Lamar Advertising Company (Nasdaq:LAMR), a leading owner and
operator of outdoor advertising and logo sign displays, announces
that it has received its requested private letter ruling from the
U.S. Internal Revenue Service (the "IRS") regarding certain matters
relevant to its intended election to be taxed as a real estate
investment trust (REIT) under the Internal Revenue Code of 1986, as
amended (the "Code"). As previously announced, Lamar intends to
make an election under §1033(g)(3) of the Code to treat its outdoor
advertising displays as real property for tax purposes. The private
letter ruling confirms, among other matters, that Lamar's income
from renting space on such outdoor advertising displays qualifies
as rents from real property for REIT purposes. Lamar's conversion
to REIT status is expected to be effective as of January 1, 2014.
Internal Reorganization
As previously announced, Lamar completed an internal corporate
restructuring at the end of 2013 so that it would be in compliance
with applicable REIT rules for the 2014 taxable year. Under the new
structure, we hold and operate certain of our assets that cannot be
held and operated directly by a REIT through taxable REIT
subsidiaries, or TRSs. A TRS is a subsidiary of a REIT that is
taxed as a regular corporation. Our TRSs primarily hold our transit
advertising business and foreign operations in Canada and Puerto
Rico. In addition, our TRSs perform certain activities and services
for our customers that a REIT cannot perform directly. The TRS
assets and operations would continue to be subject, as applicable,
to federal and state corporate income taxes. Furthermore,
assets and operations outside the United States will continue to be
subject to foreign taxes in the jurisdictions in which those assets
and operations are located.
As a REIT, we will be required to distribute annually at least
90% of our REIT taxable income (determined without regard to the
dividends paid deduction and by excluding net capital
gain). Our REIT taxable income generally does not include
income earned by our TRSs except to the extent the TRSs pay
dividends to the REIT. We expect to have net operating loss
carry forwards, or NOLs, as of the time of our REIT
conversion. To the extent we use these NOLs to offset our REIT
taxable income, the required distributions to stockholders would be
reduced. However, in this case, we may be subject to the
alternative minimum tax.
Shareholder Approval
As part of our reorganization to meet the REIT qualification
requirements, we expect to complete a merger of Lamar into a newly
formed, wholly owned subsidiary. This merger will be subject
to approval by Lamar's stockholders. The merger will
incorporate certain stock ownership limitations into the
organizational documents of the REIT to ensure that we comply with
the ownership requirements applicable to REITs, namely that five or
fewer individuals (and certain entities) may not own more than 50%
of the value of our stock during the second half of any taxable
year.
Non-REIT E&P Dividend
In accordance with tax rules applicable to REIT conversions,
Lamar is required to distribute its earnings and profits
accumulated through the end of 2013 to stockholders during its 2014
taxable year. Based on its analysis, Lamar estimates that the
aggregate amount of accumulated non-REIT E&P will be
approximately $40 million. Currently, Lamar's Board does not
expect to make a special distribution to its stockholders on
account of its accumulated non‑REIT E&P. We plan to
distribute this amount along with the regular quarterly
distributions to stockholders that Lamar expects to commence during
2014. Lamar anticipates that these distributions will be made
solely in cash.
2014 Financial Guidance
The guidance provided below is based on a number of assumptions
that management believes to be reasonable and reflect our
expectations as of April 23, 2014. Actual results may differ
materially from these estimates as a result of various factors, and
we refer you to the cautionary language regarding "forward looking"
statements included in this press release when considering this
information.
- Projected Earnings Per Diluted Share1: $2.81 to $2.91
- Projected Adjusted Funds From Operations (AFFO) Per Diluted
Share2: $4.03 to $4.13
- 2014 Expected Annual Dividend Per Share (includes non-REIT
E&P distribution of $40 million): $2.50*
*subject to declaration by the Board
of Directors
(1) Calculated before dividends.
(2) See "Non-GAAP Measures" below.
2014 Capital Expenditures
We expect to invest approximately $100 million in total capital
expenditures in 2014, consisting of approximately $45 million
to acquire new assets that we expect will enhance revenues and the
remaining $55 million for maintenance of existing assets and
the acquisition of operating equipment necessary for the
business.
Refinancing Transaction
On April 21, 2014, Lamar Media Corp., our wholly owned
subsidiary, redeemed in full all of its outstanding $400 million in
aggregate principal amount of 7 7/8% Senior Subordinated
Notes due 2018 at a redemption price equal to 103.938 % of the
aggregate principal amount of the notes, together with accrued and
unpaid interest to (but not including) the redemption
date. The total amount paid to redeem the notes was
approximately $416.3 million, which was funded with a combination
of $300 million in new term debt under its senior credit facility,
borrowings under the revolving portion of its senior credit
facility and cash on hand.
Investor Conference Call Information
Lamar is hosting an investor conference call on Wednesday, May
7, 2014 at 10:00 a.m. (central time) to discuss the Company's
results for the first quarter ended March 31, 2014 and answer
questions relating to company operations, including with respect to
the Company's anticipated conversion to a REIT and the 2014
financial guidance included herein.
Instructions for accessing Lamar's conference call are provided
below:
All Callers: |
|
1-334-323-0520 or 1-334-323-9871 |
Passcode: |
|
Lamar |
|
|
|
Replay: |
|
1-334-323-0140 |
Passcode: |
|
39098824 |
Available through
Wednesday, May 14, 2014 at 11:59 p.m. ET |
|
|
Live Webcast: In addition, a live webcast of the conference
call may be assessed on the Investors/Webcasts section of our
website at www.lamar.com.
Webcast
Replay:
www.lamar.com
Available through Wednesday, May 14, 2014 at 11:59 p.m. ET
About Lamar
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.
Non-GAAP Measures
Funds From Operations, Adjusted Funds From Operations and
Adjusted Funds From Operations Per Diluted Share are not measures
of performance under accounting principles generally accepted in
the United States of America ("GAAP"). These measures should
not be considered alternatives to net income or other GAAP figures
as indicators of the Company's financial performance. We
define Funds From Operations as net income before gains or losses
from the sale or disposal of real estate, real estate related
impairment charges and real estate related depreciation,
amortization and accretion, and including adjustments for
(i) non‑controlling interest and (ii) a one‑time non‑cash
tax effect of conversion. We define Adjusted Funds From
Operations as Funds From Operations before (i) straight‑line
revenue and expense, (ii) stock‑based compensation expense,
(iii) the non-cash portion of our tax provision, (iv) non
real estate related depreciation, amortization,
(v) amortization of deferred financing and debt issuance
costs, (vi) loss on debt extinguishment, and adjusted for
(vii) non‑controlling interest, less cash payments related to
capital improvements and cash payments related to corporate capital
expenditures. We define Adjusted Funds From Operations Per
Share as Adjusted Funds From Operations divided by the diluted
weighted average common shares outstanding.
Our management believes that Funds From Operations, Adjusted
Funds From Operations and Adjusted Funds From Operations Per
Diluted Share are useful in evaluating the Company's performance
and provide investors and financial analysts a better understanding
of the Company's core operating results. Our presentations of
these measures may not be comparable to similarly titled measures
used by other companies. See "Calculation of Projected Adjusted
Funds From Operations and Per Share Guidance" below, which provides
reconciliations of each of these measures to the most directly
comparable GAAP measure.
Forward Looking Statements
This press release contains forward-looking statements,
including the statements regarding its consideration of an election
to real estate investment trust status; its ability to complete the
REIT conversion effective for the taxable year beginning January 1,
2014; its intention to distribute accumulated earnings and profits
to stockholders and make regular quarterly distributions to
stockholders in 2014; and its financial guidance for
2014. 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) that Lamar may
fail to quality as a REIT effective for the taxable year beginning
January 1, 2014 or at all, and, if it does quality as a REIT, it
may be unable to maintain that qualification (2) legislative,
administrative, regulatory or other actions affecting REITs,
including positions taken by the IRS; (3) Lamar's significant
indebtedness; (4) the state of the economy and financial
markets generally and the effect of the broader economy on the
demand for advertising; (5) the continued popularity of
outdoor advertising as an advertising medium; (6) Lamar's need
for and ability to obtain additional funding for operations, debt
refinancing or acquisitions; (7) the regulation of the outdoor
advertising industry; (8) the integration of any acquired
companies and Lamar's ability to recognize cost savings or
operating efficiencies as a result of these acquisitions; and
(9) the market for Lamar's 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. 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.
Lamar Advertising's decision to proceed with a REIT election
remains subject to the final approval of its board of
directors. Although Lamar has received its requested private
letter ruling from the IRS, this does not guarantee that Lamar will
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.
Additional Information
Lamar Advertising expects to reorganize its operations in
connection with the proposed REIT conversion and as part of this
reorganization it plans to effect a merger with and into a wholly
owned subsidiary of Lamar Advertising, which will be called Lamar
Advertising REIT Company. Lamar Advertising will file a proxy
statement to be used in connection with the stockholder vote on
this merger. That proxy statement will be contained in a
registration statement on Form S-4 to be filed by Lamar Advertising
REIT Company, and both companies will file other relevant documents
concerning the proposed merger transaction with the Securities and
Exchange Commission (SEC). INVESTORS ARE URGED TO READ THE
FORM S-4 AND PROXY STATEMENT (INCLUDING ALL AMENDMENTS AND
SUPPLEMENTS THERETO) WHEN THEY BECOME AVAILABLE AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. You will be
able to obtain documents free of charge at the website maintained
by the SEC at www.sec.gov. In addition, you may obtain documents
filed with the SEC by Lamar free of charge by contacting Secretary,
5321 Corporate Blvd., Baton Rouge, LA 70808.
Lamar Advertising, its directors and executive officers and
certain other members of management and employees may be deemed to
be participants in the solicitation of proxies from Lamar
Advertising's stockholders in connection with the
merger. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of
proxies in connection with the merger will be included in the Form
S-4 and proxy statement when they become
available. Information about the directors and executive
officers of Lamar Advertising and their ownership of Lamar
Advertising stock is set forth in the proxy statement for Lamar's
2013 Annual Meeting of Stockholders. Investors may obtain
additional information regarding the interests of such participants
by reading the Form S-4 and proxy statement for the merger when
they become available.
Investors should read the Form S-4 and proxy statement carefully
when they become available before making any voting or investment
decisions.
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval.
Calculation of Projected Adjusted Funds From Operations
and Per Share Guidance
|
For the Year
Ended December 31, 2014 |
|
Low End of
Guidance |
High End of
Guidance |
Net income |
$ 268,731 |
$ 278,307 |
Real estate related depreciation and
amortization |
230,501 |
230,501 |
Losses from real estate |
(4,000) |
(4,000) |
Adjustment for non-controlling interest |
1,000 |
1,000 |
Adjustment to eliminate non-cash tax effect
of conversion |
(119,000) |
(119,000) |
|
|
|
Funds From Operations |
$ 377,232 |
$ 386,808 |
|
|
|
Straight-line revenue |
1,300 |
1,300 |
Straight-line expense |
1,200 |
1,200 |
Stock-based compensation expense |
24,400 |
24,400 |
Non-cash tax expense (benefit) |
– |
– |
Non-real estate related depreciation and
amortization |
12,090 |
12,090 |
Amortization of deferred financing and debt
issuance costs |
4,405 |
4,405 |
Loss on debt extinguishment |
20,754 |
20,754 |
Capitalized expenditures—maintenance |
(55,000) |
(55,000) |
Adjustment for non-controlling interest |
(1,000) |
(1,000) |
|
|
|
Adjusted Funds From Operations |
$ 385,381 |
$ 394,957 |
|
|
|
Divided by weighted average diluted shares
outstanding |
95,670 |
95,670 |
Adjusted Funds From Operations Per Share |
$ 4.03 |
$ 4.13 |
CONTACT: Keith A. Istre
Chief Financial Officer
(225) 926-1000
KI@lamar.com
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