LAMR

Lamar Advertising Company (LAMR)

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Exchange: NASDAQ
Industry: Consumer Services
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Lamar Advertising (LAMR)

Q2 2013 Earnings Call

August 08, 2013 11:00 am ET

Executives

Sean E. Reilly - Chief Executive Officer

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

Analysts

Douglas M. Arthur - Evercore Partners Inc., Research Division

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Matthew Chesler - Deutsche Bank AG, Research Division

Westcott Rochette - S&P Capital IQ Equity Research

David W. Miller - B. Riley Caris, Research Division

Presentation

Operator

Excuse me, everyone, we now have Sean Reilly and Keith Istre in the 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 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 this 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 second quarter 2013 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, www.lamar.com.

I would now like to turn the conference over to Mr. Sean Reilly. Mr. Riley, you may begin, sir.

Sean E. Reilly

I'm going to actually send it over to our Chairman, Kevin Reilly, for a quick discussion around the REIT products.

Kevin P. Reilly

All right, that's David in the line. I welcome all of our listeners to this important call. I'm going to restrict my comments to our application to the IRS for the private letter ruling. And I've got some prepared remarks that I'd like to read to the group.

As stated in our press release, we have no new information from the IRS concerning our REIT PLR request. We've been in touch with the IRS and they've not given us any guidance as to when we may have a response to our PLR.

Without going into technical detail, we could receive a response in 2014. And assuming it was favorable, still qualifies a REIT for 2014. The good news is there is a new associate Chief Counsel at the IRS who just came onboard. This person has jurisdiction over financial institutions and products, which include REITs. Hopefully, this will have a positive impact on the pause the IRS has taken in evaluating REIT PLRs that are currently pending.

As soon as we know something meaningful, we will inform the market. That's a sort of detailed way of saying that we don't have any new information for the marketplace, but we are willing on this call to entertain specific questions regarding our REIT PLR request that are not speculative.

With that, I'd like to go ahead and turn the call over to Sean.

Sean E. Reilly

So why don't we turn it over to Keith and walk through the numbers.

Keith A. Istre

Okay. Just a real quick highlight, some of the performance in the quarter. You saw in the press release that our pro forma revenue growth was up plus 2.7%. Our guidance for the second quarter was up 2% to 3%. So we came in at a little -- at the higher end of the range.

Obviously, you saw in our guidance for the third quarter revenue, we were slightly less at up 1% to 2%. And of course, Sean, will provide you some detail and give you a little color on that in a minute. Our expenses continue to perform as we had hoped. Our pro forma direct and G&A expenses before corporate overhead were up 1.2% for the quarter. This is primarily due to our salary increases that we -- the company gives out to all employees, except senior officers, every March.

We continue to do well in the elimination and production categories, as we talked about on the last quarter. Once again, those expenses came in at about slightly less than the $1 million down for the quarter.

Corporate overhead was up 12.3% in the quarter. The company incurred $900,000 worth of REIT-related expenses in Q2. There was no REIT-related expenses in Q2 of last year. So if you want to get an apples-to-apples, back that out, and that will give you comparative numbers.

Q3 expenses, I think we're expecting consolidated expenses to be somewhere in the low-single digits, approximately 2%, similar to the second quarter that we just finished up.

A couple of other notes. As of June 30, you saw in the press release, we accumulated $119 million in cash. We've mentioned on previous calls that this was our plan for this year, to stockpile cash. And the use of that cash will go to help redeem the $350 million outstanding senior notes maturing in April of '14. That redemption will occur prior to 12/31 of this year.

Last, our debt leverage as of June 30 peaked below 4:1, ending up at 3.95x. The last time we were in the 3s was in the mid-1990s. So that's a little bit of a benchmark for us as well. Sean, can you...

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