Lamar(LAMR) - 2022 Q2 - Quarterly Report

FORM 10-Q Filing Information Registrant Information Identifies Lamar Advertising Company and Lamar Media Corp. as registrants for the Q2 2022 Form 10-Q, detailing their filer status and stock information - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2022, filed by Lamar Advertising Company and its wholly-owned subsidiary, Lamar Media Corp.[2][5] Registrant Filer Status and Common Stock Outstanding (as of July 31, 2022) | Registrant | Filer Status | Common Stock Outstanding (as of July 31, 2022) | | :----------------------- | :-------------------- | :--------------------------------------------------- | | Lamar Advertising Company | Large accelerated filer | Class A: 87,114,517, Class B: 14,420,085 | | Lamar Media Corp. | Non-accelerated filer | 100 | Note Regarding Forward-Looking Statements Forward-Looking Statements Disclosure Outlines forward-looking statements, common terminology, and associated risks, disclaiming any obligation to update them - Forward-looking statements are identified by terms like 'anticipates,' 'believes,' 'plans,' 'expects,' and similar expressions, covering areas such as future financial performance, business objectives, capital expenditures, and REIT qualification[6][8] - Key risks and uncertainties include the state of the economy, advertising expenditures, indebtedness, competition, regulation, ability to renew contracts, integration of acquisitions, digital deployment strategy, market for Class A common stock, accounting changes, severe weather, and changes in tax laws applicable to REITs[7][8] - The company disclaims any obligation to update or revise forward-looking statements, except as required by law, and encourages readers to review risk factors in the 2021 Combined Form 10-K[9][10] PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Lamar Advertising Company Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements for Lamar Advertising Company, including balance sheets, income statements, and cash flow statements, with total assets of $6.28 billion and net revenues of $969.2 million for the six months ended June 30, 2022 Lamar Advertising Company: Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :-------------- | :---------------- | | Total assets | $6,282,037 | $6,047,494 | | Total liabilities | $5,041,971 | $4,830,405 | | Total stockholders' equity | $1,240,066 | $1,217,089 | | Cash and cash equivalents | $91,686 | $99,788 | | Receivables, net | $303,323 | $269,917 | | Net property, plant and equipment | $1,377,447 | $1,337,274 | | Goodwill | $2,004,145 | $1,936,426 | | Long-term debt, net | $3,001,467 | $2,838,817 | Lamar Advertising Company: Condensed Consolidated Statements of Income Highlights (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $517,852 | $445,052 | $969,240 | $815,933 | | Operating income | $166,504 | $148,986 | $286,960 | $237,909 | | Net income | $134,205 | $119,609 | $226,356 | $157,938 | | Net income applicable to common stock | $134,114 | $119,518 | $226,174 | $157,756 | | Basic earnings per share | $1.32 | $1.18 | $2.23 | $1.56 | | Diluted earnings per share | $1.32 | $1.18 | $2.23 | $1.56 | | Cash dividends declared per share | $1.20 | $0.75 | $2.30 | $1.50 | Lamar Advertising Company: Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $312,630 | $285,257 | | Net cash used in investing activities | $(308,378) | $(64,670) | | Net cash used in financing activities | $(12,283) | $(273,643) | | Net decrease in cash and cash equivalents | $(8,102) | $(52,843) | | Cash and cash equivalents at end of period | $91,686 | $68,726 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, revenue recognition, acquisitions, debt, and subsequent events for Lamar Advertising Company - The majority of revenues are from billboard, logo, and transit advertising, recognized ratably over contract life, with production services recognized upon satisfaction[28][29] Disaggregated Revenue by Source (in thousands) | Revenue Source | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Billboard | $463,826 | $405,284 | $865,565 | $739,323 | | Logo | $20,760 | $19,694 | $40,505 | $39,100 | | Transit | $33,266 | $20,074 | $63,170 | $37,510 | | Net Revenues | $517,852 | $445,052 | $969,240 | $815,933 | - During the six months ended June 30, 2022, the Company completed over 40 acquisitions of outdoor advertising assets for a total purchase price of $234.3 million, including Burkhart Advertising Inc. for $130 million[42][44] Long-term Debt Composition (in thousands) | Debt Instrument | June 30, 2022 (Net of Deferred Financing Costs) | December 31, 2021 (Net of Deferred Financing Costs) | | :----------------------------------- | :---------------------------------------------- | :-------------------------------------------------- | | Senior Credit Facility | $925,667 | $764,411 | | Accounts Receivable Securitization Program | $239,328 | $174,415 | | 3 3/4% Senior Notes | $593,477 | $592,964 | | 3 5/8% Senior Notes | $542,650 | $542,289 | | 4% Senior Notes | $542,560 | $542,151 | | 4 7/8% Senior Notes | $395,285 | $394,987 | | Other notes | $2,196 | $2,378 | | Total Long-term Debt (excluding current maturities) | $3,001,467 | $2,838,817 | - On July 1, 2022, the Company completed a tax reorganization to an Umbrella Partnership Real Estate Investment Trust (UPREIT) structure, which is not expected to materially impact financial statements or business operations[114] - On July 29, 2022, Lamar Media entered into a new $350 million Senior Secured Term Loan A, with proceeds used to repay outstanding balances on the revolving credit facility and Accounts Receivable Securitization Program[115] Lamar Media Corp. Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements for Lamar Media Corp., a wholly-owned subsidiary, with total assets of $6.27 billion and net revenues of $969.2 million for the six months ended June 30, 2022 Lamar Media Corp.: Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :-------------- | :---------------- | | Total assets | $6,265,294 | $6,031,031 | | Total liabilities | $5,033,542 | $4,822,685 | | Total stockholder's equity | $1,231,752 | $1,208,346 | | Cash and cash equivalents | $91,186 | $99,288 | | Receivables, net | $303,323 | $269,917 | | Net property, plant and equipment | $1,377,447 | $1,337,274 | | Goodwill | $1,993,993 | $1,926,274 | | Long-term debt, net | $3,001,467 | $2,838,817 | Lamar Media Corp.: Condensed Consolidated Statements of Income Highlights (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $517,852 | $445,052 | $969,240 | $815,933 | | Operating income | $166,614 | $149,410 | $287,206 | $238,470 | | Net income | $134,315 | $120,033 | $226,602 | $158,499 | Lamar Media Corp.: Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $279,320 | $269,129 | | Net cash used in investing activities | $(308,378) | $(64,670) | | Net cash provided by (used in) financing activities | $21,027 | $(257,515) | | Net decrease in cash and cash equivalents | $(8,102) | $(52,843) | | Cash and cash equivalents at end of period | $91,186 | $68,226 | - Lamar Media Corp. is a wholly-owned subsidiary of Lamar Advertising Company, and its financial statements are substantially equivalent to those of the parent company, with earnings per share data not provided as it is a subsidiary[128] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition and results for Lamar Advertising Company and Lamar Media Corp., covering revenue growth, acquisitions, capital expenditures, and non-GAAP measures - Revenue growth is driven by increasing occupancy, raising advertising rates, and acquiring new advertising displays, with advertising spending sensitive to general economic conditions[153] - Company completed over 40 acquisitions totaling approximately $234.3 million during the first half of 2022, financed by available cash and borrowings[155] - The Company uses non-GAAP measures like Adjusted EBITDA, FFO, and AFFO to evaluate performance, believing they offer meaningful supplemental insights into operating performance[158][164] Lamar Advertising Company - Management's Discussion and Analysis Details Lamar Advertising Company's operational and financial performance, highlighting revenue, income, and liquidity, including acquisitions and non-GAAP metrics Lamar Advertising Company: Key Financial Performance Indicators (Six Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Increase (Decrease) | Percent Increase (Decrease) | | :----------------------------------- | :----- | :----- | :------------------ | :-------------------------- | | Net revenues | $969,240 | $815,933 | $153,307 | 18.8% | | Operating income | $286,960 | $237,909 | $49,051 | 20.6% | | Net income | $226,356 | $157,938 | $68,418 | 43.3% | | Adjusted EBITDA | $434,608 | $365,948 | $68,660 | 18.8% | | FFO | $353,887 | $272,243 | $81,644 | 30.0% | | AFFO | $348,801 | $294,513 | $54,288 | 18.4% | Lamar Advertising Company: Key Financial Performance Indicators (Three Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Increase (Decrease) | Percent Increase (Decrease) | | :----------------------------------- | :----- | :----- | :------------------ | :-------------------------- | | Net revenues | $517,852 | $445,052 | $72,800 | 16.4% | | Operating income | $166,504 | $148,986 | $17,518 | 11.8% | | Net income | $134,205 | $119,609 | $14,596 | 12.2% | | Adjusted EBITDA | $243,362 | $213,516 | $29,846 | 14.0% | | FFO | $197,559 | $176,181 | $21,378 | 12.1% | | AFFO | $196,892 | $177,817 | $19,075 | 10.7% | - Total liquidity as of June 30, 2022, was $496.3 million, comprising $91.7 million in cash and equivalents, $403.6 million availability under the revolving credit facility, and $1.0 million under the Accounts Receivable Securitization Program[191] - The Accounts Receivable Securitization Program was increased from $175 million to $250 million and extended to July 21, 2025, with LIBOR-based interest rates replaced by SOFR-based rates[194] - The Company expects 2022 total capital expenditures to be approximately $170.0 million and anticipates aggregate quarterly distributions to stockholders of $4.70 per common share for 2022[221][224] Lamar Media Corp. - Management's Discussion and Analysis Provides management's discussion and analysis for Lamar Media Corp., mirroring the parent company's performance with strong revenue growth and profitability Lamar Media Corp.: Key Financial Performance Indicators (Six Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Increase (Decrease) | Percent Increase (Decrease) | | :----------------------------------- | :----- | :----- | :------------------ | :-------------------------- | | Net revenues | $969,240 | $815,933 | $153,307 | 18.8% | | Operating income | $287,206 | $238,470 | $48,736 | 20.4% | | Net income | $226,602 | $158,499 | $68,103 | 43.0% | | Adjusted EBITDA | $434,854 | $366,509 | $68,345 | 18.6% | | FFO | $354,133 | $272,804 | $81,329 | 29.8% | | AFFO | $349,047 | $295,074 | $53,973 | 18.3% | Lamar Media Corp.: Key Financial Performance Indicators (Three Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Increase (Decrease) | Percent Increase (Decrease) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $517,852 | $445,052 | $72,800 | 16.4% | | Operating income | $166,614 | $149,410 | $17,204 | 11.5% | | Net income | $134,315 | $120,033 | $14,282 | 11.9% | | Adjusted EBITDA | $243,472 | $213,940 | $29,532 | 13.8% | | FFO | $197,669 | $176,605 | $21,064 | 11.9% | | AFFO | $197,002 | $178,241 | $18,761 | 10.5% | - The increase in net revenues for both periods was primarily driven by billboard and transit advertising, with acquisition-adjusted net revenue also showing significant growth[239][240][252][253] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Discusses Lamar Advertising Company's exposure to interest rate risk from variable-rate debt, estimating the impact of rate increases and outlining mitigation strategies - Lamar Advertising is exposed to interest rate risk from variable-rate debt instruments of Lamar Media, including its senior credit facility and Accounts Receivable Securitization Program[265][266] - As of June 30, 2022, approximately $1.17 billion (35.8%) of the Company's outstanding long-term debt was variable-rate[267] - A hypothetical 200 basis point increase in the weighted average interest rate (from 2.0% to 4.0%) would have increased interest expense by approximately $9.9 million for the six months ended June 30, 2022[267] - The Company mitigates interest rate risk by balancing variable and fixed-rate debt and has the capability to fix interest rates for up to twelve months under its senior credit facility[268] ITEM 4. Controls and Procedures Management concluded that disclosure controls and procedures for Lamar Advertising Company and Lamar Media Corp. were effective as of June 30, 2022, with no material changes - The disclosure controls and procedures of Lamar Advertising Company and Lamar Media Corp. were evaluated and deemed effective as of June 30, 2022[269] - No material changes in internal control over financial reporting were identified during the last fiscal quarter[270] PART II — OTHER INFORMATION ITEM 1A. Risk Factors Updates risk factors, noting no material changes since the 2021 Form 10-K, except for potential conflicts of interest arising from the new UPREIT structure - No material changes to risk factors have occurred since the 2021 Combined Form 10-K, except for those related to the new UPREIT structure[271] - The UPREIT structure may lead to potential conflicts of interest, as limited partners of the Operating Partnership have voting rights on certain matters, which could conflict with the interests of Lamar Advertising's stockholders[272] - The Operating Partnership agreement stipulates that conflicts, if unresolvable without adverse impact to either stockholders or limited partners, will be resolved by the general partner in favor of Lamar Advertising's stockholders[273] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities or use of proceeds to report[274] ITEM 5. Other Information Indicates no other information to report - There is no other information to report[274] ITEM 6. Exhibits Lists all exhibits filed with the Form 10-Q, including corporate documents, debt indentures, and executive certifications - Exhibits include Amended and Restated Certificates of Incorporation and Bylaws for both Lamar Advertising Company and Lamar Media Corp[275] - Supplemental Indentures for 3.625% Senior Notes due 2031, 3.750% Senior Notes due 2028, 4.000% Senior Notes due 2030, and 4.875% Senior Notes due 2029 are filed[275] - Certifications from the Chief Executive Officer and Chief Financial Officer are included, along with the Sixth Amendment to the Receivables Financing Agreement[275] Signatures Signatures Contains official signatures of authorized representatives for Lamar Advertising Company and Lamar Media Corp., confirming report authorization and filing - The report is signed by Jay L. Johnson, Executive Vice President, Chief Financial Officer, and Treasurer, for both Lamar Advertising Company and Lamar Media Corp., dated August 3, 2022[279][281][282]