Lamar Advertising Company - Company Profile, Information, Business Description, History, Background Information on Lamar Advertising Company



5551 Corporate Boulevard
Baton Rouge, Louisiana 70808
U.S.A.

Company Perspectives:

Lamar's strategy is to be the leading provider of outdoor advertising in each of the markets it serves, with an emphasis on markets with a media industry ranking based on population between 50 and 250. Important elements of this strategy are Lamar's decentralized management structure and its focus on providing high quality local sales and service.

History of Lamar Advertising Company

Lamar Advertising Company is the third largest outdoor advertising company in the United States, ranking behind Outdoor Systems, Inc. and Clear Channel Communications, Inc., both of which have more assets and larger networks than Lamar. Lamar has closed the gap with its recent acquisitions, however, and is now the nation's second largest "pure-play' outdoor advertising company. Through two of its subsidiaries--Lamar Outdoor Advertising and Lamar Transit Advertising--it manages approximately 71,000 billboards and displays on buses, bus shelters, and benches in 101 primary markets, with operations in 36 states. Through a third subsidiary, Interstate Logos, Inc., it provides 22,700 logo displays for limited access highways, including federal Interstates. These are signs that post information about food, gas, and lodging services at or near highway exits. Lamar also has secured contracts in Ontario Province, Canada, and in 18 of the 22 states that allow private contractors to fabricate the signs. It is the primary provider of such services in the United States. The company also offers graphic design and production services for its customers. In total, Lamar operates 94 outdoor advertising companies through its subsidiary network. Although its central management offices are housed in its 53,500-square-foot headquarters in downtown Baton Rouge, Louisiana, much local autonomy is allowed the managers of each of these companies, and they remain in charge of day-to-day company operations. Even though it is a public company, Lamar remains a family business under the control of third and fourth generation family members of the Lamar and Reilly families.

Early Development: 1902-58

Lamar's history goes back to 1902, when its founder, Charles Wilbur Lamar, Sr., began operating a poster-advertising concern in his spare time in Baton Rouge, Louisiana. It was a relatively new industry. Just a decade earlier, in 1891, poster makers had created the Associated Bill Posters' Association, generally credited with being the nation's first association of advertisers. At the time, posters were used to advertise on what were called billboards but were nothing like the large, steel-frame structures used today. Then they were nothing more than town and city wall spaces used to advertise businesses or, just as often, upcoming public events. They were more like modern bulletin boards, with posters stripped away or covered up after the events occurred.

It proved to be a timely venture, however, for although Lamar's business was the design and fabricating of wall displays, it placed Lamar in a position to finance expansion into a new realm of advertising just as modern technology created a need for it. Before the company's first decade of business ended, it became clear that the auto would soon replace the horse and buggy and that roads would be needed to accommodate it. By 1912, when Henry Ford introduced the Model-T, the nation had begun its durable love affair with the car. Important, too, Ford's assembly-line method of manufacturing had begun putting the automobile within reach of middle-class Americans. Lamar's response was to move into the new area of outdoor, roadside advertising.

Despite the Great Depression and the fact that its markets were in states with few paved roads, Lamar soon turned roadside advertising into its primary business. Like others in the industry, Lamar was aided by Outdoor Advertising Incorporated, an organization formed in 1931 to promote billboard sales nationwide. Charles Lamar and his two sons, Charles Jr. and L.V., slowly expanded the business, purchasing five outdoor advertising companies in Louisiana and Florida, areas where a paved road infrastructure was, like the company, rather slow to develop.

Although it was a growth industry, the billboard advertising business was a tough one. In the industry's early years, many billboards had to be hand-painted on the actual display surfaces, a tedious process. Eventually that process gave way to printing the billboard displays on sheets and assembling them at the "plant' (the site of the billboard). Today, most billboard advertisements are prefabricated as computer-designed and precision cut vinyl pieces with an efficiency far beyond the technology of Charles Lamar's day.

There were soon other problems, especially state and local zoning regulations that did everything from imposing permit requirements to specifying the allowed locations and size and shape of the displays. Nevertheless, the industry steadily grew, especially after World War II, when the average American family again could afford to buy an automobile. Between 1940 and 1960, the industry increased its yearly revenue from $44.7 million to more than $200 million.

New Expansion and New Directions: 1958-89

A new period of expansion for Lamar began in 1958, under the leadership of president and CEO Kevin Reilly, Sr. Over the next 15 years, Lamar purchased an additional eight companies in Florida, Alabama, and Louisiana. Growth was abetted by the fact that Florida had become a tourist and retirement mecca, and its roads were improving quickly.

Reilly also faced serious problems, however, some of which were industrywide, including growing public resistance to billboard advertising. Critics felt that the industry was cluttering the highways with eyesores, blocking out the natural beauty of the landscape. They even offered proof that billboards were dangerous distractions for drivers and caused unnecessary accidents. By the late 1950s the federal government began paying attention to the critics, adding the strong possibility of additional regulation. The rumbling prompted some important efforts by the industry to govern itself, particularly through the agency of the Outdoor Advertising Association of America and the Institute of Outdoor Advertising. But the critics prevailed. Enlisting the aid of Lady Bird Johnson, the industry's gadflies prompted a milestone piece of legislation: the Highway Beautification Act of 1965, a law designed to limit and govern outdoor advertising along 300,000 plus miles of federal highways. The act, strongly opposed in southern oil-producing states, ended the indiscriminate erection of billboards on the right-of-ways along all federally funded roads. It was a heavy blow to the outdoor advertising industry.



Lamar only reeled with the punch, however, and, in the long haul, may have benefitted from the setback. Although the act brought unit growth of billboard displays to a virtual standstill, it forced Lamar to develop adequate contingency planning and to diversify.

In 1973 the original company and its acquired companies, totaling 13, were organized into the Lamar Corporation, a network of affiliates created to provide a central and more efficient system of accounting and management. Ten years later, Lamar gained total ownership of all of its 15 affiliated partnerships. It also acquired Creative Displays, Inc., which added another ten billboard markets to the company's total.

Additional Expansion and New Looks: 1989-99

In February of 1989 Kevin Reilly, Jr. became Lamar's president and CEO. He had first joined the company in 1978, the year after earning a B.A. from Harvard University. Until assuming the presidency, he had served as president of Lamar's Outdoor Division, starting in 1984. Under his tutelage, Lamar has greatly expanded its operations.

In 1988, just before Reilly took over the company's reins, it entered the business of fabricating interstate logo signs, winning a contract from the State of Nebraska in Reilly's initial year and eventually expanding to become the principal provider of logo signs in the United States. Thanks to the burgeoning super-highway infrastructure, the need for signs on public rights-of-way for approved franchises continued to grow, and Lamar's logo sign business, through competitive bids, won contracts from 18 states.

Through the 1990s Lamar expanded its operations into other important areas, including transit advertising and wireless communications. It began creating and maintaining advertising displays on buses, bus shelters, and commuter benches in 14 of its primary markets as well as three other states: South Carolina, Utah, and Georgia. It also has begun contractual negotiations with electronic communications providers to allow them to attach receiving and transmitting devices to its billboards on properties it owns. To date, it has made agreements with four of the principal providers of such services in the United States.

The company also went public, making an initial stock offering in August of 1996. Although Lamar is a public company, to a large degree it is still a family-owned and operated business. In fact, despite its rapid expansion, Lamar prides itself on its friendliness and the experience and loyalty of its managerial personnel. On the average, its regional managers have been with the company for 25 years. A controlling interest is owned by two families. CEO Kevin Reilly Jr. owns approximately 40 percent of the business, and Charles Lamar III and his sister, Mary Lee Lamar Dixon, great-grandchildren of the company's founder, own about 27 percent.

Lamar undertook a vigorous acquisitions program in the 1990s, despite the fact that it faced some problems. A major, industrywide setback was the steady decline in the billboard advertising of tobacco products, which had begun in 1992. Leading tobacco companies, yielding to both governmental mandates and societal pressures, began a drastic reduction in their outdoor advertising, a policy that continued over the next several years. It cut fairly deep into the billboard advertising business and left many billboards blank. Recovery was slow. It was not until 1996 that the industry, with 396,000 operating displays, came close to the 400,000 of the peak year, 1985. In 1992 tobacco advertising accounted for 12 percent of Lamar's net revenue, and although it had only dropped by three percent by 1997, Lamar was faced with the prospect that settlements in suits against the tobacco industry would lead to a total ban of outdoor advertising of tobacco products. It responded by planning the total elimination of tobacco advertising, to be completed by April 1999.

Lamar will easily weather the end of its tobacco accounts, however. Many non-tobacco advertisers have been waiting for billboard locations to free up. In any case, most of Lamar's real growth in outdoor advertising has come from its transit and logo displays, areas in which Lamar has put major efforts in the last few years. It has proved to be a fruitful strategy. In 1996 Lamar purchased FKM Advertising. In the next year its revenue increased by 61 percent over the previous year and its earnings rose by 74 percent, reaching $92.3 million.

During 1997 Lamar also continued to expand through important acquisitions. In fact, it was a year of tremendous growth, accounting for 24 of the 106 acquisitions the company made between 1983 and 1997. It increased its total number of outdoor displays by a hefty 47 percent. In April it purchased Penn Advertising, gaining close to 7,000 displays in New York and Pennsylvania, and in June it bought Headrick Outdoor, adding close to 3,200 bulletin displays and providing entry into four new states--Arkansas, Illinois, Kansas, and Missouri. It also bought McWhorter Advertising and some markets from National Advertising Company (3M), owned by Outdoor Systems, Inc., and several smaller acquisitions. These resulted in expanded markets plus a significant increase in the total number of outdoor bulletin displays operated by Lamar.

The "accretive acquisitions' continued in 1998. By July it had completed the purchase of an additional 24 concerns; by October it had five more. Early in the year, after purchasing Ragan Outdoor in Iowa and Illinois, Derby Outdoor in South Dakota, and Pioneer Outdoor in Missouri and Arkansas, Lamar also signed an agreement to buy Northwest Outdoor, which, in addition to adding about 4,000 displays, allowed the company entry markets in Washington, Montana, Oregon, Idaho, Wyoming, Nebraska, Nevada, and Utah. In May it acquired two more companies: Sun Media and Odegard Outdoor Advertising, L.L.C. A major acquisition followed in October, when, for $385 million and a debt assumption of about $105 million, Lamar purchased Outdoor Communications, Inc., adding 14,700 displays in 12 southeastern states. Lamar also has plans for other acquisitions, including the assets of Imperial Outdoor of Lincoln and Omaha, Nebraska, scheduled to close in February 1999. To help finance its purchases and offset its indebtedness, Lamar has used equity sales, the last of which was completed at the end of 1998. The sale, netting $219.8 million, added 6.9 million shares, bringing Lamar's total to 61.5 million.

Lamar's future continues to look bright. Among it strategies for growth, the company plans to firm up its position as the largest logo sign operator by adding new state franchises and, possibly, new acquisitions. In an industry that is highly fragmented at best, Lamar continues to work toward consolidation of its various operations without sacrificing its local identity in the various communities served by its individual companies. It will remain a major player among the 600 companies in the outdoor advertising business, successfully competing with both rival display concerns as well as media advertisers vying for the same market share.

Principal Subsidiaries: Lamar Outdoor Advertising; Interstate Logos, Inc.; Lamar Transit Advertising; Interstate Graphics.

Additional Details

Further Reference

Atlas, Riva, "Billboard Mania,' Forbes, November 4, 1996, p. 371.Beatty, Sally Goll, "Billboard Firms Ease into Smokeless Era,' Wall Street Journal (Eastern Edition), October 30, 1997, p. B6.Brownlee, Lisa, "Sign of the Times: Billboards IPOs Catch Eye with Oversize Gains,' Wall Street Journal (Eastern Edition), September 12, 1996, p. B6.Harrison, Joan, "A Face Lift for a Drab Industry,' Mergers and Acquisitions, May/June, 1997, pp. 46--47.Sparks, Debra, "Musical Billboards Are the Hottest Advertising Medium. Then Why Is the Smart Money Bailing Out?,' Financial World, February 18, 1997, pp. 48--51.

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