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Lamar Advertising Company (LAMR)
Q3 2008 Earnings Call
November 6, 2008 11:00 am ET
Kevin Reilly - CEO
Keith Istre - CFO
Sean Reilly - COO and President of the Outdoor Division
Marci Ryvicker - Wachovia
Mark Wienkes - Goldman Sachs
Anthony DiClemente - Barclays Capital
Jason Helfstein - Oppenheimer
Harry DeMott - King Street Capital Management
Kit Spring - Stifel Nicolaus
Previous Statements by LAMR
» Lamar Advertising Company Q1 2009 Earnings Call Transcript
» Lamar Advertising Company., Q4 2008 Earnings Call Transcript
» Lamar Advertising Co., Q2 2008 Earnings Call Transcript
In the course of this discussion Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals and plans. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's reports on forms 10-K and 10-Q, and the registration statements that Lamar files with the SEC from time to time. Lamar refers you those documents.
Lamar's third quarter end 2008 earnings release which contains the information required by Regulation G was furnished with the SEC on a Form 8-K this morning, and is available an Lamar's website, www.lamar.com.
I would now like to turn the conference over to Kevin Reilly. Mr. Reilly, you may begin.
Thank you, Chantal. As is our custom, management will open up the call with some brief comments and then we will turn to Q&A.
Let's get right to the Q4 guidance. The negative 9% surrounds weakness in three areas, auto, real estate, and other media. I want to take this opportunity to let our shareholders and friends know how we plan to manage through this recession and my comments directed really to what we can do right now in areas of CapEx and expenses, and not towards what we think might happen regarding revenue.
We have a plan in place to generate $200 million in cash over the next 13 months. This is how we are going to get there. We are going to cut total CapEx to $30 million, and that is against across all areas of CapEx, real estate, digital, and analog, and we are going to hold our expense growth to less than zero. That plan is in place, has been in place for the last three weeks and we know where it is, and we know how to get it, and so we have a very high level of confidence that we will generate a couple of hundred million dollars in cash flow.
What we are also confident of is that our strong free cash flow against our modest leverage and Keith is going to cover some details regarding our leverage and our modest fixed charges. This effort will serve our shareholders very well over the next few years.
With that, I would like to turn the call over to Keith.
Good morning. Just to touch on Q3 as you saw in the press release, our revenue for Q3 declined by 3.9%. We had guided to downsize for the quarter and August and September came in just a hair better than we expected at the time we gave out the guidance.
The good news is that the expenses, direct and G&A expenses for the quarter were up only 2.7%. As you know, 4% is our normal run rate and that should hold true for Q4 as well. We should be somewhere in the 2.7 or less expense growth range.
That being said, as Kevin mentioned, we did include a supplemental indebtedness schedule in the release, which is something that we never done before, but there is a certain amount of misunderstanding and misinterpretation with our credit agreements and our outstanding debt, and we just wanted to clarify with respect to these issues.
There are three common misunderstandings in the investment community. Number one is that our senior credit facility total debt ratio test steps down from 6 to 1 to 5.75 to 1. That is not the case that was in the original agreement and we amended that ratio to remain at 6 to 1 for the life of the seen credit agreement, the bank agreement with our bank consortium. So it is at 6 to 1 today and it will remain 6 to 1 for the life of the loan.
The second misunderstanding is that our convertible notes at Lamar Advertising Company which is $287.5 million that those notes are included in total debt for covenant calculation purposes. That is not the case. Those are at as I said, Lamar Advertising Company, that is the holding company all other debt is at Lamar Media Company, which is a wholly owned subsidiary of Lamar Advertising. So, those are not included in any of our debt tests, and are not counted as debt under our debt agreements.
The last misconception referred to in the last paragraph on that first page. It says there is a line, the last sentence in that last paragraph, the supplemental indebtedness schedule says in addition and without regard to any limitations described in the preceding sense under the indentures Lamar Media may at any time incur up to $1.3 billion in indebtedness under any senior credit facility.
People read that, those are in our high that is a basket given to us in our high yield senior subordinated notes and what that means is not that we can only borrow up to $1.3 billion under our senior bank credit facility, it means that at any time, regardless of our EBITDA, if the company had zero EBITDA, and we could convince our bank group to lend us $1.3 billion, then that would be permitted under our high yield indentures.