By Zacks Equity Research

 

Lamar Advertising Company (LAMR) reported its financial results for the second quarter 2012 on August 8. Earnings per share stood at 15 cents compared with 12 cents in the year-ago quarter and a loss of 25 cents in the previous quarter.

Second quarter results were in line with the Zacks consensus estimate of 15 cents per share.

Pro forma net revenue jumped 3.6% year over year to $304.9 million in the quarter and registered a reported growth of 3.9%. The result was slightly above management's revenue guidance of $303 million and pro forma growth forecast of 3.0%.

Direct advertising and G&A expenses in the quarter were $154.7 million, up 2.7% year over year on a pro forma basis. As reported, operating income modestly increased 8.5% year over year to $64.5 million.

Interest expense dipped 10.7% year over year to $38.6 million in the quarter due to a lower debt level. Adjusted EBITDA stood at $138.2 million, up roughly 3.6% year over year.

Balance Sheet

Exiting the second quarter, Lamar Advertising's cash and cash equivalents more than doubled to $98.9 million as compared to $35.9 million in the previous quarter. Total debt, including current maturities increased slightly to $2,189.7 million from $2,187.6 million in the previous quarter.

Cash Flow

In the second quarter 2012, cash flow from operating activities was approximately $97.3 million, up 15.0% year over year. Capital spending totaled $29.8 million, up 15.3% year over year, of which the company expended roughly 74.2% on upgrading its billboards business while the rest was spent for logo, transit, land and buildings, and operating equipment businesses.

Free cash flow was $73.7 million, up from $68.2 million in the year-ago quarter.

Outlook
For the third quarter of 2012, management expects net revenue to be within the $303 million-$306 million range and up roughly 1% to 2% on a pro forma basis.

The company also communicated its intention of attaining a REIT status, during its second quarter conference call. It also expressed uncertainty as to the timing of a REIT election.

Lamar Advertising Company is one of the largest owners and operators of outdoor advertising structures in the U.S. It provides advertising services to restaurants, retailers, automotive, real estate, health care, gaming, service, hotel and motel, telecommunication, and amusement industries, including entertainments and sports. The company faces stiff competition from Clear Channel Outdoor Holdings Inc. (CCO) and CBS Outdoor.

The stock currently bears a Zacks #2 Rank, implying a short-term "buy rating.

 

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