Edgar Filing: LAMAR ADVERTISING CO/NEW

lamr-10q_20190331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2019

☐	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 1-36756

Lamar 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.)

5321 Corporate Blvd., Baton Rouge, LA		70808
(Address of principal executive offices)		(Zip Code)

Registrants’ telephone number, including area code: (225) 926-1000

Securities registered pursuant to Section 12(b) of the Act:

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 ☒ No ☐

Indicate by check mark whether each registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether Lamar Advertising Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if Lamar Advertising Company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether Lamar Media Corp. is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if Lamar Media Corp. has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether Lamar Advertising Company is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

Indicate by check mark whether Lamar Media Corp. is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.001 par value	LAMR	The NASDAQ Stock Market, LLC

The number of shares of Lamar Advertising Company’s Class A common stock outstanding as of April 25, 2019: 85,567,889

The number of shares of the Lamar Advertising Company’s Class B common stock outstanding as of April 25, 2019: 14,420,085

The number of shares of Lamar Media Corp. common stock outstanding as of April 25, 2019: 100

This combined Form 10-Q 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 H(1) (a) and (b) of Form 10-Q and is, therefore, filing this form with the reduced disclosure format permitted by such instruction.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information included in this report is forward-looking in nature within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This report uses terminology such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue” and similar expressions to identify forward-looking statements. Examples of forward-looking statements in this report include statements about:

•

our future financial performance and condition;

•

our business plans, objectives, prospects, growth and operating strategies;

•

our future capital expenditures and level of acquisition activity;

•

market opportunities and competitive positions;

•

our future cash flows and expected cash requirements;

•

estimated risks;

•

our ability to maintain compliance with applicable covenants and restrictions included in Lamar Media’s senior credit facility and the indentures relating to its outstanding notes;

•

stock price;

•

estimated future dividend distributions; and

•

our ability to remain qualified as a Real Estate Investment Trust (“REIT”).

Forward-looking statements are subject to known and unknown risks, uncertainties and other important factors, including but not limited to the following, any of which may cause the actual results, performance or achievements of Lamar Advertising Company (referred to herein as the “Company” or “Lamar Advertising”) or Lamar Media Corp. (referred to herein as “Lamar Media”) to differ materially from those expressed or implied by the forward-looking statements:

•

the state of the economy and financial markets generally and their effects on the markets in which we operate and the broader demand for advertising;

•

the levels of expenditures on advertising in general and outdoor advertising in particular;

•

risks and uncertainties relating to our significant indebtedness;

•

the demand for outdoor advertising and its continued popularity as an advertising medium;

•

our need for, and ability to obtain, additional funding for acquisitions, operations and debt refinancing;

•

increased competition within the outdoor advertising industry;

•

the regulation of the outdoor advertising industry by federal, state and local governments;

•

our ability to renew expiring contracts at favorable rates;

•

the integration of businesses and assets that we acquire and our ability to recognize cost savings and operating efficiencies as a result of these acquisitions;

•

our ability to successfully implement our digital deployment strategy;

•

the market for our Class A common stock;

•

changes in accounting principles, policies or guidelines;

•

our ability to effectively mitigate the threat of and damages caused by hurricanes and other kinds of severe weather;

•

our ability to qualify as a REIT and maintain our status as a REIT; and

•

changes in tax laws applicable to REIT’s or in the interpretation of those laws.

The forward-looking statements in this report are based on our current good faith beliefs, however, actual results may differ due to inaccurate assumptions, the factors listed above or other foreseeable or unforeseeable factors. Consequently, we cannot guarantee that any of the forward-looking statements will prove to be accurate. The forward-looking statements in this report speak only as of the date of this report, and Lamar Advertising and Lamar Media expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained in this report, except as required by law.

For a further description of these and other risks and uncertainties, the Company encourages you to read carefully Item 1A to the combined Annual Report on Form 10-K/A for the year ended December 31, 2018 of the Company and Lamar Media (the “2018 Combined Form 10-K/A”), filed on February 26, 2019 and as such risk factors may be updated or supplemented, from time to time, in our combined Quarterly Reports on Form 10-Q.

CONTENTS

		Page
PART I — FINANCIAL INFORMATION		5

ITEM 1. FINANCIAL STATEMENTS		5

Lamar Advertising Company
Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018		5
Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2019 and 2018		6
Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2019 and 2018		7
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018		8
Notes to Condensed Consolidated Financial Statements		9-20

Lamar Media Corp.
Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018		21
Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2019 and 2018		22
Condensed Consolidated Statements of Stockholder’s Equity for the three months ended March 31, 2019 and 2018		23
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018		24
Notes to Condensed Consolidated Financial Statements		25-31

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		32-44

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		45

ITEM 4. Controls and Procedures		46

PART II — OTHER INFORMATION		46

ITEM 1A. Risk Factors		46

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		46

ITEM 5. Other Information		46

ITEM 6. Exhibits		46-48

PART I — FINANCIAL INFORMATION

ITEM 1. — FINANCIAL STATEMENTS

LAMAR ADVERTISING COMPANY

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	March 31, 2019			December 31, 2018
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	32,828		$	21,494
Receivables, net of allowance for doubtful accounts of $13,166 and $11,161 in 2019 and 2018, respectively		218,114			235,576
Prepaid lease and contract expenses		—			80,684
Other current assets		36,894			25,915
Total current assets		287,836			363,669
Property, plant and equipment		3,563,025			3,525,725
Less accumulated depreciation and amortization		(2,253,376	)		(2,230,677	)
Net property, plant and equipment		1,309,649			1,295,048
Operating lease right of use assets		1,292,438			—
Goodwill		1,876,356			1,919,386
Intangible assets		978,307			915,453
Other assets		49,958			51,085
Total assets	$	5,794,544		$	4,544,641
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	14,577		$	21,246
Current maturities of long-term debt, net of deferred financing costs of $5,966 and $5,245 in 2019 and 2018, respectively		199,930			204,120
Current operating lease liabilities		174,345			—
Accrued expenses		61,053			122,467
Deferred income		101,312			107,202
Total current liabilities		551,217			455,035
Long-term debt, net of deferred financing costs of $22,730 and $20,619 in 2019 and 2018, respectively		2,826,624			2,684,568
Operating lease liabilities		1,029,663			—
Deferred income tax liabilities		20,622			20,734
Asset retirement obligation		224,019			222,989
Other liabilities		32,821			29,531
Total liabilities		4,684,966			3,412,857
Stockholders’ equity:
Series AA preferred stock, par value $.001, $63.80 cumulative dividends, 5,720 shares authorized; 5,720 shares issued and outstanding at 2019 and 2018		—			—
Class A common stock, par value $.001, 362,500,000 shares authorized; 86,068,627 and 85,551,595 shares issued at 2019 and 2018, respectively; 85,567,889 and 85,162,692 outstanding at 2019 and 2018, respectively		86			86
Class B common stock, par value $.001, 37,500,000 shares authorized, 14,420,085 shares issued and outstanding at 2019 and 2018		14			14
Additional paid-in capital		1,883,391			1,852,421
Accumulated comprehensive income		271			12
Accumulated deficit		(740,090	)		(695,337	)
Cost of shares held in treasury, 500,738 and 388,903 shares at 2019 and 2018, respectively		(34,094	)		(25,412	)
Stockholders’ equity		1,109,578			1,131,784
Total liabilities and stockholders’ equity	$	5,794,544		$	4,544,641

See accompanying notes to condensed consolidated financial statements.

LAMAR ADVERTISING COMPANY

AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(In thousands, except share and per share data)

	Three months ended March 31,
	2019			2018
Statements of Income
Net revenues	$	384,457		$	361,026
Operating expenses (income)
Direct advertising expenses (exclusive of depreciation and amortization)		140,470			138,293
General and administrative expenses (exclusive of depreciation and amortization)		79,293			70,208
Corporate expenses (exclusive of depreciation and amortization)		17,029			21,104
Depreciation and amortization		61,506			56,840
(Gain) loss on disposition of assets		(4,624	)		8,701
		293,674			295,146
Operating income		90,783			65,880
Other expense (income)
Loss on extinguishment of debt		—			15,429
Interest income		(153	)		(24	)
Interest expense		37,595			33,579
		37,442			48,984
Income before income tax expense		53,341			16,896
Income tax expense		2,088			1,844
Net income		51,253			15,052
Cash dividends declared and paid on preferred stock		91			91
Net income applicable to common stock	$	51,162		$	14,961
Earnings per share:
Basic earnings per share	$	0.51		$	0.15
Diluted earnings per share	$	0.51		$	0.15
Cash dividends declared per share of common stock	$	0.96		$	0.91
Weighted average common shares used in computing earnings per share:
Weighted average common shares outstanding basic		99,710,406			98,301,551
Weighted average common shares outstanding diluted		99,915,443			98,726,934
Statements of Comprehensive Income
Net income	$	51,253		$	15,052
Other comprehensive income (loss)
Foreign currency translation adjustments		259			(543	)
Comprehensive income	$	51,512		$	14,509

See accompanying notes to condensed consolidated financial statements.

LAMAR ADVERTISING COMPANY

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share data)

	Series AA PREF Stock		Class A CMN Stock		Class B CMN Stock		Treasury Stock			Add’l Paid in Capital		Accumulated Comprehensive Income		Accumulated Deficit			Total
Balance, December 31, 2018	$	—		86		14		(25,412	)		1,852,421		12		(695,337	)		1,131,784
Non-cash compensation		—		—		—		—			21,097		—		—			21,097
Exercise of 186,521 shares of stock options		—		—		—		—			7,352		—		—			7,352
Issuance of shares of common stock through employee purchase plan		—		—		—		—			2,521		—		—			2,521
Purchase of 111,835 shares of treasury stock		—		—		—		(8,682	)		—		—		—			(8,682	)
Foreign currency translation		—		—		—		—			—		259		—			259
Net income		—		—		—		—			—		—		51,253			51,253
Dividends/distributions to common shareholders ($0.96 per common share)		—		—		—		—			—		—		(95,915	)		(95,915	)
Dividends ($15.95 per preferred share)		—		—		—		—			—		—		(91	)		(91	)
Balance, March 31, 2019	$	—		86		14		(34,094	)		1,883,391		271		(740,090	)		1,109,578

	Series AA PREF Stock		Class A CMN Stock		Class B CMN Stock		Treasury Stock			Add’l Paid in Capital		Accumulated Comprehensive Income (Loss)			Accumulated Deficit			Total
Balance, December 31, 2017	$	—		84		14		(21,300	)		1,762,499		1,302			(639,106	)		1,103,493
Non-cash compensation		—		—		—		—			11,968		—			—			11,968
Exercise of 54,480 shares of stock options		—		—		—		—			1,836		—			—			1,836
Issuance of shares of common stock through employee purchase plan		—		—		—		—			2,138		—			—			2,138
Purchase of 57,619 shares of treasury stock		—		—		—		(4,112	)		—		—			—			(4,112	)
Foreign currency translation		—		—		—		—			—		(543	)		—			(543	)
Net income		—		—		—		—			—		—			15,052			15,052
Dividends/distributions to common shareholders ($0.91 per common share)		—		—		—		—			—		—			(89,542	)		(89,542	)
Dividends ($15.95 per preferred share)		—		—		—		—			—		—			(91	)		(91	)
Balance, March 31, 2018	$	—		84		14		(25,412	)		1,778,441		759			(713,687	)		1,040,199

LAMAR ADVERTISING COMPANY

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three months ended March 31,
	2019			2018
Cash flows from operating activities:
Net income	$	51,253		$	15,052
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		61,506			56,840
Stock-based compensation		2,233			7,514
Amortization included in interest expense		1,332			1,242
(Gain) loss on disposition of assets and investments		(4,624	)		8,701
Loss on extinguishment of debt		—			15,429
Deferred tax expense (benefit)		792			(87	)
Provision for doubtful accounts		2,403			2,206
Changes in operating assets and liabilities
Decrease (increase) in:
Receivables		15,198			(9,876	)
Prepaid expenses		20,835			(26,968	)
Other assets		(14,393	)		(7,542	)
Increase (decrease) in:
Trade accounts payable		1,303			944
Accrued expenses		(41,210	)		(27,682	)
Operating lease liabilities		(29,207	)		—
Other liabilities		(6,695	)		4,999
Net cash provided by operating activities		60,726			40,772
Cash flows from investing activities:
Acquisitions		(66,423	)		(6,637	)
Capital expenditures		(25,951	)		(23,252	)
Proceeds received from insurance claims		—			790
Proceeds from disposition of assets and investments		1,297			244
Decrease in notes receivable		2			2
Net cash used in investing activities		(91,075	)		(28,853	)
Cash flows from financing activities:
Cash used for purchase of treasury stock		(8,682	)		(4,112	)
Net proceeds from issuance of common stock		9,874			3,974
Principal payments on long term debt		(7,210	)		(5,703	)
Payments on revolving credit facility		(255,000	)		(135,000	)
Proceeds received from revolving credit facility		155,000			112,000
Proceeds received from note offering		255,000			—
Redemption of senior subordinated notes		—			(509,790	)
Proceeds received from senior credit facility Term B loan		—