Lamar Advertising Company — Q1 2012 Form 10-Q
Business context and reporting period. This combined, unaudited filing covers the three months ended March 31, 2012, with comparison to Q1 2011. Lamar earns most revenue from selling advertising on outdoor displays; the filing also reports Lamar Media Corp., its wholly owned principal operating and borrowing subsidiary. Amounts below are in U.S. dollars; financial figures are in millions unless stated otherwise.
Financial performance and position
- Revenue: $266.2 million, up 4.3% from $255.2 million. Billboard revenue rose 4.0%, logo revenue 8.1%, and transit revenue 6.9%. On the company’s acquisition-adjusted comparison, revenue growth was 4.1%.
- Operating results: Operating income was $25.8 million versus $25.6 million. Operating margin was approximately 9.7%, compared with 10.0% in Q1 2011. Operating expenses excluding depreciation, amortization, and asset-sale gains increased 4.2% to $169.0 million.
- Net results: Net loss attributable to common stock was $22.9 million, or $0.25 per share, versus a $13.3 million loss, or $0.14 per share. The 2012 loss included a $30.0 million loss on extinguishment of debt. Interest expense declined to $39.9 million from $43.6 million. The reported effective tax rate was 48.2%.
- Cash flow and investment: Operating cash flow was $36.7 million, up from $25.8 million. Capital expenditures were $19.7 million, versus $28.8 million; acquisitions used $6.1 million. Operating cash flow less capital expenditures was approximately $17.0 million, compared with negative $3.0 million in Q1 2011. Ending cash was $35.9 million.
- Debt and liquidity: Total debt carrying value was $2.188 billion at March 31, 2012, including $26.2 million of current maturities; debt was $2.159 billion at year-end 2011. Cash plus available revolving credit capacity provided reported total liquidity of approximately $277.5 million, including $241.6 million available under the revolver. The company reported compliance with applicable debt covenants.
- Other balance-sheet items: Total assets were $3.417 billion and stockholders’ equity was $821.1 million. Asset retirement obligations were $181.5 million.
Material changes versus Q1 2011
- Revenue increased $11.0 million, with growth across billboards, logos, and transit; management attributed most of the increase to billboards.
- Operating income was nearly flat: higher operating costs and substantially lower gains on asset sales offset revenue growth. Q1 2011 included a $5.7 million gain on sale of the company aircraft.
- Net loss widened mainly because Q1 2012 included the $30.0 million debt-extinguishment charge. Approximately $14.4 million of that charge was non-cash, related to writing off unamortized debt issuance fees and discounts.
- Interest expense fell by $3.7 million following refinancing transactions and reductions in debt outstanding. Cash from operations increased, while capital expenditures declined.
Outlook, financing, and risks
- Management expected 2012 operating cash flow to exceed operating and capital needs and intended to use excess cash principally to reduce debt. It stated that cash, revolver availability, and expected operating cash flow were sufficient for operating needs through fiscal 2012.
- Management anticipated approximately $100 million of total capital expenditures in 2012 and planned to limit acquisition activity, with no material acquisition spending then planned.
- In February 2012, Lamar Media issued $500 million of 5.875% senior subordinated notes due 2022 and obtained a $100 million term loan. Proceeds, together with term-loan proceeds, funded tenders for approximately $583.1 million principal amount of 6.625% notes; aggregate tender payments were approximately $613.9 million.
- The company had $695.5 million outstanding under its senior credit facility, bearing variable rates; its Q1 weighted-average rate was 3.3%. Management estimated that a 200-basis-point increase would have raised quarterly interest expense by approximately $3.3 million and increased net loss by approximately $2.0 million.
- Key risks include economic conditions and advertising spending, significant indebtedness and access to funding, competition and industry regulation, renewal of contracts at favorable rates, and execution of the digital-display strategy. Debt agreements restrict additional borrowing, distributions, asset sales, and other actions; failure to comply with financial tests could accelerate debt repayment.
- The filing provides no numerical revenue or earnings guidance. Interim results are not necessarily indicative of full-year results.
Investor facts to verify
- Whether revenue growth continues on an acquisition-adjusted basis and translates into improved operating margins.
- Whether the refinancing reduces ongoing interest costs enough to offset the one-time extinguishment charge, and how debt maturities and leverage evolve.
- Whether the company delivers its stated 2012 capital-spending plan and generates enough cash to reduce debt.
- Compliance with credit-facility covenants, available revolver capacity, and the effect of variable interest rates.
- Whether the stated risks—especially advertising-market conditions, contract renewals, and digital deployment—materially affect performance.