Lamar, the Billboard Company That Defied Gravity During the Real Estate Collapse
Billboard giant 
Lamar Advertising (LAMR) is struggling to emerge from the recession. While other advertising companies like Omnicom (OMC) and MDC Partners (MDCA) are seeing revenues grow once more, Lamar's sales sank another 1 percent to $244 million in Q1 2010.
Motley Fool recently asked whether Lamar is storing up more trouble for itself in the future, as it hasn't written down a significant amount of the intangible "goodwill" assets sitting on its balance sheet. If it did take a writedown, that charge would hit the income statement and drastically lower Lamar's profits-on-paper. (If Lamar had any profits, that is: It lost another $24.8 million last quarter.)
Among advertising companies that previously indicated a reduction in goodwill were Valassis (VCI), which wrote off $246 million; ValueClick (VCLK) wrote down $327 million and said more might come; and Clear Channel Outdoor (CCO), another billboard company, took down a massive $3.2 billion. Even Interpublic (IPG), whose goodwill has been flat, warned of write-downs.
Goodwill assets represent either an estimate of future potential cashflows or the premium over the actual value that a company pays for something in an acquisition. You're supposed to reduce its value if you believe that the asset you bought is "impaired," which often happens during a recession as companies and bits of property become drains on cash rather than producers of revenue.
Lamar's goodwill is valued at about $1.4 billion. Here's a snapshot of its progress during the last three years:
- Q1 2010: 1,425,500
- Q1 2009: 1,424,283
- Q1 2008: 1,422,033
- Q1 2007: 1,376,240
So let's put this all together: We've had a recession reducing Lamar's revenues; a collapse in real estate prices; and Lamar's business depends on real estate ... and yet one of its biggest assets is not significantly impaired? What an amazing feat of economic resilience!
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