Lamar Advertising Company Announces Fourth Quarter and Year End 2013 Operating Results

Lamar Advertising Company Announces Fourth Quarter and Year End 2013 Operating Results  BATON ROUGE, La., Feb. 27, 2014 (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 fourth quarter ended December 31, 2013.  Fourth Quarter Results  Lamar reported net revenues of $320.4 million for the fourth quarter of 2013 versus $306.6 million for the fourth quarter of 2012, a 4.5% increase. See "Immaterial Correction of Prior Period Amounts" below. Operating income for the fourth quarter of 2013 was $63.8 million as compared to $65.1 million for the same period in 2012. Lamar recognized $10.2 million in net income for the fourth quarter of 2013 compared to net income of $7.9 million for the fourth quarter of 2012.  Adjusted EBITDA (defined as operating income before non-cash compensation, depreciation and amortization and gain on disposition of assets) for the fourth quarter of 2013 was $145.0 million versus $136.9 million for the fourth quarter of 2012, a 5.9% increase.  Free Cash Flow (defined as Adjusted EBITDA less interest, net of interest income and amortization of financing costs, current taxes, preferred stock dividends and total capital expenditures) for the fourth quarter of 2013 was $85.0 million as compared to $73.1 million for the same period in 2012, a 16.3% increase.  Pro forma net revenue for the fourth quarter of 2013 increased 0.3% and pro forma Adjusted EBITDA decreased 0.9% as compared to the fourth quarter of 2012. Pro forma net revenue and pro forma Adjusted EBITDA include adjustments to the 2012 period for acquisitions and divestitures for the same time frame as actually owned in the 2013 period. Pro forma net revenue, pro forma Adjusted EBITDA and pro forma outdoor operating income have also been adjusted to eliminate the effect of the immaterial correction in both the 2012 and 2013 periods.^1 See "Immaterial Correction of Prior Period Amounts" below.                                          ^1 Adjusted EBITDA, free cash flow, pro forma results and outdoor operating income are non-GAAP Financial Measures.Please see "Use of Non-GAAP Measures" and 'Supplemental Schedules—Reconciliations of non-GAAP Financial Measures" below on pages 6-8.  Twelve Months Results  Lamar reported net revenues of $1.25 billion for the twelve months ended December 31, 2013 versus $1.18 billion for the same period in 2012, a 5.6% increase.Operating income for the twelve months ended December 31, 2013 was $223.4 million as compared to $214.5 million for the same period in 2012.Adjusted EBITDA increased 6.6% for the twelve months ended December 31, 2013 to $545.1 million from $511.3 million for the same period in 2012.There was net income of $40.1 million for the twelve months ended December 31, 2013 as compared to net income of $7.9 million for the same period in 2012.  Free Cash Flow for the twelve months ended December 31, 2013 increased 14.8% to $303.6 million as compared to $264.4 million for the same period in 2012.  Immaterial Correction of Prior Period Amounts  The Company has historically recognized revenue on a monthly basis over the term of each advertising contract which produced results that were consistent with generally accepted accounting principles in all material respects.Commencing with the fourth quarter of 2013, revenue is recognized on a daily basis and will be going forward.An example that illustrates monthly versus daily revenue recognition is included on page 8. The Company evaluated the effect of this correction under Staff Accounting Bulletin Nos. 99 and 108 and concluded that it is immaterial to the current and prior periods.Actual reported revenue for the fourth quarter and all prior periods presented in this earnings release have been adjusted to reflect this immaterial correction.In line with its historical practice, the Company will continue to present pro forma results and quarterly guidance based on monthly revenue recognition.See "Reconciliation of Reported Basis to Pro Forma Basis" on page 7 of this release, which presents pro forma net revenue after acquisition adjustments and prior to the correction.As noted in this schedule, pro forma net revenue on a monthly basis for the fourth quarter of 2013 is $313.3 million, a 0.3% increase over the fourth quarter of 2012.A schedule comparing net revenue recognized on a monthly basis to net revenue recognized on a daily basis for the years ended December 31, 2013, 2012 and 2011 is also included in the release. See "Revenue Comparison Monthly vs Daily" on page 8.  Guidance  For the first quarter of 2014, the Company expects net revenue as recognized on a monthly basis without giving effect to the correction to be approximately $290 million to $293 million.On a pro forma basis this represents an increase of approximately 1% to 2%.The Company will continue to provide net revenue guidance for 2014 based on monthly revenue recognition consistent with past practice.  Liquidity  As of December 31, 2013, Lamar had $126.2 million in total liquidity that consists of $93.0 million available for borrowing under its then-existing $250 million revolving senior credit facility and approximately $33.2 million in cash and cash equivalents.Currently, Lamar has approximately $243 million available for borrowing under its revolving senior credit facility.See "Recent Transactions—Senior Credit Facility" below.  Recent Transactions  Senior Credit Facility. On February 3, 2014, the senior credit facility of Lamar's wholly owned subsidiary, Lamar Media Corp., was amended to increase the revolving credit facility from $250 million to $400 million and extend its maturity date to February 2, 2019.The incremental facility was also increased from $300 million to $500 million.In addition, the senior credit facility was amended to include provisions that would allow Lamar Media to conduct its affairs in a manner that would allow Lamar Advertising to qualify and remain qualified as a real estate investment trust (REIT).  Notes Offering.On January 10, 2014, Lamar Media Corp., closed a private placement of $510 million in aggregate principal amount of 5 3/8% Senior Notes due 2024, which resulted in net proceeds to Lamar Media of approximately $502 million.Lamar Media used the proceeds of the offering to pay off all loan balances outstanding under its senior credit facility.  Early Extinguishment of Debt.On December 4, 2013, Lamar Media redeemed in full all its outstanding 9 3/4% Senior Notes due 2014 at a redemption price equal to 100% of the aggregate principal amount of outstanding Notes plus a make whole amount and accrued and unpaid interest up to but not including the applicable redemption date for an aggregate redemption price of approximately $366.4 million. The redemption was funded using cash on hand of $182.4 million and borrowings under Lamar Media's revolving credit facility of $184 million.In connection with the redemption, the Company recorded a loss on early extinguishment of debt of $14.3 million for the fourth quarter of 2013, of which $3.9 million related to the write off of previously capitalized and unamortized debt issuance fees.  Real Estate Investment Trust Update  As previously announced, Lamar is actively considering an election to convert to a REIT status. In conjunction with this review, Lamar submitted a private letter ruling request to the U.S. Internal Revenue Service (the "IRS") in November of 2012 addressing certain matters relevant to its contemplated qualification as a REIT. After a delay caused by internal IRS procedures and considerations, in November 2013 Lamar was advised by the IRS that it will resume issuing private letter rulings regarding the REIT provisions of the Internal Revenue Code of 1986, as amended, and that the IRS is actively working on Lamar's private letter ruling request.Based on current information, Lamar believes that it will be in a position to convert to a REIT effective January 1, 2014.  Lamar's decision to proceed with a REIT election is subject to the approval of its board of directors.A favorable IRS ruling, if received, does not guarantee that Lamar would succeed in qualifying as a REIT and there is no certainty as to the timing of a REIT election.Lamar may not ultimately pursue a conversion to a REIT, and it can provide no assurance that a REIT conversion, if completed, will be successfully implemented or achieve the intended benefits.  Forward Looking Statements  This press release contains forward-looking statements, including the statements regarding guidance for the first quarter of 2014; consideration of an election to real estate investment trust status; and the ability to complete the REIT conversion effective for the taxable year beginning January 1, 2014 and remain qualified as a REIT assuming a conversion is successfully completed.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 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 Measures  Adjusted EBITDA, Free Cash Flow, pro forma results and outdoor operating income are not measures of performance under accounting principles generally accepted in the United States of America ("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, 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 the effect of the correction in its method of revenue recognition useful to allow investors to see the impact of the correction and to provide pro forma results that are comparable with prior periods and in line with the Company's presentation of market guidance.Our presentations of these measures may not be comparable to similarly titled measures used by other companies.See "Supplemental Schedules—Reconciliations of Non-GAAP Measures," which provides reconciliations 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, February 27, 2014 at 10:00 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 Pass Code:                94615468                           Available through Thursday, March 6, 2014 at 11:59 p.m. eastern time                           Live Webcast:             www.lamar.com                           Webcast Replay:           www.lamar.com Available through Thursday, March 6, 2014 at 11:59 p.m. eastern time  General Information  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 22 states and the province of Ontario, Canada and over 60 transit advertising franchises in the United States, Canada and Puerto Rico.  LAMAR ADVERTISING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                                                                              Three months ended   Twelve months ended                               December 31,         December 31,                               2013       2012       2013         2012                                                                Net revenues                   $320,352 $306,639 $1,245,842 $1,179,736                                                                Operating expenses (income)                                     Direct advertising expenses   109,962    106,199    436,844      418,538 General and administrative     52,880     51,994     213,087      203,065 expenses Corporate expenses            12,468     11,537     50,763       46,875 Non-cash compensation          1,829      3,564      24,936       14,466 Depreciation and amortization  81,087     76,800     300,579      296,083 Gain on disposition of assets  (1,710)    (8,508)    (3,804)      (13,817)                               256,516    241,586    1,022,405    965,210 Operating income              63,836     65,053     223,437      214,526                                                                Other expense (income)                                          Loss on extinguishment of debt 14,345     9,676      14,345       41,632 Interest income                (44)       (61)       (165)        (331) Interest expense               34,013     40,012     146,277      157,093                               48,314     49,627     160,457      198,394                                                                Income before income tax      15,522     15,426     62,980       16,132 Income tax expense            5,336      7,515      22,841       8,242                                                                Net income                     10,186     7,911      40,139       7,890 Preferred stock dividends      92         92         365          365 Net income applicable to       $10,094  $7,819   $39,774    $7,525 common stock                                                                Earnings per share:                                             Basic income per share         $0.11    $0.08    $0.42      $0.08                                                                Diluted income per share       $0.11    $0.08    $0.42      $0.08                                                                Weighted average common shares                                  outstanding: - basic                       94,697,622 93,717,650 94,387,230   93,379,246 - diluted                     95,091,780 94,075,642 94,745,515   93,666,641                                                                OTHER DATA                                                     Free Cash Flow Computation:                                     Adjusted EBITDA                $145,042 $136,909 $545,148   $511,258 Interest, net                  (30,656)   (35,311)   (131,445)    (139,021) Current tax expense           (1,339)    (622)      (4,092)      (1,926) Preferred stock dividends      (92)       (92)       (365)        (365) Total capital expenditures    (27,973)   (27,823)   (105,650)    (105,570) Free cash flow                 $84,982  $73,061  $ 303,596   $264,376                                                                                                                              OTHER DATA (continued):                         December 31, December 31, Selected Balance Sheet                          2013           2012 Data:                                                               Cash and cash equivalents                      $33,212      $58,911 Working capital                                 36,705         82,127 Total assets                                    3,401,618      3,514,030 Total debt (including                           1,938,802      2,160,854 current maturities) Total stockholders' equity                      $932,946     $861,625                                                                                                                                                        Three months ended   Twelve months ended                            December 31,         December 31,                            2013       2012       2013           2012                                                               Selected Cash Flow Data:                                       Cash flows provided by      $100,021 $122,560 $394,705     $375,909 operating activities Cash flows used in          (34,826)   (176,055)  (191,869)      (303,399) investing activities Cash flows (used in) provided by financing       (213,902)  74,165     (227,195)      (47,417) activities                                                                                                                             Reconciliation ofFree Cash Flow to Cash                                                   FlowsProvided by Operating Activities Cash flows provided by      $ 100,021  $ 122,560  $ 394,705      $ 375,909 operating activities Changes in operating assets 14,111     (20,408)   20,940         (114) and liabilities Total capital expenditures  (27,973)   (27,823)   (105,650)      (105,570) Preferred stock dividends   (92)       (92)       (365)          (365) Other                       (1,085)    (1,176)    (6,034)        (5,484) Free cash flow              $84,982  $73,061  $303,596     $264,376    SUPPLEMENTAL SCHEDULES—RECONCILIATIONS OF NON-GAAP MEASURES (IN THOUSANDS)                         Three months ended         Twelve months ended                        December 31,               December 31,                        2013          2012          2013          2012 Reconciliation ofAdjusted EBITDA to                                           Net income: Adjusted EBITDA         $145,042    $136,909    $545,148    $511,258 Less:                                                           Non-cash compensation   1,829         3,564         24,936        14,466 Depreciation and        81,087        76,800        300,579       296,083 amortization Gain on disposition of  (1,710)       (8,508)       (3,804)       (13,817) assets Operating Income        63,836        65,053        223,437       214,526                                                                Less:                                                           Interest income         (44)          (61)          (165)         (331) Loss on extinguishment  14,345        9,676         14,345        41,632 of debt Interest expense        34,013        40,012        146,277       157,093 Income tax expense     5,336         7,515         22,841        8,242 Net income              $10,186     $7,911      $40,139     $7,890                                                                                                                                                                                              Capital expenditure                                             detail by category Billboards -            $2,024      $8,123      $21,295     $29,061 traditional Billboards - digital    15,268        9,800         50,233        42,134 Logo                    4,025         3,157         11,182        8,704 Transit                 114           149           168           259 Land and buildings      3,435         3,396         9,471         12,797 Operating Equipment     3,107         3,198         13,301        12,615 Total capital           $27,973     $27,823     $105,650    $105,570 expenditures                                                                                        Three months ended                                              December 31,                                                   2013          2012          % Change      Reconciliation of Reported Basis to Pro                                           Forma (a) Basis: Net revenue (daily      $320,352    $306,639    4.5%           basis) Adjustment for          (7,005)       (1,134)                     immaterial correction Adjusted net revenue, prior to immaterial     313,347       305,505       2.6%           correction Acquisitions and        —            6,845                       divestitures Pro forma net revenue   $313,347    $312,350    0.3%           (monthly basis)                                                                Reported direct advertising and G&A     $162,842    $158,193    2.9%           expenses Acquisitions and        —            3,304                       divestitures Pro forma direct advertising and G&A     $162,842    $161,497    0.8%           expenses                                                                Outdoor operating       $157,510    $148,446    6.1%           income (daily basis) Adjustment for          (7,005)       (1,134)                     immaterial correction Adjusted outdoor operating income, prior 150,505       147,312       2.2%           to immaterial correction Acquisitions and        —            3,541                       divestitures Pro forma outdoor operating income        $150,505    $150,853    (0.2)%         (monthly basis)                                                                Reported corporate      $12,468     $11,537     8.1%           expenses Acquisitions and        —            —                          divestitures Pro forma corporate     $12,468     $11,537     8.1%           expenses                                                                Adjusted EBITDA (daily  $145,042    $136,909    5.9%           basis) Adjustment for          (7,005)       (1,134)                     immaterial correction Adjusted EBITDA, prior to immaterial           138,037       135,775       1.7%           correction Acquisitions and        —            3,541                       divestitures Pro forma Adjusted      $138,037    $139,316    (0.9)%         EBITDA (monthly basis)                                                                (a)Pro forma net revenue, direct advertising and general and administrative expenses, outdoor operating income, corporate expenses and Adjusted EBITDA include adjustments to 2012 for acquisitions and divestitures for the same time frame as actually owned in 2013.Pro forma net revenue, outdoor operating income and Adjusted EBITDA have also been adjusted to eliminate the effect of the immaterial correction in both the 2012 and 2013 periods.                                                   Three months ended                                                  December 31,                                                  2013          2012 Reconciliation of Outdoor Operating                                               Income to Operating Income: Outdoor operating                                 $157,510    $148,446 income Less: Corporate                                   12,468        11,537 expenses Non-cash compensation                            1,829         3,564 Depreciation and                                 81,087        76,800 amortization Plus: Gain on                                    1,710         8,508 disposition of assets Operating income                                  $63,836     $65,053    REVENUE COMPARISON-MONTHLY VS DAILY 2013, 2012 AND 2011 QUARTERLY AND FYE   2013  Actual 2013                 Actual 2013                           (prior to correction)       (after correction)                                                                              + (-)      Monthly Recognition   %      Converted to Daily        %      Difference                                    Recognition                                                                 Q1    283,479               22.8%  276,605                   22.2%  (6,874) Q2    324,684               26.0%  327,744                   26.3%  3,060 Q3    323,184               26.0%  321,141                   25.8%  (2,043) Q4    313,347               25.2%  320,352                   25.7%  7,005 Total 1,244,694             100.0% 1,245,842                 100.0% 1,148                                                                                                                                  2012  Actual 2012                 Actual 2012                           (prior to correction)       (after correction)                                                                              + (-)      Monthly Recognition   %      Converted to Daily        %      Difference                                    Recognition                                                                 Q1    266,238               22.5%  262,465                   22.3%  (3,773) Q2    304,872               25.8%  301,106                   25.5%  (3,766) Q3    306,286               25.9%  309,526                   26.2%  3,240 Q4    305,505               25.8%  306,639                   26.0%  1,134 Total 1,182,901             100.0% 1,179,736                 100.0% (3,165)                                                                                                                                  2011  Actual 2011                 Actual 2011                           (prior to correction)       (after correction)                                                                              + (-)      Monthly Recognition   %      Converted to Daily        %      Difference                                    Recognition                                                                 Q1    255,202               22.5%  250,546                   22.2%  (4,656) Q2    293,345               25.9%  289,367                   25.6%  (3,978) Q3    296,701               26.2%  296,568                   26.2%  (133) Q4    288,239               25.4%  294,233                   26.0%  5,994 Total 1,133,487             100.0% 1,130,714                 100.0% (2,773)     EXAMPLE: MONTHLY VS DAILY BILLING RECOGNITION                                      Contract Amount:             $3,100    Contract Period:             31 days   Contract Start Date:         March 15  Invoice Date:                March 15                                                                                                                 Revenue Recognized                                     March       April                                              Revenue Recognition, monthly         $3,100   $0 Revenue Recognition, daily          $1,700   $1,400  CONTACT: Keith A. Istre          Chief Financial Officer          (225) 926-1000          KI@lamar.com