of assets      (189 )        (5,203 )        (12,221 )        (7,230 )
Operating Income     119,774          111,644          323,675          278,244  
               
               
Less:              
 Interest income      (2 )        (2 )        (6 )        (28 )
 Loss on extinguishment of debt                  3,198        
 Interest expense      31,102          24,709          92,469          73,953  
 Income tax expense      3,613          972          9,730          18,278  
Net income $      85,061      $      85,965     $      218,284     $      186,041  
               
               
Capital expenditure detail by category:              
Billboards - traditional $      10,950        $      8,939     $      34,322       $    21,628  
Billboards - digital      9,283          9,864          24,757         40,002  
Logo      2,160           2,112          5,421         7,159  
Transit      387          84          603         246  
Land and buildings      2,956            1,706          8,504         5,845  
Operating equipment      1,576          1,694          5,218          5,884  
Total capital expenditures $     27,312       $      24,399     $      78,825      $    80,764  
               

SUPPLEMENTAL SCHEDULES UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES (IN THOUSANDS)
  Three months endedSeptember 30,  
    2016       2015     % Change
Reconciliation of Reported Basis to Acquisition-Adjusted Results (a) :          
Net revenue $   387,516     $   350,701          10.5 %
Acquisitions and divestitures           23,466      
Acquisition-adjusted results-net revenue $   387,516     $   374,167          3.6 %
           
Reported direct advertising and G&A expenses $   195,865     $   178,772          9.6 %
Acquisitions and divestitures           11,809       
Acquisition-adjusted results-direct advertising and G&A expenses $   195,865     $   190,581          2.8 %
           
Outdoor operating income $   191,651     $   171,929          11.5 %
Acquisitions and divestitures           11,657      
Acquisition-adjusted results-outdoor operating income $   191,651     $   183,586          4.4 %
           
Reported corporate expenses $     14,401      $     12,926           11.4 %
Acquisitions and divestitures           72      
Acquisition-adjusted results-corporate expenses $     14,401     $     12,998           10.8 %
           
Adjusted EBITDA $   177,250     $   159,003          11.5 %
Acquisitions and divestitures           11,585      
Acquisition-adjusted  EBITDA $   177,250     $   170,588          3.9 %
           

 (a)  Acquisition-adjusted net revenue, direct advertising and general and administrative expenses, outdoor operating income, corporate expenses and EBITDA include adjustments to 2015 for acquisitions and divestitures for the same time frame as actually owned in 2016. 
    Three months ended   September 30,
      2016       2015  
Reconciliation of Outdoor Operating Income to Operating Income:        
Outdoor Operating Income   $   191,651      $   171,929  
Less:  Corporate expenses       14,401          12,926   
  Stock-based compensation        8,358          6,121   
  Depreciation and amortization       49,307          46,441   
Plus:  Gain on disposition of assets       189          5,203   
Operating Income   $  119,774     $  111,644  
                 

SUPPLEMENTAL SCHEDULESUNAUDITED REIT MEASURESAND RECONCILIATIONS TO GAAP MEASURES(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Adjusted Funds From Operations:

    Three months ended   Nine months ended 
    September 30,   September 30, 
    2016         2015       2016         2015  
               
Net income $    85,061     $     85,965     $    218,284     $    186,041  
Depreciation and amortization related to real estate   46,327         42,554         142,394         132,931  
Gain from disposition of real estate assets and investments      (546 )       (5,125 )        (12,020 )     (6,924 )
Adjustment for unconsolidated affiliates and non-controlling interest      52          96          318            446  
Funds From Operations $    130,894      $     123,490      $    348,976      $     312,494   
               
Straight-line (income) expense     (46 )       (22 )        231         181  
Stock-based compensation expense     8,358          6,121          19,650         17,508   
 Non-cash portion of tax provision   (509 )     (1,306 )       (150 )       9,572   
 Non-real estate related depreciation and amortization      2,980         3,887          10,335         11,465  
Amortization of deferred financing costs      1,332          1,174           3,993          3,498  
Loss on extinguishment of debt                  3,198         
Capitalized expenditures—maintenance      (9,005 )       (10,610 )       (25,942 )       (34,746 )
Adjustment for unconsolidated affiliates and non-controlling interest      (52 )        (96 )       (318 )     (446 )
               
 Adjusted Funds From Operations $     133,952      $     122,638      $  359,973      $     319,526  
               
Divided by weighted average diluted common shares outstanding      97,881,878          96,602,429          97,631,606          96,284,482  
Diluted AFFO per share $      1.37        $     1.27     $    3.69      $     3.32  
                               

 
Company Contact:Buster KantrowDirector of Investor Relations(225) 926-1000bkantrow@lamar.com

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