Lamar(LAMR) - 2021 Q2 - Quarterly Report

FORM 10-Q Filing Information This section provides general information about the Form 10-Q filing for Lamar Advertising Company and Lamar Media Corp. for the period ended June 30, 2021 General Information This report is a Quarterly Report on Form 10-Q for Q2 2021, filed by Lamar Advertising Company and its subsidiary, both non-shell companies - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2021[2] - Lamar Advertising Company is a large accelerated filer, and Lamar Media Corp. is a non-accelerated filer[4][5] - Both Lamar Advertising Company and Lamar Media Corp. are not shell companies[5] Lamar Advertising Company - Shares Outstanding as of July 31, 2021 | Class of Stock | Shares Outstanding | | :--------------- | :----------------- | | Class A common stock (Lamar Advertising Company) | 86,762,533 | | Class B common stock (Lamar Advertising Company) | 14,420,085 | | Common stock (Lamar Media Corp.) | 100 | NOTE REGARDING FORWARD-LOOKING STATEMENTS This section outlines the nature of forward-looking statements within the report and the associated risks and disclaimers Forward-Looking Statements Disclosure This section identifies forward-looking statements, their inherent risks, and the company's disclaimer to update them - Forward-looking statements are identified by terms such as 'anticipates,' 'believes,' 'plans,' 'expects,' 'future,' 'intends,' 'may,' 'will,' 'should,' 'estimates,' 'predicts,' 'potential,' 'continue' and similar expressions[6] - Key areas of forward-looking statements include future financial performance, business plans, capital expenditures, market opportunities, cash flows, dividend distributions, and ability to maintain REIT qualification[8] - Significant risks include general economic and financial market conditions, the impact of the COVID-19 pandemic, advertising expenditure levels, indebtedness, competition, regulatory changes, and the ability to maintain REIT status[8] - The company expressly disclaims any obligation to update or revise any forward-looking statement, except as required by law[9] PART I — FINANCIAL INFORMATION This part contains the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for Lamar Advertising Company and Lamar Media Corp., including balance sheets, income, equity, and cash flow statements Lamar Advertising Company - Condensed Consolidated Financial Statements This sub-section details Lamar Advertising Company's financial statements, showing asset decrease, equity increase, and significant revenue and net income growth Condensed Consolidated Balance Sheets Lamar Advertising Company - Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :-------------- | :------------------ | | Total assets | $5,715,298 | $5,791,441 | | Total liabilities | $4,483,693 | $4,588,673 | | Stockholders' equity | $1,231,605 | $1,202,768 | - Total assets decreased by $76,143 thousand, while stockholders' equity increased by $28,837 thousand from December 31, 2020, to June 30, 2021[15] Condensed Consolidated Statements of Income and Comprehensive Income Lamar Advertising Company - Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $445,052 | $347,652 | $815,933 | $754,221 | | Operating income | $148,986 | $66,452 | $237,909 | $163,023 | | Net income | $119,609 | $31,429 | $157,938 | $71,922 | | Basic earnings per share | $1.18 | $0.31 | $1.56 | $0.71 | | Diluted earnings per share | $1.18 | $0.31 | $1.56 | $0.71 | - Net revenues increased by 28.0% for the three months and 8.2% for the six months ended June 30, 2021, compared to the same periods in 2020[17] - Net income increased significantly by 280.6% for the three months and 119.6% for the six months ended June 30, 2021, compared to the same periods in 2020[17] Condensed Consolidated Statements of Stockholders' Equity Lamar Advertising Company - Stockholders' Equity Changes (in thousands) | Item | Six Months Ended June 30, 2021 | | :--------------------------------- | :----------------------------- | | Balance, December 31, 2020 | $1,202,768 | | Non-cash compensation | $1,977 | | Issuance of common stock (stock awards & ESPP) | $18,137 | | Exercise of stock options | $7,799 | | Purchase of treasury stock | $(5,717) | | Foreign currency translation | $504 | | Net income | $157,938 | | Dividends/distributions to common shareholders | $(151,692) | | Dividends to preferred shareholders | $(182) | | Balance, June 30, 2021 | $1,231,605 | - Stockholders' equity increased from $1,202,768 thousand at December 31, 2020, to $1,231,605 thousand at June 30, 2021[19] Condensed Consolidated Statements of Cash Flows Lamar Advertising Company - Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $285,257 | $210,677 | | Net cash used in investing activities | $(64,670) | $(57,677) | | Net cash used in financing activities | $(273,643) | $(1,903) | | Net (decrease) increase in cash and cash equivalents | $(52,843) | $150,905 | | Cash and cash equivalents at end of period | $68,726 | $177,093 | - Net cash provided by operating activities increased by $74,580 thousand, while net cash used in financing activities significantly increased due to debt redemption in 2021[24] Notes to Condensed Consolidated Financial Statements - The interim condensed consolidated financial statements are unaudited and include all necessary normal recurring adjustments for fair presentation[26] Lamar Advertising Company - Disaggregated Revenue by Source (in thousands) | Revenue Source | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Billboard advertising | $405,284 | $312,095 | $739,323 | $667,400 | | Logo advertising | $19,694 | $21,053 | $39,100 | $42,445 | | Transit advertising | $20,074 | $14,504 | $37,510 | $44,376 | | Net revenues | $445,052 | $347,652 | $815,933 | $754,221 | - Operating lease costs for the six months ended June 30, 2021, were $145,350 thousand, a decrease from $158,734 thousand in the prior year[35] - Total long-term debt, net of deferred financing costs, decreased from $2,764,082 thousand at December 31, 2020, to $2,661,486 thousand at June 30, 2021[15][54] - The company redeemed $650,000 thousand of 5 3/4% Senior Notes in February 2021, incurring a loss on debt extinguishment of approximately $21,604 thousand[79] - Cash distributions to common shareholders were $0.75 per share for both the first and second quarters of 2021, totaling $1.50 per share for the six months[96] Lamar Media Corp. - Condensed Consolidated Financial Statements This sub-section details Lamar Media Corp.'s financial statements, mirroring the parent company's performance with increased revenues and net income Condensed Consolidated Balance Sheets Lamar Media Corp. - Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :-------------- | :------------------ | | Total assets | $5,698,835 | $5,774,707 | | Total liabilities | $4,476,412 | $4,581,863 | | Stockholder's equity | $1,222,423 | $1,192,844 | - Total assets decreased by $75,872 thousand, while stockholder's equity increased by $29,579 thousand from December 31, 2020, to June 30, 2021[107] Condensed Consolidated Statements of Income and Comprehensive Income Lamar Media Corp. - Condensed Consolidated Statements of Income (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $445,052 | $347,652 | $815,933 | $754,221 | | Operating income | $149,410 | $66,557 | $238,470 | $163,252 | | Net income | $120,033 | $31,534 | $158,499 | $72,151 | - Net revenues increased by 28.0% for the three months and 8.2% for the six months ended June 30, 2021, compared to the same periods in 2020[109] - Net income increased by 280.6% for the three months and 119.7% for the six months ended June 30, 2021, compared to the same periods in 2020[109] Condensed Consolidated Statements of Stockholder's Equity Lamar Media Corp. - Stockholder's Equity Changes (in thousands) | Item | Six Months Ended June 30, 2021 | | :--------------------------------- | :----------------------------- | | Balance, December 31, 2020 | $1,192,844 | | Contribution from parent | $27,985 | | Foreign currency translations | $504 | | Net income | $158,499 | | Dividend to parent | $(157,409) | | Balance, June 30, 2021 | $1,222,423 | - Stockholder's equity increased from $1,192,844 thousand at December 31, 2020, to $1,222,423 thousand at June 30, 2021[112] Condensed Consolidated Statements of Cash Flows Lamar Media Corp. - Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $269,129 | $182,753 | | Net cash used in investing activities | $(64,670) | $(57,677) | | Net cash (used in) provided by financing activities | $(257,515) | $26,021 | | Net (decrease) increase in cash and cash equivalents | $(52,843) | $150,905 | | Cash and cash equivalents at end of period | $68,226 | $176,593 | - Net cash provided by operating activities increased by $86,376 thousand, while financing activities shifted from a net inflow of $26,021 thousand in 2020 to a net outflow of $257,515 thousand in 2021, primarily due to debt redemption[114] Notes to Condensed Consolidated Financial Statements - The notes for Lamar Media Corp. are substantially equivalent to those of Lamar Advertising Company, with specific summarized financial information provided for subsidiary guarantors and non-guarantor subsidiaries[117][118] Lamar Media Corp. - Condensed Consolidating Balance Sheet (June 30, 2021, in thousands) | Metric | Lamar Media Corp. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Lamar Media Consolidated | | :-------------------------- | :---------------- | :--------------------- | :------------------------- | :----------- | :----------------------- | | Total current assets | $61,090 | $26,228 | $260,375 | $0 | $347,693 | | Net property, plant and equipment | $0 | $1,250,719 | $14,775 | $0 | $1,265,494 | | Intangibles and goodwill, net | $0 | $2,763,265 | $17,659 | $0 | $2,780,924 | | Total assets | $4,073,781 | $5,507,037 | $470,017 | $(4,352,000) | $5,698,835 | | Total liabilities | $2,851,358 | $1,583,448 | $462,929 | $(421,323) | $4,476,412 | | Stockholder's equity | $1,222,423 | $3,923,589 | $7,088 | $(3,930,677) | $1,222,423 | Lamar Media Corp. - Condensed Consolidating Statements of Income (Six Months Ended June 30, 2021, in thousands) | Metric | Lamar Media Corp. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Lamar Media Consolidated | | :-------------------------- | :---------------- | :--------------------- | :------------------------- | :----------- | :----------------------- | | Net revenues | $0 | $800,596 | $16,110 | $(773) | $815,933 | | Operating income | $0 | $237,238 | $1,232 | $0 | $238,470 | | Net income | $158,499 | $233,381 | $448 | $(233,829) | $158,499 | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results for Lamar Advertising and Lamar Media, covering business, COVID-19 impact, acquisitions, capital expenditures, non-GAAP measures, operations, and liquidity LAMAR ADVERTISING COMPANY This sub-section covers Lamar Advertising Company's business, COVID-19 impact, capital strategies, financial performance, and liquidity, showing strong recovery and growth Overview - Net revenues are primarily derived from renting advertising space on outdoor displays[144] - Revenue growth is influenced by increasing occupancy, raising advertising rates, and acquiring new displays, all sensitive to general economic conditions and advertising industry trends[144] - The COVID-19 pandemic initially reduced demand but showed improvement from June 2020 to June 2021, leading to a resumption of acquisition activities and capital projects[145] Acquisitions and Capital Expenditures - The Company completed acquisitions totaling approximately $27.2 million in cash during the six months ended June 30, 2021[148] Lamar Advertising Company - Capital Expenditures (in thousands) | Category | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Billboard — traditional | $4,604 | $1,503 | $7,371 | $8,023 | | Billboard — digital | $13,627 | $5,227 | $22,701 | $16,802 | | Logos | $2,644 | $670 | $4,567 | $3,545 | | Transit | $757 | $289 | $1,210 | $1,855 | | Land and buildings | $1,388 | $1,022 | $2,362 | $2,258 | | Operating equipment | $2,064 | $1,854 | $3,205 | $3,791 | | Total capital expenditures | $25,084 | $10,565 | $41,416 | $36,274 | - Total capital expenditures for the six months ended June 30, 2021, were $41.4 million, with anticipated total capital expenditures for 2021 at approximately $135.0 million[149][216] Non-GAAP Financial Measures - Management uses non-GAAP measures such as Adjusted EBITDA, FFO, AFFO, and acquisition-adjusted net revenue to evaluate operating performance and organic growth[150][156][157] - Adjusted EBITDA is defined as net income before income tax, interest, debt extinguishment loss/gain, stock-based compensation, depreciation and amortization, asset disposition loss/gain, and capitalized contract fulfillment costs, net[152] - FFO (Funds From Operations) is defined as net income before gains/losses from real estate asset sales and real estate-related depreciation and amortization, adjusted for unconsolidated affiliates and non-controlling interest[153] - AFFO (Adjusted Funds From Operations) further adjusts FFO for items like straight-line income/expense, stock-based compensation, non-cash tax, and maintenance capital expenditures[154] RESULTS OF OPERATIONS - Six Months Ended June 30, 2021 vs. 2020 - Net revenues increased by $61.7 million (8.2%) to $815.9 million, primarily due to a $71.9 million increase in billboard net revenues, partially offset by a $6.9 million decrease in transit net revenues[159] - Operating income increased by $74.9 million to $237.9 million[163] - Net income increased by $86.0 million (119.6%) to $157.9 million[166][169] Lamar Advertising Company - Key Performance Indicators (Six Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Increase (Decrease) | Percent Increase (Decrease) | | :--------------------------------- | :----- | :----- | :------------------ | :-------------------------- | | Net income | $157,938 | $71,922 | $86,016 | 119.6% | | Adjusted EBITDA | $365,948 | $293,013 | $72,935 | 24.9% | | FFO | $272,243 | $189,666 | $82,577 | 43.5% | | AFFO | $294,513 | $209,323 | $85,190 | 40.7% | RESULTS OF OPERATIONS - Three Months Ended June 30, 2021 vs. 2020 - Net revenues increased by $97.4 million (28.0%) to $445.1 million, primarily due to increases in billboard ($93.2 million) and transit ($5.6 million) net revenues[172] - Operating income increased by $82.5 million to $149.0 million[176] - Net income increased by $88.2 million (280.6%) to $119.6 million[179][182] Lamar Advertising Company - Key Performance Indicators (Three Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Increase (Decrease) | Percent Increase (Decrease) | | :--------------------------------- | :----- | :----- | :------------------ | :-------------------------- | | Net income | $119,609 | $31,429 | $88,180 | 280.6% | | Adjusted EBITDA | $213,516 | $133,196 | $80,320 | 60.3% | | FFO | $176,181 | $92,103 | $84,078 | 91.3% | | AFFO | $177,817 | $96,060 | $81,757 | 85.1% | LIQUIDITY AND CAPITAL RESOURCES - Total liquidity as of June 30, 2021, was $856.8 million, comprising $68.7 million in cash and cash equivalents, $735.6 million availability under the revolving credit facility, and $52.5 million under the Accounts Receivable Securitization Program[185] - Net cash provided by operating activities increased to $285.3 million for the six months ended June 30, 2021, from $210.7 million in the prior year[187] - The Accounts Receivable Securitization Program's maturity date was extended to July 21, 2024, with $122.5 million outstanding and $52.5 million available as of June 30, 2021[190][191] - A new 'at-the-market' offering program (2021 Sales Agreement) allows for the issuance of up to $400.0 million in Class A common stock, with no shares sold as of June 30, 2021[194][195] - The senior credit facility includes a $750.0 million revolving credit facility (maturing Feb 2025) and a $600.0 million Term B loan facility (maturing Feb 2027); as of June 30, 2021, there were no outstanding borrowings under the revolving credit facility, with $735.6 million unused capacity[199][201] - In January 2021, Lamar Media issued $550.0 million of 3 5/8% Senior Notes due 2031, using proceeds to redeem $650.0 million of 5 3/4% Senior Notes[202][218] - The company acquired a minority stake in Vistar Media for $30.0 million on July 12, 2021[217] - The Board of Directors authorized a stock and debt repurchasing program of up to $250.0 million each, expiring September 30, 2021, with no repurchases as of June 30, 2021[222] Lamar Advertising Company - Contractual Obligations (June 30, 2021, in millions) | Contractual Obligations | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | After 5 Years | | :--------------------------------- | :---- | :--------------- | :---------- | :---------- | :------------ | | Long-term debt | $2,783.7 | $122.2 | $0.8 | $0.8 | $2,659.9 | | Interest obligations on long-term debt | $731.7 | $94.6 | $187.5 | $187.5 | $262.1 | | Billboard site, transit and other operating and financing leases | $1,683.7 | $116.3 | $428.0 | $316.1 | $823.3 | | Total payments due | $5,199.1 | $333.1 | $616.3 | $504.4 | $3,745.3 | LAMAR MEDIA CORP. This sub-section details Lamar Media Corp.'s operations, showing significant increases in net revenues, operating income, and net income, mirroring the parent company's strong recovery RESULTS OF OPERATIONS - Six Months Ended June 30, 2021 vs. 2020 - Net revenues increased by $61.7 million (8.2%) to $815.9 million, primarily from billboard net revenues ($71.9 million increase), partially offset by a decrease in transit net revenues ($6.9 million)[230] - Operating income increased by $75.2 million to $238.5 million[234] - Net income increased by $86.3 million (119.7%) to $158.5 million[237][240] Lamar Media Corp. - Key Performance Indicators (Six Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Increase (Decrease) | Percent Increase (Decrease) | | :--------------------------------- | :----- | :----- | :------------------ | :-------------------------- | | Net income | $158,499 | $72,151 | $86,348 | 119.7% | | Adjusted EBITDA | $366,509 | $293,242 | $73,267 | 25.0% | | FFO | $272,804 | $189,895 | $82,909 | 43.7% | | AFFO | $295,074 | $209,552 | $85,522 | 40.8% | RESULTS OF OPERATIONS - Three Months Ended June 30, 2021 vs. 2020 - Net revenues increased by $97.4 million (28.0%) to $445.1 million, primarily from billboard ($93.2 million) and transit ($5.6 million) net revenues[243] - Operating income increased by $82.9 million to $149.4 million[247] - Net income increased by $88.5 million (280.6%) to $120.0 million[250][254] Lamar Media Corp. - Key Performance Indicators (Three Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Increase (Decrease) | Percent Increase (Decrease) | | :--------------------------------- | :----- | :----- | :------------------ | :-------------------------- | | Net income | $120,033 | $31,534 | $88,499 | 280.6% | | Adjusted EBITDA | $213,940 | $133,301 | $80,639 | 60.5% | | FFO | $176,605 | $92,208 | $84,397 | 91.5% | | AFFO | $178,241 | $96,165 | $82,076 | 85.3% | ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk from variable-rate debt, with 25.5% of long-term debt variable, and manages it through balanced debt and fixing options - The company is exposed to interest rate risk from variable-rate debt under its senior credit facility and Accounts Receivable Securitization Program[257] - As of June 30, 2021, approximately $721.1 million (25.5% of outstanding long-term debt) was variable-rate debt, with a weighted average interest rate of 1.4% for 2021[258] - A hypothetical 200 basis point increase in interest rates would have increased interest expense by approximately $7.6 million for the six months ended June 30, 2021[258] - Mitigation strategies include maintaining a balance between variable and fixed-rate debt and utilizing options to fix interest rates for up to twelve months under the senior credit facility[259] ITEM 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2021[260] - There have been no material changes in internal control over financial reporting during the last fiscal quarter[261] PART II — OTHER INFORMATION This part includes additional information such as risk factors, equity sales, other disclosures, and a list of exhibits ITEM 1A. Risk Factors This section references risk factors from the 2020 Form 10-K, noting no material changes since that filing - Operations and financial results are subject to various risks and uncertainties described in the 2020 Combined Annual Report on Form 10-K[262] - There have been no material changes to the risk factors since the December 31, 2020, Form 10-K filing[262] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds occurred during the period[263] ITEM 5. Other Information No other information is required to be reported under this item - No other information to report[263] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, financing amendments, and executive certifications - Exhibit 3.1: Amended and Restated Certificate of Incorporation of Lamar Advertising Company[264] - Exhibit 10.1: Fifth Amendment to the Receivables Financing Agreement, dated May 24, 2021[264] - Exhibits 31.1 and 31.2: Certifications of the Chief Executive Officer and Chief Financial Officer, respectively, pursuant to the Sarbanes-Oxley Act of 2002[264] - Exhibit 101: Inline XBRL formatted financial statements[264] SIGNATURES This section contains the official signatures for the Form 10-Q report, confirming its submission Signatures The report was signed by Jay L. Johnson, Executive Vice President, Chief Financial Officer and Treasurer, on behalf of both Lamar Advertising Company and Lamar Media Corp[268][269] - The signing date for the report was August 5, 2021[268][269]