OREANDA-NEWS. 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, 2016.

“Our team turned in strong operating results across all key metrics, including sales growth and expense control, yielding substantial Adjusted EBITDA and AFFO increases,” said Lamar CEO Sean Reilly. “We are particularly pleased with the performance of our digital platform, as revenue trends on both our new units and our existing units were extremely encouraging.”

Second Quarter Highlights

  • Same unit digital revenue increased 5.1%
  • FFO increased $25.7 million
  • AFFO increased $15.7 million
  • Diluted AFFO per share increased 12.3%

Second Quarter Results
Lamar reported net revenues of $387.5 million for the second quarter of 2016 versus $344.2 million for the second quarter of 2015, a 12.6% increase. Operating income for the second quarter of 2016 was $117.1 million as compared to $99.3 million for the same period in 2015. Lamar recognized net income of $81.9 million for the second quarter of 2016 compared to net income of $59.4 million for same period in 2015. Net income per basic and diluted share was $0.84 per share and $0.61 per share for the three months ended June 30, 2016 and 2015, respectively.

Adjusted EBITDA for the second quarter of 2016 was $176.4 million versus $155.4 million for the second quarter of 2015, an increase of 13.5%.

Cash flow provided by operating activities increased 19.5% to $159.5 million for the three months ended June 30, 2016 as compared to the same period in 2015. Free cash flow for the second quarter of 2016 was $112.1 million as compared to $101.2 million for the same period in 2015, a 10.8% increase. 

For the second quarter of 2016, Funds From Operations, or FFO, was $130.2 million versus $104.4 million for the same period in 2015, an increase of 24.6%. Adjusted Funds From Operations, or AFFO, for second quarter of 2016 was $133.7 million compared to $118.0 million for the same period in 2015, a 13.3% increase. Diluted AFFO per share increased 12.3% to $1.37 per share for the three months ended June 30, 2016 as compared to $1.22 per share for the same period in 2015.

Acquisition-Adjusted Three Months Results
Acquisition-adjusted net revenue for the second quarter of 2016 increased 3.5% over Acquisition-adjusted net revenue for the second quarter of 2015. Acquisition-adjusted EBITDA increased 5.6% as compared to Acquisition-adjusted EBITDA for the second 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.

Six Months Results
Lamar reported net revenues of $726.1 million for the six months ended June 30, 2016 versus $646.7 million for the same period in 2015, a 12.3% increase. Operating income for the six months ended June 30, 2016 was $203.9 million as compared to $166.6 million for the same period in 2015. Lamar recognized net income of $133.2 million for the six months ended June 30, 2016 as compared to net income of $100.1 million for the same period in 2015. Net income per diluted share was $1.36 and $1.04 per share for the six months ended June 30, 2016 and 2015, respectively. In addition, Adjusted EBITDA for the six months ended June 30, 2016 was $306.6 million versus $273.9 million for the same period in 2015, an 11.9% increase.

Cash flow provided by operating activities increased to $211.0 million for the six months ended June 30, 2016, as compared to $188.2 million in the same period in 2015. Free cash flow for the six months ended June 30, 2016 increased 16.1% to $190.4 million as compared to $164.0 million for the same period in 2015.

For the six months ended June 30, 2016, FFO was $218.1 million versus $189.0 million for the same period in 2015, a 15.4% increase. AFFO for the six months ended June 30, 2016 was $226.0 million compared to $196.9 million for the same period in 2015, a 14.8% increase. Diluted AFFO per share increased to $2.32 per share for the six months ended June 30, 2016, as compared to $2.05 per share in the comparable period in 2015, an increase of 13.2%.

Liquidity
As of June 30, 2016, Lamar had $218.6 million in total liquidity that consisted of $176.9 million available for borrowing under its revolving senior credit facility and approximately $41.7 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 Tuesday, August 9, 2016 at 8:00 a.m. central time. Instructions for the conference call and Webcast are provided below:

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
  June 30,		   Six months ended
  June 30,
      2016       2015       2016       2015  
               
Net revenues $ 387,528     $    344,249     $    726,061     $    646,726  
                 
               
Operating expenses (income)              
Direct advertising expenses     132,725         115,951         261,450         229,183  
General and administrative expenses     63,287         57,616         127,717         114,143  
Corporate expenses      15,124         15,316          30,311         29,485  
Stock-based compensation     8,093         7,486         11,292         11,387  
Depreciation and amortization     51,933         48,725          103,422          97,955  
Gain on disposition of assets      (705 )        (191 )        (12,032 )        (2,027 )
                 
         270,457          244,903          522,160          480,126  
                 
Operating income     117,071         99,346          203,901          166,600  
                 
Other (income) expense              
Interest income     (3 )       (24 )        (4 )        (26 )
Loss on extinguishment of debt      56       —          3,198       —  
Interest expense      31,299          24,712          61,367          49,244  
         31,352       24,688          64,561          49,218  
                 
Income before income tax expense     85,719         74,658         139,340         117,382  
Income tax expense      3,810         15,298          6,117         17,306  
                 
Net income     81,909         59,360         133,223       100,076  
Preferred stock dividends      91          91          182          182  
Net income applicable to common stock $      81,818     $    59,269     $    133,041      $    99,894  
                 
               
Earnings per share:              
Basic earnings per share $     0.84     $      0.61     $    1.37      $   1.04  
Diluted earnings per share $     0.84     $    0.61     $    1.36      $   1.04  
               
Weighted average common shares outstanding:                              
- basic   97,121,619       96,405,105       96,956,535       96,056,912  
- diluted   97,731,467         96,482,919       97,523,379       96,115,587  
OTHER DATA              
Free Cash Flow Computation:              
Adjusted EBITDA $ 176,392     $ 155,366     $ 306,583     $ 273,915  
Interest, net   (30,017 )     (23,522 )     (58,702 )     (46,894 )
Current tax expense    (3,269 )     (3,233 )     (5,758 )     (6,428 )
Preferred stock dividends   (91 )     (91 )     (182 )     (182 )
Total capital expenditures   (30,894 )     (27,324 )     (51,513 )     (56,365 )
Free Cash Flow $    112,121     $    101,196     $    190,428     $    164,046  
                               
  OTHER DATA (continued):              
               
            June 30,       December 31,  
Selected Balance Sheet Data:           2016       2015  
Cash and cash equivalents         $     41,737     $     22,327  
Working capital         $     94,974     $   44,902  
Total assets         $   3,912,521     $  3,363,744  
Total debt, net of deferred financing costs (including current maturities)         $   2,392,677     $  1,891,450  
Total stockholders’ equity         $   1,039,731     $  1,021,059  
               
               
    Three months ended
  June, 30		   Six months ended
  June 30,
      2016       2015       2016       2015  
Selected Cash Flow Data:              
Cash flows provided by operating activities $      159,488     $  133,486     $    211,025      $    188,217  
Cash flows used in investing activities $     (33,360 )   $   (65,807 )   $     (550,913 )   $   (110,077 )
Cash flows (used in) provided by financing activities $   (112,888 )   $   (73,061 )   $    358,115     $    (75,880 )
               

SUPPLEMENTAL SCHEDULES
UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES
(IN THOUSANDS)

    Three months ended     Six months ended
    June 30,     June 30,
      2016         2015         2016         2015  
Reconciliation of Free Cash Flow to Cash Flows Provided by              
Operating Activities:              
Cash flows provided by operating activities $      159,488       $      133,486     $      211,025      $    188,217  
Changes in operating assets and liabilities     (14,551 )        (2,561 )        34,638          36,362  
Total capital expenditures     (30,894 )       (27,324 )        (51,513 )        (56,365 )
Preferred stock dividends     (91 )       (91 )       (182 )        (182 )
Other      (1,831 )       (2,314 )        (3,540 )        (3,986 )
Free cash flow $      112,121     $      101,196     $     190,428     $      164,046  
               
               
               
Reconciliation of  Adjusted EBITDA to Net Income:              
Adjusted EBITDA $      176,392      $      155,366     $    306,583     $    273,915  
Less:              
Stock-based compensation      8,093         7,486         11,292          11,387  
Depreciation and amortization      51,933          48,725          103,422           97,955  
Gain on disposition of assets      (705 )        (191 )        (12,032 )        (2,027 )
Operating Income     117,071          99,346          203,901          166,600  
               
               
Less:              
Interest income      (3 )       (24 )        (4 )        (26 )
Loss on extinguishment of debt      56       —         3,198       —  
Interest expense      31,299          24,712          61,367          49,244  
Income tax expense      3,810          15,298          6,117          17,306  
Net income $      81,909     $      59,360     $      133,223     $      100,076  
               
               
Capital expenditure detail by category:              
Billboards - traditional $      16,498        $      6,880     $    23,372        $      12,689  
Billboards - digital      8,926          15,876          15,474          30,138  
Logo      1,830          2,105          3,261           5,047  
Transit      86          32         216          162  
Land and buildings      1,655          968          5,548          4,139  
Operating equipment      1,899          1,463          3,642          4,190  
Total capital expenditures $      30,894     $      27,324     $    51,513     $    56,365  
               

SUPPLEMENTAL SCHEDULES
UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES
(IN THOUSANDS)

  Three months ended June 30,  
    2016       2015     % Change
Reconciliation of Reported Basis to Acquisition-Adjusted Results (a):          
 Net revenue $   387,528      $   344,249           12.6 %
Acquisitions and divestitures   —         30,058      
Acquisition-adjusted results-net revenue $   387,528      $   374,307           3.5 %
           
Reported direct advertising and G&A expenses $   196,012      $   173,567          12.9 %
Acquisitions and divestitures   —         18,381      
Acquisition-adjusted results-direct advertising and G&A expenses $   196,012      $   191,948           2.1 %
           
Outdoor operating income $   191,516      $   170,682           12.2 %
Acquisitions and divestitures   —         11,677      
Acquisition-adjusted results-outdoor operating income $   191,516     $   182,359         5.0 %
           
Reported corporate expenses $     15,124      $     15,316           (1.3 %)
Acquisitions and divestitures   —         71      
Acquisition-adjusted results-corporate expenses $     15,124      $     15,387          (1.7 %)
           
Adjusted EBITDA $   176,392      $   155,366          13.5 %
Acquisitions and divestitures   —         11,606      
Acquisition-adjusted  EBITDA $   176,392      $   166,972           5.6 %
           

(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
June 30,
      2016       2015  
Reconciliation of Outdoor Operating Income to Operating Income:        
Outdoor Operating Income   $  191,516      $ 170,682   
Less:  Corporate expenses       15,124          15,316  
Stock-based compensation        8,093           7,486  
Depreciation and amortization       51,933           48,725  
Plus:  Gain on disposition of assets        705           191  
Operating Income   $  117,071     $  99,346