LAMR

Lamar Advertising Company (LAMR)

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Lamar Advertising (LAMR)

Q3 2013 Earnings Call

November 06, 2013 11:00 am ET

Executives

Sean E. Reilly - Chief Executive Officer

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

Analysts

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

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

Avi Steiner - JP Morgan Chase & Co, Research Division

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

Presentation

Operator

Excuse me, everyone, we now have 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 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 an 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 third 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 this conference over to Sean Reilly.

Sean E. Reilly

Thank you, and good morning, everyone. Welcome to Lamar's Q3 earnings call. First, I'd like to address a little bit of white noise in our Q4 guidance, then I'll speak briefly to our REIT conversion process. Then I'll turn it over to Keith to walk through the financials.

In our release, we guided to up 0.5% to 1.5% in net revenue or $314 million to $317 million in Q4 revenues. Last Q4, we received a one-time legal settlement of $1.5 million for lost revenues related to a taking. Adjusting for that result, and about 0.5% increase in guidance, we also have a little white noise from closing some modest acquisitions last quarter and the mid-quarter closing of Next last year. Adjusting for these items, we would be guiding to up 1% to 2%. Nothing to write home about, but nothing to be alarmed about either. If anyone needs to be in touch with Keith about refining your same-store calculations, please feel free to call him after this call. .

On the REIT front, after the IRS reopened a couple of weeks ago, our team reopened lines of communications with them. Our experts continue to tell us they have no reason to think we're not on track for our 2014 conversion.

Keith, you want to walk through the numbers?

Keith A. Istre

Yes. Thank you, Sean. As you saw in the press release for the third quarter, our pro forma revenue increased 2.1%. The guidance that we had put out for third quarter revenue growth was between 1% and 2%. So we did come in at the upper end of that range.

On the expense side, for Q3, our consolidated pro forma expense growth, including $700,000 of REIT expenses, was 2.6%. Without the REIT expense, the growth for the quarter would have been 2.1%.

Also, speaking of white noise, we did have an unexpected liability insurance claim for $500,000 during the quarter that hit the expense line liability deductible as $0.5 million. So any claim up to that amount, we have to pay for out of pocket.

As far as Q4 consolidated pro forma expense growth before REIT expenses, we should be in the 1.5% to 2% range. We're not sure what the REIT expenses are going to be. As I mentioned, it was $700,000 in Q3, and we are back actively working with the IRS and our attorneys and advisors to move that process forward.

We said at the beginning of this year, our consolidated pro forma expense growth for 2013 should be approximately 3% without REIT expense and approximately 4% with REIT expense. For the year-to-date through September without REIT expenses, our consolidated expense -- pro forma expense growth is 1.5%. And with REIT expenses, it's 1.7%. So based on that, I think we'll come in well under the 3% and 4% that we projected -- that we told you at the beginning of the year.

Also, in the press release, we had a paragraph on senior note redemption. We did issue a call notice on Monday of this week calling the 9.75%, $350 million senior notes that come due in April of next year. We will redeem those notes on December 4 of next month. We will use approximately $180 million in cash on hand and $180 million draw on our revolving credit facility to take those notes out. After that transaction, our pro forma debt leverage will be 3.5x. It's 3.9x at the end of September. And our total debt will be $1.970 billion.

With that, Sean, you want to walk through some of the stats?

Sean E. Reilly

Super. Thanks, Keith. Let me start with digital units in the air and same-board performance. As of today, we have 1,836 units in the air. I would note that 25 of those are by acquisitions, those previous acquisitions that I announced that we completed last quarter. On the same-board front, we've had a little -- a bit of improvement. As you recall in Q1, we were down 2.7% same-board performance; Q2, down 2.1%; Q3, we were down 0.9%. So things are getting marginally better on the same-board front for our digital product.

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