Lamar Advertising Company (LAMR)

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Lamar Advertising (LAMR)

Q4 2012 Earnings Call

February 27, 2013 11:00 am ET


Kevin P. Reilly - Chairman, President, Chairman of Lamar Media Corporation, Chief Executive Officer of Lamar Media Corporation and President of Lamar Media Corporation

Keith A. Istre - Chief Financial Officer, Principal Accounting Officer and Treasurer

Sean E. Reilly - Chief Executive Officer


Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Matthew Chesler - Deutsche Bank AG, Research Division

James G. Dix - Wedbush Securities Inc., Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

David W. Miller - B. Riley & Co., LLC, Research Division

Tracy B. Young - Evercore Partners Inc., Research Division



Excuse me, everyone. We now have Kevin Reilly; Sean Reilly; and Keith Istre in conference. [Operator Instructions] 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. All forward-looking statements, including statements with respect to Lamar's consideration of an election to real estate and investment trust status involve risks, uncertainties and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ materially from anticipated results. Lamar has identified important factors that could cause actual results to differ materially from those discussed in the call in the company's most recent annual report on Form 10-K as updated by its quarterly reports on Form 10-Q. Lamar refers you to those documents. Lamar's fourth quarter and year end 2012 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on a Form 8-K this morning and is available on Lamar's website, I would now like to turn the conference over to Kevin Reilly. Mr. Reilly, you may begin.

Kevin P. Reilly

Thank you, Chantelle. I want to welcome our friends to Lamar's Q4 call. As was announced, we filed our private letter with the IRS in November, and we're awaiting word. The themes for 2013 are to continue to manage our balance sheet in anticipation of a REIT conversion, to continue to manage the REIT conversion process in an orderly way and keeping the market informed as we cross certain milestones. And then lastly, try to operate our business smart in an environment where we still don't quite have the national economic winds at our back.

And with that, I'll go ahead and turn the call over to Keith Istre to walk us through some of the numbers.

Keith A. Istre

Okay, just to recap briefly the fourth quarter, you saw the operating performance on the last call, we had guided to Q4 without the NextMedia acquisition, which we closed October 31. And as we posted in our press release, the pro forma revenue guidance growth for Q4, without Next, was up 2.6%; EBITDA pro forma growth of 3.6%, and our consolidated expenses for the quarter came in at up 1.8%. And we had guided to approximate [indiscernible] For the full year, including Next, [indiscernible] revenue on a pro forma basis of [indiscernible] 4.6 and consolidated expenses grew at exactly 2.0.

I don't know if anybody recalls, but last year at this same time, we had guided expense growth for 2012 of approximately 3%, so for the year, we came in a little bit better than we had thought. For 2013, obviously for the first quarter, you saw what our revenue guidance was. We're projecting up 2% to 3% on a pro forma basis and that includes the Next acquisition in those numbers.

For the expense growth for 2013, let me just make a couple of comments. Just like last year, we think if you take our pro forma operating expenses for 2012 and grow them 3%, that's where we are projecting to come in for the year. We are, as Kevin mentioned, we are in the process of moving forward with our request, and we think that in addition to the 3% pro forma growth in our base expense that we should have about $5 million in additional REIT-related expenses in 2013, so that would add about an extra 1% to our expense growth for the year. We're not sure exactly when those expenses will hit. We budgeted for them, but for Q1, without REIT expenses, we would probably guide you to approximately 3% for the quarter.

Just a couple of housekeeping things. CapEx budget for 2013, just like '12, looks like it will come in at approximately $100 million at this time. And last, we're projecting free cash flow in '13 to be approximately $320 million coming off of $267 million in 2012.

And with that, I'll turn it over to Sean.

Sean E. Reilly

Thank you, Keith, and welcome, everybody. I guess the watchwords for 2013 are, "steady as she goes", both strategically and operationally. Keith mentioned the CapEx budget, a little over 1/2 of that will be maintenance and a little under 1/2 will be growth as we move through the year in 2013.

I want to accomplish a couple of things as I walk through the operational statistics. Number one, to walk through those aggregate statistics with you, but I am going to highlight what I believe are some very encouraging data points from the fourth quarter that are carrying into the first. First, on our total digital units in the air as of the end of the year, we had 1,693 digital units up and operational. That includes 64 from NextMedia.

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