Lamar Advertising (LAMR) Gets Positive IRS Letter on REIT Ruling

Lamar Advertising Company (Nasdaq: LAMR) 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. (The Street sees EPS of $1.02.)
• 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.

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