This report contains forward-looking statements. Actual results could differ materially from those anticipated by the forward-looking statements due to risks and uncertainties described in the section of this combined report on Form 10-Q entitled "Note Regarding Forward-Looking Statements" and in Item 1A to the 2020 Combined Form 10-K filed on February 26 2021, and as such risk factors may be further updated or supplemented, from time to time, in our future combined Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. You should carefully consider each of these risks and uncertainties in evaluating the Company's andLamar Media's financial conditions and results of operations. Investors are cautioned 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 the Company undertakes no obligation to update or revise the statements, except as may be required by law.LAMAR ADVERTISING COMPANY The following is a discussion of the consolidated financial condition and results of operations of the Company for the three and six months endedJune 30, 2021 and 2020. This discussion should be read in conjunction with the consolidated financial statements of the Company and the related notes thereto. Overview The Company's net revenues are derived primarily from the rental of advertising space on outdoor advertising displays owned and operated by the Company. Revenue growth is based on many factors that include the Company's ability to increase occupancy of its existing advertising displays; raise advertising rates; and acquire new advertising displays and its operating results are therefore affected by general economic conditions, as well as trends in the advertising industry. Advertising spending is particularly sensitive to changes in general economic conditions which affect the rates that the Company is able to charge for advertising on its displays and its ability to maximize advertising sales or occupancy on its displays. Impact of the COVID-19 Pandemic The unprecedented and rapid spread of COVID-19 and the related government-imposed restrictions and social distancing measures implemented throughout the world have reduced demand for out-of-home advertising. Beginning in lateMarch 2020 , large public events were cancelled, and governments began imposing restrictions on non-essential activities, which in turn led to advertisers suspending, delaying or cancelling their advertising campaigns. We observed an improvement in customer activity beginning inJune 2020 and throughJune 2021 as the government-imposed restrictions on travel were eased and more of the population became vaccinated. Accordingly, we are not actively pursuing additional cost saving measures, and are resuming acquisition activities and spending on capital projects. However, we cannot predict the length or strength of the recovery in advertising demand due to the continued and potential impact of the pandemic on the overallU.S. and global economy, particularly in light of new and variant strains of the virus and the plateau of vaccination rates, and new or renewed government-imposed restrictions on travel that may be enacted in the future. While some of our corporate, front office and sales workforce continues to work from home, a large majority have returned to their offices while adhering to theCenters for Disease Control and Prevention and state and local governmental guidelines and recommendations. The impacts of working from home have been minimal on productivity. Also, while working from home has minimally impacted our processes, there have been no material impacts to our internal control environment. We continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners and stockholders. Acquisitions and capital expenditures Historically, the Company has made strategic acquisitions of outdoor advertising assets to increase the number of outdoor advertising displays it operates in existing and new markets. The Company continues to evaluate and pursue strategic acquisition opportunities as they arise. The Company has financed its historical acquisitions and intends to finance any future acquisition activity from available cash, borrowings under its senior credit facility or the issuance of debt or equity securities. See "Liquidity and Capital Resources-Sources of Cash" for more information. During the six months endedJune 30, 2021 , the Company completed acquisitions for a total cash purchase price of approximately$27.2 million . See Uses of Cash - Acquisitions for more information. 34 -------------------------------------------------------------------------------- Table of Contents The Company's business requires expenditures for maintenance and capitalized costs associated with the construction of new billboard displays, the entrance into and renewal of logo sign and transit contracts, and the purchase of real estate and operating equipment. The following table presents a breakdown of capitalized expenditures for the three and six months endedJune 30, 2021 and 2020: Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Total capital expenditures: Billboard - traditional$ 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
Non-GAAP Financial Measures Our management reviews our performance by focusing on several key performance indicators not prepared in conformity with Generally Accepted Accounting Principles inthe United States ("GAAP"). We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for, their most directly comparable GAAP financial measures. Included in our analysis of our results of operations are discussions regarding earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), funds from operations ("FFO"), as defined by theNational Association of Real Estate Investment Trusts , adjusted funds from operations ("AFFO") and acquisition-adjusted net revenue. We define adjusted EBITDA as net income before income tax expense (benefit), interest expense (income), loss (gain) on extinguishment of debt and investments, stock-based compensation, depreciation and amortization, loss (gain) on disposition of assets and investments and capitalized contract fulfillment costs, net. FFO is defined as net income before gains or losses from the sale or disposal of real estate assets and investments and real estate related depreciation and amortization and including adjustments to eliminate unconsolidated affiliates and non-controlling interest. We define AFFO as FFO before (i) straight-line income and expense; (ii) capitalized contract fulfillment costs, net (iii) stock-based compensation expense; (iv) non-cash portion of tax expense (benefit); (v) non-real estate related depreciation and amortization; (vi) amortization of deferred financing costs; (vii) loss on extinguishment of debt; (viii) non-recurring infrequent or unusual losses (gains); (ix) less maintenance capital expenditures; and (x) an adjustment for unconsolidated affiliates and non-controlling interest. Acquisition-adjusted net revenue adjusts our net revenue for the prior period by adding to it the net revenue generated by the acquired assets before our acquisition of these assets for the same time frame that those assets were owned in the current period. In calculating acquisition-adjusted revenue, therefore, we include revenue generated by assets that we did not own in the period but acquired in the current period. We refer to the amount of pre-acquisition revenue generated by the acquired assets during the prior period that corresponds with the current period in which we owned the assets (to the extent within the period to which this report relates) as "acquisition net revenue". In addition, we also adjust the prior period to subtract revenue generated by the assets that have been divested since the prior period and, therefore, no revenue derived from those assets is reflected in the current period. Adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue are not intended to replace net income or any other performance measures determined in accordance with GAAP. Neither FFO nor AFFO represent cash flows from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities as a measure of liquidity or of funds available to fund our cash needs, including our ability to make cash distributions. Rather, adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue are presented as we believe each is a useful indicator of our current operating performance. We believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for purposes of decision-making and 35 -------------------------------------------------------------------------------- Table of Contents for evaluating our core operating results; (2) adjusted EBITDA is widely used in the industry to measure operating performance as depreciation and amortization may vary significantly among companies depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (3) acquisition-adjusted net revenue is a supplement to net revenue to enable investors to compare period-over-period results on a more consistent basis without the effects of acquisitions and divestitures, which reflects our core performance and organic growth (if any) during the period in which the assets were owned and managed by us; (4) adjusted EBITDA, FFO and AFFO each provide investors with a meaningful measure for evaluating our period-to-period operating performance by eliminating items that are not operational in nature; and (5) each provides investors with a measure for comparing our results of operations to those of other companies. Our measurement of adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue to net income, the most directly comparable GAAP measure, have been included herein. RESULTS OF OPERATIONS Six months endedJune 30, 2021 compared to six months endedJune 30, 2020 Net revenues increased$61.7 million or 8.2% to$815.9 million for the six months endedJune 30, 2021 from$754.2 million for the same period in 2020. This increase was primarily attributable to an increase in billboard net revenues of$71.9 million offset by a decrease in transit net revenues, due to the effects of the ongoing COVID-19 pandemic, of$6.9 million over the same period in 2020. For the six months endedJune 30, 2021 , there was a$66.4 million increase in net revenues as compared to acquisition-adjusted net revenue for the six months endedJune 30, 2020 , which represents an increase of 8.9%. See "Reconciliations" below. The$66.4 million increase in revenue is primarily due to an increase of$70.6 million in billboard net revenues offset by a decrease in transit net revenues, due to the effects of the ongoing COVID-19 pandemic, of$4.6 million over the same period in 2020. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, decreased$9.9 million , or 2.1%, to$458.5 million for the six months endedJune 30, 2021 from$468.4 million in the same period in 2020. The$9.9 million decrease over the prior year is comprised of a$13.2 million decrease in total direct, general and administrative and corporate expenses (excluding stock-based compensation) primarily related to the operations of our outdoor advertising assets, offset by a$3.3 million increase in stock-based compensation. Depreciation and amortization expense decreased$4.9 million to$121.4 million for the six months endedJune 30, 2021 as compared to$126.3 million for the same period in 2020. For the six months endedJune 30, 2021 , the Company recognized a gain on disposition of assets of$1.9 million primarily resulting from transactions related to the sale of billboard locations and displays. Due to the above factors, operating income increased by$74.9 million to$237.9 million for the six months endedJune 30, 2021 as compared to$163.0 million for the same period in 2020. The Company recognized a loss on debt extinguishment of$21.6 million during the six months endedJune 30, 2021 , a$3.4 million increase over the same period in 2020. The loss on debt extinguishment during the six months endedJune 30, 2021 relates to the early repayment of our 5 3/4% Senior Notes during the period. Interest expense decreased$17.5 million for the six months endedJune 30, 2021 to$54.5 million as compared to$72.0 million for the six months endedJune 30, 2020 . The decrease is primarily related to the Company's debt transactions completed in 2020 and 2021, as well as a reduction in our senior credit facility interest rates. The increase in operating income and decrease in interest expense, offset by the increase in loss on extinguishment of debt, resulted in an$88.9 million increase in net income before income taxes. The effective tax rate for the six months endedJune 30, 2021 was 2.6%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items. As a result of the above factors, the Company recognized net income for the six months endedJune 30, 2021 of$157.9 million , as compared to net income of$71.9 million for the same period in 2020. 36 -------------------------------------------------------------------------------- Table of Contents Reconciliations: Because acquisitions occurring afterDecember 31, 2019 have contributed to our net revenue results for the periods presented, we provide 2020 acquisition-adjusted net revenue, which adjusts our 2020 net revenue for the six months endedJune 30, 2020 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the six months endedJune 30, 2021 . Reconciliations of 2020 reported net revenue to 2020 acquisition-adjusted net revenue for the six months endedJune 30 , as well as a comparison of 2020 acquisition-adjusted net revenue to 2021 reported net revenue for the six months endedJune 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Six Months Ended June 30, 2021 2020 (in thousands) Reported net revenue$ 815,933 $ 754,221 Acquisition net revenue - (4,729) Adjusted totals$ 815,933 $ 749,492 Key Performance Indicators Net Income/Adjusted EBITDA (in thousands) Six Months Ended Amount of June 30, Increase Percent 2021 2020 (Decrease) Increase (Decrease) Net income$ 157,938 $ 71,922 $ 86,016 119.6 % Income tax expense 4,210 1,296 2,914 Loss on debt extinguishment 21,604 18,184 3,420 Interest expense (income), net 54,157 71,621 (17,464) Gain on disposition of assets (1,896) (3,519) 1,623 Depreciation and amortization 121,371 126,311 (4,940) Capitalized contract fulfillment costs, net (900) 1,036 (1,936) Stock-based compensation expense 9,464 6,162 3,302 Adjusted EBITDA$ 365,948 $ 293,013 $ 72,935 24.9 % Adjusted EBITDA for the six months endedJune 30, 2021 increased 24.9% to$365.9 million . The increase in adjusted EBITDA was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) of$75.5 million , as well as a decrease in total general and administrative and corporate expenses of$1.3 million , excluding the impact of stock-based compensation expense. 37 --------------------------------------------------------------------------------
Table of Contents Net Income/FFO/AFFO (in thousands) Six Months Ended Amount of Percent June 30, Increase Increase 2021 2020 (Decrease) (Decrease) Net income$ 157,938 $ 71,922 $ 86,016 119.6 % Depreciation and amortization related to real estate 115,815 120,453 (4,638) Gain from sale or disposal of real estate, net of tax (1,795) (3,098) 1,303
Adjustments for unconsolidated affiliates and
non-controlling interest 285 389 (104) FFO$ 272,243 $ 189,666 $ 82,577 43.5 % Straight line expense 1,729 1,733 (4) Capitalized contract fulfillment costs, net (900) 1,036 (1,936) Stock-based compensation expense 9,464 6,162 3,302 Non-cash portion of tax provision 1,743 (1,313) 3,056 Non-real estate related depreciation and amortization 5,556 5,858 (302) Amortization of deferred financing costs 2,962 2,878 84 Loss on extinguishment of debt 21,604 18,184 3,420 Capital expenditures - maintenance (19,603) (14,492) (5,111)
Adjustments for unconsolidated affiliates and
non-controlling interest (285) (389) 104 AFFO$ 294,513 $ 209,323 $ 85,190 40.7 % FFO for the six months endedJune 30, 2021 increased from$189.7 million in 2020 to$272.2 million for the same period in 2021, an increase of 43.5%. AFFO for the six months endedJune 30, 2021 increased 40.7% to$294.5 million as compared to$209.3 million for the same period in 2020. The increase in AFFO was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) as well as a decrease in total general and administrative and corporate expenses (excluding the effect of stock-based compensation expense). Three months endedJune 30, 2021 compared to three months endedJune 30, 2020 Net revenues increased$97.4 million or 28.0% to$445.1 million for the three months endedJune 30, 2021 from$347.7 million for the same period in 2020. This increase was primarily attributable to an increase in billboard and transit net revenues of$93.2 million and$5.6 million , respectively, over the same period in 2020. For the three months endedJune 30, 2021 , there was a$99.7 million increase in net revenues as compared to acquisition-adjusted net revenue for the three months endedJune 30, 2020 , which represents an increase of 28.9%. See "Reconciliations" below. The$99.7 million increase in revenue is primarily due to a$92.5 million and$6.7 million increase in billboard and transit net revenues, respectively. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, increased$18.7 million , or 8.6%, to$236.9 million for the three months endedJune 30, 2021 from$218.2 million in the same period in 2020. The$18.7 million increase over the prior year is comprised of a$15.6 million increase in total direct, general and administrative and corporate expenses (excluding stock-based compensation) primarily related to the operations of our outdoor advertising assets and a$3.1 million increase in stock-based compensation. Depreciation and amortization expense decreased$3.4 million to$60.6 million for the three months endedJune 30, 2021 as compared to$64.0 million for the same period in 2020. For the three months endedJune 30, 2021 , the Company recognized a gain on disposition of assets of$1.5 million primarily resulting from transactions related to billboard locations. Due to the above factors, operating income increased by$82.5 million to$149.0 million for the three months endedJune 30, 2021 as compared to$66.5 million for the same period in 2020. 38 -------------------------------------------------------------------------------- Table of Contents Interest expense decreased$9.1 million for the three months endedJune 30, 2021 to$26.4 million as compared to$35.4 million for the three months endedJune 30, 2020 . The decrease is primarily related to the Company's debt transactions completed in 2020 and 2021, as well as a reduction in our senior credit facility interest rates. The increase in operating income and decrease in interest expense resulted in a$91.6 million increase in net income before income taxes. The effective tax rate for the three months endedJune 30, 2021 was 2.6%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items. As a result of the above factors, the Company recognized net income for the three months endedJune 30, 2021 of$119.6 million , as compared to net income of$31.4 million for the same period in 2020. Reconciliations Because acquisitions occurring afterDecember 31, 2019 have contributed to our net revenue results for the periods presented, we provide 2020 acquisition-adjusted net revenue, which adjusts our 2020 net revenue for the three months endedJune 30, 2020 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the three months endedJune 30, 2021 . Reconciliations of 2020 reported net revenue to 2020 acquisition-adjusted net revenue for the three months endedJune 30 , as well as a comparison of 2020 acquisition-adjusted net revenue to 2021 reported net revenue for the three months endedJune 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Three Months Ended June 30, 2021 2020 (in thousands) Reported net revenue$ 445,052 $ 347,652 Acquisition net revenue - (2,328) Adjusted totals$ 445,052 $ 345,324 Key Performance Indicators Net Income/Adjusted EBITDA (in thousands) Three Months Ended Amount of June 30, Increase Percent Increase 2021 2020 (Decrease) (Decrease) Net income$ 119,609 $ 31,429 $ 88,180 280.6 % Income tax expense (benefit) 3,200 (240) 3,440 Loss on debt extinguishment - 5 (5) Interest expense (income), net 26,177 35,258 (9,081) Gain on disposition of assets (1,481) (1,015) (466) Depreciation and amortization 60,622 63,998 (3,376) Capitalized contract fulfillment costs, net (400) 1,036 (1,436) Stock-based compensation expense 5,789 2,725 3,064 Adjusted EBITDA$ 213,516 $ 133,196 $ 80,320 60.3 % Adjusted EBITDA for the three months endedJune 30, 2021 increased 60.3% to$213.5 million . The increase in adjusted EBITDA was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) of$92.4 million , and was offset by an increase in total general and administrative and corporate expenses of$9.3 million , excluding the impact of stock-based compensation expense. 39 -------------------------------------------------------------------------------- Table of Contents Net Income/FFO/AFFO (in thousands) Three Months Ended Amount of June 30, Increase Amount of Increase 2021 2020 (Decrease) (Decrease) Net income$ 119,609 $ 31,429 $ 88,180 280.6 % Depreciation and amortization related to real estate 57,852 61,089 (3,237) Gain from sale or disposal of real estate, net of tax (1,412) (555) (857) Adjustments for unconsolidated affiliates and non-controlling interest 132 140 (8) FFO$ 176,181 $ 92,103 $ 84,078 91.3 % Straight line expense 954 679 275 Capitalized contract fulfillment costs, net (400) 1,036 (1,436) Stock-based compensation expense 5,789 2,725 3,064 Non-cash portion of tax provision 2,763 (894) 3,657 Non-real estate related depreciation and amortization 2,770 2,909 (139) Amortization of deferred financing costs 1,591 1,500 91 Loss on extinguishment of debt - 5 (5) Capital expenditures - maintenance (11,699) (3,863) (7,836) Adjustments for unconsolidated affiliates and non-controlling interest (132) (140) 8 AFFO$ 177,817 $ 96,060 $ 81,757 85.1 % FFO for the three months endedJune 30, 2021 increased from$92.1 million in 2020 to$176.2 million in 2021, an increase of 91.3%. AFFO for the three months endedJune 30, 2021 increased 85.1% to$177.8 million as compared to$96.1 million for the same period in 2020. The increase in AFFO was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized fulfillment costs, net) offset by an increase in total general and administrative and corporate expenses (excluding the effect of stock-based compensation expense). LIQUIDITY AND CAPITAL RESOURCES Overview The Company has historically satisfied its working capital requirements with cash from operations and borrowings under the senior credit facility. The Company's wholly owned subsidiary,Lamar Media Corp. , is the borrower under the senior credit facility and maintains all corporate operating cash balances. Any cash requirements of the Company, therefore, must be funded by distributions fromLamar Media . Sources of Cash Total Liquidity. As ofJune 30, 2021 we had$856.8 million of total liquidity, which is comprised of$68.7 million in cash and cash equivalents and$735.6 million of availability under the revolving portion ofLamar Media's senior credit facility and$52.5 million of availability under the Accounts Receivable Securitization Program. We expect our total liquidity to be adequate for the Company to meet its operational requirements for the next twelve months. We will continue to monitor the impacts of the COVID-19 pandemic, particularly in light of new and variant strains of the virus and the plateau of vaccination rates, and, if necessary, may access the debt and/or equity markets for additional liquidity. We are currently in compliance with the maintenance covenant included in the senior credit facility and we would remain in compliance after giving effect to borrowing the full amount available to us under the revolving portion of the senior credit facility. As ofJune 30, 2021 andDecember 31, 2020 , the Company had a working capital deficit of$196.6 million and$167.3 million , respectively. The decrease in working capital of$29.3 million is primarily due to a decrease in cash and cash equivalents of$52.8 million offset by an increase in receivables, net of$16.6 million as ofJune 30, 2021 . Cash Generated by Operations. For the six months endedJune 30, 2021 and 2020, our cash provided by operating activities was$285.3 million and$210.7 million , respectively. The increase in cash provided by operating activities for the six months endedJune 30, 2021 over the same period in 2020 primarily relates to an increase in revenues of$61.7 million . We expect to generate cash flows from operations during 2021 in excess of our cash needs for operations, capital expenditures and dividends, 40 -------------------------------------------------------------------------------- Table of Contents as described herein. However, we will continue to monitor the impacts of the COVID-19 pandemic, particularly in light of new and variant strains of the virus and the plateau of vaccination rates, and if we are not able to generate sufficient cash flows from operations during 2021 to meet our cash needs, we believe we have sufficient liquidity available under our revolving credit facility to meet our operating cash needs for the next twelve months. Accounts Receivable Securitization Program. OnDecember 18, 2018 , we entered into the Accounts Receivable Securitization Program. The Accounts Receivable Securitization Program provides up to$175.0 million in borrowing capacity, plus an accordion feature that would permit the borrowing capacity to be increased by up to$125.0 million . Borrowing capacity under the Accounts Receivable Securitization Program is limited to the availability of eligible accounts receivable collateralizing the borrowings under the agreements governing the Accounts Receivable Securitization Program. In connection with the Accounts Receivable Securitization Program,Lamar Media and certain of its subsidiaries (such subsidiaries, the "Subsidiary Originators") sell and/or contribute their existing and future accounts receivable and certain related assets to one of two special purpose subsidiaries,Lamar QRS Receivables, LLC (the "QRS SPV") andLamar TRS Receivables, LLC (the "TRS SPV" and together with the QRS SPV the "Special Purpose Subsidiaries"), each of which is a wholly-owned subsidiary ofLamar Media . Existing and future accounts receivable relating toLamar Media and its qualified REIT subsidiaries will be sold and/or contributed to the QRS SPV and existing and future accounts receivable relating toLamar Media's taxable REIT subsidiaries will be sold and/or contributed to the TRS SPV. Each of the Special Purpose Subsidiaries has granted the lenders party to the Accounts Receivable Securitization Program a security interest in all of its assets, which consist of the accounts receivable and related assets sold or contributed to them, as described above, in order to secure the obligations of the Special Purpose Subsidiaries under the agreements governing the Accounts Receivable Securitization Program. Pursuant to the Accounts Receivable Securitization Program,Lamar Media has agreed to service the accounts receivable on behalf of the two Special Purpose Subsidiaries for a fee.Lamar Media has also agreed to guaranty its performance in its capacity as servicer and originator, as well as the performance of the Subsidiary Originators, of their obligations under the agreements governing the Account Receivable Securitization Program. None ofLamar Media , the Subsidiary Originators or the Special Purpose Subsidiaries guarantees the collectability of the receivables under the Accounts Receivable Securitization Program. In addition, each of the Special Purpose Subsidiaries is a separate legal entity with its own separate creditors who will be entitled to access the assets of such Special Purpose Subsidiary before the assets become available toLamar Media . Accordingly, the assets of the Special Purpose Subsidiaries are not available to pay creditors ofLamar Media or any of its subsidiaries, although collections from receivables in excess of the amounts required to repay the lenders and the other creditors of the Special Purpose Subsidiaries may be remitted toLamar Media . OnMay 24, 2021 ,Lamar Media and the Special Purpose Subsidiaries entered into the Fifth Amendment (the "Fifth Amendment") to the Accounts Receivable Securitization Program, as amended. The Fifth Amendment extends the maturity date of the Accounts Receivable Securitization Program toJuly 21, 2024 . Additionally, the Fifth Amendment decreases the Minimum Funding Threshold which, as amended, requires the Special Purpose Subsidiaries to maintain minimum borrowings under the Accounts Receivable Securitization Program on any day equal to the lesser of (i) 50.00% of the aggregate Commitment of all Lenders or (ii) the Borrowing Base, provided that the Minimum Funding Threshold shall be zero on any day that is a Minimum Funding Threshold Holiday which, as amended, provides for an annual holiday from the requirement of up to sixty days per year. The Fifth Amendment also provides for updated LIBOR replacement procedures. As ofJune 30, 2021 , there was$122.5 million in outstanding aggregate borrowings under the Accounts Receivable Securitization Program.Lamar Media had$52.5 million of unused availability under the Accounts Receivable Securitization Program as ofJune 30, 2021 . The Accounts Receivable Securitization Program will mature onJuly 21, 2024 .Lamar Media may amend the facility to extend the maturity date, enter into a new securitization facility with a different maturity date, or refinance the indebtedness outstanding under the Accounts Receivable Securitization Program using borrowings under its senior credit facility or from other financing sources. "At-the-Market" Offering Program. OnMay 1, 2018 , the Company entered into an equity distribution agreement (the "Sales Agreement") withJ.P. Morgan Securities LLC ,Wells Fargo Securities LLC andSunTrust Robinson Humphrey, Inc. as our sales agents. Under the terms of the Sales Agreement, the Company could have, from time to time, issued and sold shares of its Class A common stock, having an aggregate offering price of up to$400.0 million through the sales agents as either agents or principals. The Sales Agreement expired by its terms onMay 1, 2021 . The Company did not issue any shares under this program in 2021. OnJune 21, 2021 , the Company entered into a new equity distribution agreement (the "2021 Sales Agreement"), withJ.P. Morgan Securities LLC ,Wells Fargo Securities LLC ,Truist Securities, Inc. ,SMBC Nikko Securities America, Inc. andScotia Capital (USA) Inc. as our sales agents (each a "Sales Agent", and collectively, the "Sales Agents"), which replaced the prior 41 -------------------------------------------------------------------------------- Table of Contents Sales Agreement with substantially similar terms. Under the terms of the 2021 Sales Agreement, the Company may, from time to time, issue and sell shares of its Class A common stock, having an aggregate offering price of up to$400.0 million through the Sales Agents as either agents or principals. Sales of the Class A common stock, if any, may be made in negotiated transactions or transactions that are deemed to be "at-the-market offerings" as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Global Select Market and any other existing trading market for the Class A common stock, or sales made to or through a market maker other than on an exchange. The Company has no obligation to sell any of the Class A common stock under the 2021 Sales Agreement and may at any time suspend solicitations and offers under the 2021 Sales Agreement. The Company intends to use the net proceeds, if any, from the sale of the Class A common stock pursuant to the 2021 Sales Agreement for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness, working capital, capital expenditures, acquisition of outdoor advertising assets and businesses and other related investments. The Company did not issue any shares under this program from its inception throughJune 30, 2021 . Shelf Registration Statement. OnAugust 6, 2018 , the Company filed an automatically effective shelf registration statement (No. 333-226614) that registered the offer and sale of an indeterminate amount of additional shares of our Class A common stock. In anticipation of the upcoming expiration of the existing shelf registration statement inAugust 2021 , onJune 21, 2021 , the Company filed a new automatically effective shelf registration statement (No. 333-257243) that allowsLamar Advertising to offer and sell an indeterminate amount of additional shares of its Class A common stock on similar terms as the prior registration statement. During the six months endedJune 30, 2021 , the Company did not issue any shares under either shelf registration. Credit Facilities. OnFebruary 6, 2020 ,Lamar Media entered into a Fourth Amended and Restated Credit Agreement (the "Fourth Amended and Restated Credit Agreement") with certain ofLamar Media's subsidiaries as guarantors,JPMorgan Chase Bank, N.A . as administrative agent and the lenders party thereto, under which the parties agreed to amend and restateLamar Media's existing senior credit facility. The Fourth Amended and Restated Credit Agreement amended and restated the Third Amended and Restated Credit Agreement dated as ofMay 15, 2017 , as amended (the "Third Amended and Restated Credit Agreement"). OnJuly 2, 2021 ,Lamar Media entered into Amendment No. 1 (the "Amendment"), to the Fourth Amended and Restated Credit Agreement. The Amendment amends the definition of "Subsidiary" to exclude each ofLamar Partnering Sponsor LLC andLamar Partnering Corporation and any of their subsidiaries (collectively, the "Lamar Partnering Entities") such that, after the giving effect to the Amendment, none of the Lamar Partnering Entities are subject to the Fourth Amended and Restated Credit Agreement covenants and reporting requirements, but any investment byLamar Media in any of the Lamar Partnering Entities would be subject to the Fourth Amended and Restated Credit Agreement covenants. The Amendment also amends the definition of "EBITDA" to replace the existing calculation with a net income-based calculation, which excludes the income of non-Subsidiary entities such as the Lamar Partnering Entities, except to the extent that income of such entities is received byLamar Media in the form of dividends or distributions. The senior credit facility, as established by the Fourth Amended and Restated Credit Agreement (the "senior credit facility"), consists of (i) a new$750.0 million senior secured revolving credit facility which will mature onFebruary 6, 2025 (the "revolving credit facility"), (ii) a new$600.0 million Term B loan facility (the "Term B loans") which will mature onFebruary 6, 2027 , and (iii) an incremental facility (the "Incremental Facility") pursuant to whichLamar Media may incur additional term loan tranches or increase its revolving credit facility subject to a pro forma secured debt ratio calculated as described under "Restrictions under Senior Credit Facility" of 4.50 to 1.00, as well as certain other conditions including lender approval.Lamar Media borrowed all$600.0 million in Term B loans onFebruary 6, 2020 . The entire amount of the Term B loans will be payable at maturity. The Term B loans bear interest at rates based on the Adjusted LIBO Rate ("Eurodollar term loans") or the Adjusted Base Rate ("Base Rate term loans"), atLamar Media's option. Eurodollar term loans bear interest at a rate per annum equal to the Adjusted LIBO Rate plus 1.50%. Base Rate term loans bear interest at a rate per annum equal to the Adjusted Base Rate plus 0.50%. The revolving credit facility bears interest at rates based on the Adjusted LIBO Rate ("Eurodollar revolving loans") or the Adjusted Base Rate ("Base Rate revolving loans"), atLamar Media's option. Eurodollar revolving loans bear interest at a rate per annum equal to the Adjusted LIBO Rate plus 1.50% (or the Adjusted LIBO Rate plus 1.25% at any time the Total Debt Ratio is less than or equal to 3.25 to 1). Base Rate revolving loans bear interest at a rate per annum equal to the Adjusted Base Rate plus 0.50% (or the Adjusted Base Rate plus 0.25% at any time the total debt ratio is less than or equal to 3.25 to 1). The guarantees, covenants, events of default and other terms of the senior credit facility apply to the Term B loans and revolving credit facility. 42 -------------------------------------------------------------------------------- Table of Contents As ofJune 30, 2021 the aggregate balance outstanding under the senior credit facility was$600.0 million , consisting of$600.0 million in Term B loans aggregate principal balance and no outstanding borrowings under our revolving credit facility.Lamar Media had approximately$735.6 million of unused capacity under the revolving credit facility. Note Offerings. OnJanuary 22, 2021 ,Lamar Media completed, an institutional private placement of$550.0 million in aggregate principal amount of 3 5/8% Senior Notes due 2031 (the "3 5/8% Senior Notes"). The institutional private placement onJanuary 22, 2021 resulted in net proceeds toLamar Media of approximately$542.5 million .Lamar Media used the proceeds of this offering, together with cash on hand and borrowings under the revolving credit facility and Accounts Receivable Securitization Program, to redeem all of its outstanding$650.0 million aggregate principal amount 5 3/4% Senior Notes due 2026. See Uses of Cash- Note Redemption for more information. Factors Affecting Sources of Liquidity Internally Generated Funds. The key factors affecting internally generated cash flow are general economic conditions, specific economic conditions in the markets where the Company conducts its business and overall spending on advertising by advertisers. We expect to generate cash flows from operations during 2021 in excess of our cash needs for operations, capital expenditures and dividends, as described herein. However, we will continue to monitor the impacts of the COVID-19 pandemic, particularly in light of new and variant strains of the virus and the plateau of vaccination rates, and if we are not able to generate sufficient cash flows from operations during 2021 to meet our cash needs we believe we have sufficient liquidity available under our revolving credit facility to meet our operating cash needs for the next twelve months.Credit Facilities and Other Debt Securities . The Company andLamar Media must comply with certain covenants and restrictions related to the senior credit facility, its outstanding debt securities and its Accounts Receivable Securitization Program.Restrictions Under Debt Securities . The Company andLamar Media must comply with certain covenants and restrictions related to its outstanding debt securities. Currently, Lamar Media has outstanding the$600.0 million 3 3/4% Senior Notes issuedFebruary 2020 , the$550.0 million 4% Senior Notes issuedFebruary 2020 and August 2020, the$400.0 million 4 7/8% Senior Notes issued in May 2020 and the$550.0 million 3 5/8% Senior Notes issued in January 2021. The indentures relating toLamar Media's outstanding notes restrict its ability to incur additional indebtedness, but permit the incurrence of indebtedness (including indebtedness under the senior credit facility), (i) if no default or event of default would result from such incurrence and (ii) if after giving effect to any such incurrence, the leverage ratio (defined as the sum of (x) total consolidated debt plus (y) the aggregate liquidation preference of any preferred stock ofLamar Media's restricted subsidiaries to trailing four fiscal quarter EBITDA (as defined in the indentures)) would be less than 7.0 to 1.0. Currently,Lamar Media is not in default under the indentures of any of its outstanding notes and, therefore, would be permitted to incur additional indebtedness subject to the foregoing provision. In addition to debt incurred under the provisions described in the preceding paragraph, the indentures relating toLamar Media's outstanding notes permitLamar Media to incur indebtedness pursuant to the following baskets: •up to$2.0 billion of indebtedness under the senior credit facility; •indebtedness outstanding on the date of the indentures or debt incurred to refinance outstanding debt; •inter-company debt betweenLamar Media and its restricted subsidiaries or between restricted subsidiaries; •certain purchase money indebtedness and capitalized lease obligations to acquire or lease property in the ordinary course of business that cannot exceed the greater of$50.0 million or 5% ofLamar Media's net tangible assets; •additional debt not to exceed$75.0 million ; and •up to$500.0 million of permitted securitization financings. Restrictions Under Senior Credit Facility.Lamar Media is required to comply with certain covenants and restrictions under the senior credit facility. If the Company orLamar Media fails to comply with these tests, the lenders under the senior credit facility will be entitled to exercise certain remedies, including the termination of the lending commitments and the acceleration of the debt payments under the senior credit facility. AtJune 30, 2021 we were, and currently, we are, in compliance with all such tests under the senior credit facility. 43 -------------------------------------------------------------------------------- Table of ContentsLamar Media must maintain a secured debt ratio, defined as total consolidated secured debt ofLamar Advertising ,Lamar Media and its restricted subsidiaries (including capital lease obligations), minus the lesser of (x)$150.0 million and (y) the aggregate amount of unrestricted cash and cash equivalents ofLamar Advertising ,Lamar Media and its restricted subsidiaries (other than the Special Purpose Subsidiaries (as defined above under Sources of Cash - Accounts Receivable Securitization Program)) to EBITDA, as defined below, for the period of four consecutive fiscal quarters then ended, of less than or equal to 4.5 to 1.0.Lamar Media is restricted from incurring additional indebtedness subject to exceptions, one of which is that it may incur additional indebtedness not exceeding the greater of$250.0 million or 6% of its total assets.Lamar Media is also restricted from incurring additional unsecured senior indebtedness under certain circumstances unless, after giving effect to the incurrence of such indebtedness,Lamar Media would have a total debt ratio, defined as (a) total consolidated debt (including subordinated debt) ofLamar Advertising ,Lamar Media and its restricted subsidiaries as of any date minus the lesser of (i)$150.0 million and (ii) the aggregate amount of unrestricted cash and cash equivalents ofLamar Advertising ,Lamar Media and its restricted subsidiaries (other than the Special Purpose Subsidiaries) to (b) EBITDA, as defined below, for the most recent four fiscal quarters then ended, is less than 7.0 to 1.0.Lamar Media is also restricted from incurring additional subordinated indebtedness under certain circumstances unless, after giving effect to the incurrence of such indebtedness, it is in compliance with the secured debt ratio covenant and its total debt ratio is less than 7.0 to 1.0. Under the Fourth Amended and Restated Senior Credit Facility, as amended, "EBITDA" means, for any period, net income, plus (a) to the extent deducted in determining net income for such period, the sum determined without duplication and in accordance with GAAP, of (i) taxes, (ii) interest expense, (iii) depreciation, (iv) amortization, (v) any other non-cash income or charges accrued for such period, (vi) charges and expenses in connection with the senior credit facility, any actual or proposed acquisition, disposition or investment (excluding, in each case, purchases and sales of advertising space and operating assets in the ordinary course of business) and any actual or proposed offering of securities, incurrence or repayment of indebtedness (or amendment to any agreement relating to indebtedness), including any refinancing thereof, or recapitalization and (vii) any loss or gain relating to amounts paid or earned in cash prior to the stated settlement date of any swap agreement that has been reflected in operating income for such period) and (viii) any loss on sales of receivables and related assets to a Securitization Entity in connection with a Permitted Securitization Financing, plus (b) the amount of cost savings, operating expense reductions and other operating improvements or synergies projected byLamar Media in good faith to be realized as a result of any acquisition, investment, merger, amalgamation or disposition within 18 months of any such acquisition, investment, merger, amalgamation or disposition, net of the amount of actual benefits realized during such period from such action; provided, (a) the aggregate amount for all such cost savings, operating expense reductions and other operating improvements or synergies will not exceed an amount equal to 15% of EBITDA for the applicable four quarter period and (b) any such adjustment to EBITDA pursuant to this clause b may only take into account cost savings, operating expense reductions and other operating improvements or synergies that are (I) directly attributable to such acquisition, investment, merger, amalgamation or disposition, (II) expected to have a continuing impact onLamar Media and its restricted subsidiaries and (III) factually supportable, in each case all as certified by the chief financial officer ofLamar Media ) on behalf ofLamar Media , and excluding minus (c) to the extent included in net income for such period (determined without duplication and in accordance with GAAP) (i) any extraordinary and unusual gains or losses during such period, and (ii) the proceeds of any casualty events and dispositions. For purposes hereof, the effect thereon of any adjustments required under Statement of Financial Accounting Standards No. 141R shall be excluded. If during any period for which EBITDA is being determined, we have consummated any acquisition or disposition, EBITDA will be determined on a pro forma basis as if such acquisition or disposition had been made or consummated on the first day of such period. Under the senior credit facility, "net income" means for any period, the consolidated net income (or loss) ofLamar Advertising , us, and our restricted subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that following is excluded from net income: the (a) the income (or deficit) of any person accrued prior to the date it becomes a restricted subsidiary or is merged into or consolidated withLamar Advertising , us or any of our restricted subsidiaries, and (b) the income (or deficit) of any person (other than any of our restricted subsidiaries) in whichLamar Advertising , we or any of our subsidiaries has an ownership interest, except to the extent that any such income is received byLamar Advertising , us or any of our restricted subsidiaries in the form of dividends or similar distributions. The Company believes that its current level of cash on hand, availability under the senior credit facility and future cash flows from operations are sufficient to meet its operating needs for the next twelve months. All debt obligations are reflected on the Company's balance sheet. 44 -------------------------------------------------------------------------------- Table of Contents Restrictions under Accounts Receivable Securitization Program. The agreements governing the Accounts Receivable Securitization Program contain customary representations and warranties, affirmative and negative covenants, and termination event provisions, including but not limited to those providing for the acceleration of amounts owed under the Accounts Receivable Securitization Program if, among other things, the Special Purpose Subsidiaries fail to make payments when due,Lamar Media , the Subsidiary Originators or the Special Purpose Subsidiaries become insolvent or subject to bankruptcy proceedings or certain judicial judgments, breach certain representations and warranties or covenants or default under other material indebtedness, a change of control occurs, or ifLamar Media fails to maintain the maximum secured debt ratio of 4.5 to 1.0 required underLamar Media's senior credit facility. Uses of Cash Capital Expenditures. Capital expenditures, excluding acquisitions, were approximately$41.4 million for the six months endedJune 30, 2021 . We anticipate our 2021 total capital expenditures to be approximately$135.0 million . Acquisitions. During the six months endedJune 30, 2021 , the Company completed acquisitions for an aggregate purchase price of approximately$27.2 million , which were financed using available cash on hand. Investments. OnJuly 12, 2021 , Lamar acquired a minority stake in Vistar Media ("Vistar"), a leading global provider of programmatic technology for the digital out-of-home sector. Management believes that Lamar's investment of$30.0 million will help Vistar strengthen its balance sheet, expand its research and development and extend its reach into new markets. Lamar will receive a seat on Vistar's Board of Directors. Note Redemption. OnFebruary 3, 2021 , the Company redeemed in full all$650.0 million aggregate principal amount 5 3/4% Senior Notes due 2026. The 5 3/4% Senior Notes redemption was completed using the proceeds received from the 3 5/8% Senior Notes offering completed onJanuary 22, 2021 , together with cash on hand and borrowings under the revolving credit facility and Accounts Receivable Securitization Program. The notes were redeemed at a redemption price equal to 102.875% of the aggregate principal amount of the outstanding notes, plus accrued and unpaid interest to (but not including) the redemption date. During the six months endedJune 30, 2021 , the Company recorded a loss on debt extinguishment of approximately$21.6 million related to the note redemption. See Sources of Cash- Note Offerings for more information. Dividends. OnFebruary 25, 2021 , the Company's Board of Directors declared a quarterly cash dividend of$0.75 per share, paid onMarch 31, 2021 to its stockholders of record of its Class A common stock and Class B common stock onMarch 22, 2021 . OnMay 20, 2021 , the Company's Board of Directors declared a quarterly cash dividend of$0.75 per share, paid onJune 30, 2021 to its stockholders of record of its Class A common stock and Class B common stock onJune 21, 2021 . Subject to approval of the Company's Board of Directors, the Company expects to increase its quarterly dividend to$1.00 per share of common stock for the upcoming third and fourth quarter 2021 distributions to stockholders. As a REIT, the Company must annually distribute to its stockholders an amount equal to at least 90% of its REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). The amount, timing and frequency of future distributions will be at the sole discretion of the Board of Directors and will be declared based upon various factors, a number of which may be beyond the Company's control, including financial condition and operating cash flows, the amount required to maintain REIT status and reduce any income and excise taxes that the Company otherwise would be required to pay, limitations on distributions in our existing and future debt instruments, the Company's ability to utilize net operating losses to offset, in whole or in part, the Company's distribution requirements, limitations on its ability to fund distributions using cash generated through its Taxable REIT Subsidiaries ("TRSs"), the impact of COVID-19 on the Company's operations and other factors that the Board of Directors may deem relevant.Special Purpose Acquisition Company . OnApril 6, 2021 ,Lamar Partnering Corporation ("LPC"), a newly formed special purpose acquisition company and indirect wholly-owned subsidiary of the Company, filed a Registration Statement on Form S-1, with theSecurities and Exchange Commission . Subject to market conditions, LPC's proposed public offering is expected to have a base offering size of$300.0 million , or up to$345.0 million if the underwriters' over-allotment is exercised in full. The Company, through an indirect wholly-owned subsidiary, would own approximately 20% of LPC's issued and outstanding ordinary shares upon the consummation of the proposed offering. The Company intends to commit to acquire up to$100.0 million of forward purchase units in a forward purchase agreement that would close concurrently with LPC's consummation of an initial business combination. As ofJune 30, 2021 , the Company incurred$0.7 million in deferred offering costs related to the proposed offering, which is included in other assets on our Condensed Consolidated Balance Sheet. 45 -------------------------------------------------------------------------------- Table of Contents Stock and Debt Repurchasing Program. OnMarch 16, 2020 , the Company's Board of Directors authorized the repurchase of up to$250.0 million of the Company's Class A common stock. Additionally, the Board of Directors has authorizedLamar Media to repurchase up to$250.0 million in outstanding senior or senior subordinated notes and other indebtedness outstanding from time to time under its senior credit agreement. The repurchase program will expire onSeptember 30, 2021 unless extended by the Board of Directors. There were no repurchases under the program as ofJune 30, 2021 . The Company's management may opt not to make any repurchases under the program, or may make aggregate purchases less than the total amount authorized. Off-Balance Sheet Arrangements Our off-balance sheet commitments consist of guaranteed minimum payments to local transit municipalities and airport authorities for agreements which entitle us to rent advertising space to customers, in airports and on buses, benches or shelters. Commitments and Contingencies As ofJune 30, 2021 , we had outstanding debt of approximately$2.78 billion . In the future,Lamar Media has principal reduction obligations and revolver commitment reductions under the senior credit facility. In addition, it has fixed commercial commitments. These commitments are detailed on a contractual basis as follows: Payments Due by Period Less Than After Contractual Obligations Total 1 Year 1 - 3 Years 3 - 5 Years 5 Years (In millions) Long-term debt$ 2,783.7 $ 122.2
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
(1) Interest rates on our variable rate instruments are assuming rates at the
Amount of Expiration Per Period Total Amount Less Than 1 After Other Commercial Commitments Committed Year 1 - 3 Years 3 - 5 Years 5 Years (In millions) Revolving Bank Facility(2)$ 750.0 $ - $ -$ 750.0 $ - Standby Letters of Credit(3)$ 14.4 $ 13.7 $ 0.7 $ - $ - (2)Lamar Media had no outstanding borrowings under the revolving credit facility as ofJune 30, 2021 . (3) The standby letters of credit are issued under the revolving credit facility and reduce the availability of the facility by the same amount. Critical Accounting Estimates Our discussion and analysis of our results of operations and liquidity and capital resources are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. There have been no material changes to the critical accounting policies and estimates as previously disclosed in Item 7 of our 2020 Combined Form 10-K. Accounting Standards Update InDecember 2019 , the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing specific exceptions to the general principles in Topic 740 - Income Taxes. This guidance is effective for years beginning afterDecember 15, 2020 . The Company adopted this guidance onJanuary 1, 2021 and the impact of the adoption is not material to the Company's consolidated financial statements. 46 -------------------------------------------------------------------------------- Table of Contents LAMAR MEDIA CORP. The following is a discussion of the consolidated financial condition and results of operations ofLamar Media for the three and six months endedJune 30, 2021 and 2020. This discussion should be read in conjunction with the consolidated financial statements ofLamar Media and the related notes thereto. RESULTS OF OPERATIONS Six months endedJune 30, 2021 compared to six months endedJune 30, 2020 Net revenues increased$61.7 million or 8.2% to$815.9 million for the six months endedJune 30, 2021 from$754.2 million for the same period in 2020. This increase was primarily attributable to an increase in billboard net revenues of$71.9 million offset by a decrease in transit net revenues, due to the effects of the ongoing COVID-19 pandemic, of$6.9 million , over the same period in 2020. For the six months endedJune 30, 2021 , there was a$66.4 million increase in net revenues as compared to acquisition-adjusted net revenue for the six months endedJune 30, 2020 , which represents an increase of 8.9%. See "Reconciliations" below. The$66.4 million increase in revenue is primarily due to a$70.6 million increase in billboard net revenues offset by a decrease in transit net revenues, due to the effects of the ongoing COVID-19 pandemic, of$4.6 million over the same period in 2020. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, decreased$10.2 million , or 2.2%, to$458.0 million for the six months endedJune 30, 2021 from$468.2 million in the same period in 2020. The$10.2 million decrease over the prior year is comprised of a$13.5 million decrease in total direct, general and administrative and corporate expenses (excluding stock-based compensation) primarily related to the operations of our outdoor advertising assets, offset by a$3.3 million increase in stock-based compensation. Depreciation and amortization expense decreased$4.9 million to$121.4 million for the six months endedJune 30, 2021 as compared to$126.3 million for the same period in 2020. For the six months endedJune 30, 2021 ,Lamar Media recognized a gain on disposition of assets of$1.9 million , primarily resulting from transactions related to billboard locations. Due to the above factors, operating income increased by$75.2 million to$238.5 million for the six months endedJune 30, 2021 as compared to$163.3 million for the same period in 2020.Lamar Media recognized a loss on debt extinguishment of$21.6 million for the six months endedJune 30, 2021 , a$3.4 million increase over the same period in 2020. The loss on debt extinguishment during the six months endedJune 30, 2021 relates to the early repayment of our 5 3/4% Senior Notes during the period. Interest expense decreased$17.5 million for the six months endedJune 30, 2021 to$54.5 million as compared to$72.0 million for the six months endedJune 30, 2020 . The decrease is primarily related toLamar Media's debt transactions completed in 2020 and 2021, as well as a reduction in our senior credit facility interest rates. The increase in operating income and decrease in interest expense, offset by the increase in loss on extinguishment of debt, resulted in an$89.3 million increase in net income before income taxes. The effective tax rate for the six months endedJune 30, 2021 was 2.6%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items. As a result of the above factors,Lamar Media recognized net income for the six months endedJune 30, 2021 of$158.5 million , as compared to net income of$72.2 million for the same period in 2020. 47 -------------------------------------------------------------------------------- Table of Contents Reconciliations: Because acquisitions occurring afterDecember 31, 2019 have contributed to our net revenue results for the periods presented, we provide 2020 acquisition-adjusted net revenue, which adjusts our 2020 net revenue for the six months endedJune 30, 2020 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the six months endedJune 30, 2021 . Reconciliations of 2020 reported net revenue to 2020 acquisition-adjusted net revenue for the six months endedJune 30 , as well as a comparison of 2020 acquisition-adjusted net revenue to 2021 reported net revenue for the six months endedJune 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Six Months Ended June 30, 2021 2020 (in thousands) Reported net revenue$ 815,933 $ 754,221 Acquisition net revenue - (4,729) Adjusted totals$ 815,933 $ 749,492 Key Performance Indicators Net Income/Adjusted EBITDA (in thousands) Six Months Ended Amount of June 30, Increase Percent 2021 2020 (Decrease) Increase (Decrease) Net income$ 158,499 $ 72,151 $ 86,348 119.7 % Income tax expense 4,210 1,296 2,914 Loss on debt extinguishment 21,604 18,184 3,420 Interest expense (income), net 54,157 71,621 (17,464) Gain on disposition of assets (1,896) (3,519) 1,623 Depreciation and amortization 121,371 126,311 (4,940) Capitalized contract fulfillment costs, net (900) 1,036 (1,936) Stock-based compensation expense 9,464 6,162 3,302 Adjusted EBITDA$ 366,509 $ 293,242 $ 73,267 25.0 % Adjusted EBITDA for the six months endedJune 30, 2021 increased 25.0% to$366.5 million . The increase in adjusted EBITDA was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) of$75.5 million , as well as a decrease in total general and administrative and corporate expenses of$1.6 million , excluding the impact of stock-based compensation expense. 48 --------------------------------------------------------------------------------
Table of Contents Net Income/FFO/AFFO (in thousands) Six Months Ended Amount of Percent June 30, Increase Increase 2021 2020 (Decrease) (Decrease) Net income$ 158,499 $ 72,151 $ 86,348 119.7 % Depreciation and amortization related to real estate 115,815 120,453 (4,638) Gain from sale or disposal of real estate, net of tax (1,795) (3,098) 1,303
Adjustments for unconsolidated affiliates and
non-controlling interest 285 389 (104) FFO$ 272,804 $ 189,895 $ 82,909 43.7 % Straight line expense 1,729 1,733 (4) Capitalized contract fulfillment costs, net (900) 1,036 (1,936) Stock-based compensation expense 9,464 6,162 3,302 Non-cash portion of tax provision 1,743 (1,313) 3,056 Non-real estate related depreciation and amortization 5,556 5,858 (302) Amortization of deferred financing costs 2,962 2,878 84 Loss on extinguishment of debt 21,604 18,184 3,420 Capital expenditures - maintenance (19,603) (14,492) (5,111)
Adjustments for unconsolidated affiliates and
non-controlling interest (285) (389) 104 AFFO$ 295,074 $ 209,552 $ 85,522 40.8 % FFO for the six months endedJune 30, 2021 increased from$189.9 million in 2020 to$272.8 million for the same period in 2021, an increase of 43.7%. AFFO for the six months endedJune 30, 2021 increased 40.8% to$295.1 million as compared to$209.6 million for the same period in 2020. The increase in AFFO was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) as well as a decrease in total general and administrative and corporate expenses (excluding the effect of stock-based compensation expense). Three months endedJune 30, 2021 compared to three months endedJune 30, 2020 Net revenues increased$97.4 million or 28.0% to$445.1 million for the three months endedJune 30, 2021 from$347.7 million for the same period in 2020. This increase was primarily attributable to an increase in billboard and transit net revenues of$93.2 million and$5.6 million , respectively, over the same period in 2020. For the three months endedJune 30, 2021 , there was a$99.7 million increase in net revenues as compared to acquisition-adjusted net revenue for the three months endedJune 30, 2021 , which represents an increase of 28.9%. See "Reconciliations" below. The$99.7 million increase in revenue is primarily due to a$92.5 million and$6.7 million increase in billboard and transit net revenues, respectively. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, increased$18.4 million , or 8.4%, to$236.5 million for the three months endedJune 30, 2021 from$218.1 million in the same period in 2020. The$18.4 million increase over the prior year is comprised of a$15.3 million increase in total direct, general and administrative and corporate expenses (excluding stock-based compensation) primarily related to the operations of our outdoor advertising assets, as well as a$3.1 million increase in stock-based compensation. Depreciation and amortization expense decreased$3.4 million to$60.6 million for the three months endedJune 30, 2021 as compared to$64.0 million for the same period in 2020. For the three months endedJune 30, 2021 ,Lamar Media recognized a gain on disposition of assets of$1.5 million , primarily resulting from transactions related to billboard locations. 49 -------------------------------------------------------------------------------- Table of Contents Due to the above factors, operating income increased by$82.9 million to$149.4 million for the three months endedJune 30, 2021 as compared to$66.6 million for the same period in 2020. Interest expense decreased$9.1 million for the three months endedJune 30, 2021 to$26.4 million as compared to$35.4 million for the three months endedJune 30, 2020 . The decrease is primarily related toLamar Media's debt transactions completed in 2020 and 2021, as well as a reduction in our senior credit facility interest rates. The increase in operating income and decrease in interest expense resulted in a$91.9 million increase in net income before income taxes. The effective tax rate for the three months endedJune 30, 2021 was 2.6%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items. As a result of the above factors,Lamar Media recognized net income for the three months endedJune 30, 2021 of$120.0 million , as compared to net income of$31.5 million for the same period in 2020. Reconciliations: Because acquisitions occurring afterDecember 31, 2019 have contributed to our net revenue results for the periods presented, we provide 2020 acquisition-adjusted revenue, which adjusts our 2020 net revenue for the three months endedJune 30, 2021 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the three months endedJune 30, 2021 . Reconciliations of 2020 reported net revenue to 2020 acquisition-adjusted net revenue for the three months endedJune 30 , as well as a comparison of 2020 acquisition-adjusted net revenue to 2021 reported net revenue for the three months endedJune 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Three Months Ended June 30, 2021 2020 (in thousands) Reported net revenue$ 445,052 $ 347,652 Acquisition net revenue - (2,328) Adjusted totals$ 445,052 $ 345,324 50
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Table of Contents Key Performance Indicators Net Income/Adjusted EBITDA (in thousands) Three Months Ended Amount of June 30, Increase Percent of Increase 2021 2020 (Decrease) (Decrease) Net income$ 120,033 $ 31,534 $ 88,499 280.6 % Income tax expense (benefit) 3,200 (240) 3,440 Loss on debt extinguishment - 5 (5) Interest expense (income), net 26,177 35,258 (9,081) Gain on disposition of assets (1,481) (1,015) (466) Depreciation and amortization 60,622 63,998 (3,376) Capitalized contract fulfillment costs, net (400) 1,036 (1,436) Stock-based compensation expense 5,789 2,725 3,064 Adjusted EBITDA$ 213,940 $ 133,301 $ 80,639 60.5 % Adjusted EBITDA for the three months endedJune 30, 2021 increased 60.5% to$213.9 million . The increase in adjusted EBITDA was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) of$92.4 million , and was offset by an increase in total general and administrative and corporate expenses of$8.9 million , excluding the impact of stock-based compensation expense. Net Income/FFO/AFFO (in thousands) Three Months Ended Amount of June 30, Increase Percent of Increase 2021 2020 (Decrease) (Decrease) Net income$ 120,033 $ 31,534 $ 88,499 280.6 % Depreciation and amortization related to real estate 57,852 61,089 (3,237) Gain from sale or disposal of real estate, net of tax (1,412) (555) (857) Adjustments for unconsolidated affiliates and non-controlling interest 132 140 (8) FFO$ 176,605 $ 92,208 $ 84,397 91.5 % Straight line expense 954 679 275 Capitalized contract fulfillment costs, net (400) 1,036 (1,436) Stock-based compensation expense 5,789 2,725 3,064 Non-cash portion of tax provision 2,763 (894) 3,657 Non-real estate related depreciation and amortization 2,770 2,909 (139) Amortization of deferred financing costs 1,591 1,500 91 Loss on extinguishment of debt - 5 (5) Capital expenditures - maintenance (11,699) (3,863) (7,836) Adjustments for unconsolidated affiliates and non-controlling interest (132) (140) 8 AFFO$ 178,241 $ 96,165 $ 82,076 85.3 % FFO for the three months endedJune 30, 2021 increased from$92.2 million in 2020 to$176.6 million in 2021, an increase of 91.5%. AFFO for the three months endedJune 30, 2021 increased 85.3% to$178.2 million as compared to$96.2 million for the same period in 2020. The increase in AFFO was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) as well as an increase in total general and administrative and corporate expenses (excluding the effect of stock-based compensation expense). 51
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