Lamar 3Q Turns Positive on Top-Line - Analyst Blog

Lamar Advertising Company (LAMR) reported its financial results for the third quarter of 2010. Net income reported in the quarter was $0.69 million compared with a loss of $4.9 million announced in the third quarter of 2009. Earnings per share (EPS) were 1 cent, up from a loss of 5 cents in the year-ago quarter. The reported EPS was above the Zacks Consensus Estimate of a break-even level.

The net results were driven by higher revenue growth, offset partially by a rise in operating expenses.

Revenue

Net sales were $286.1 million, up 5.3% year over year from $271.8 million in the comparable quarter of 2009. Results were in line with the Zacks Consensus Estimate of $286.0 million and above the company's forecast of $284.0 million.

On a proforma basis, net revenue increased 4.6%, registering a hike of 60 basis points over the company's guidance of a 4.0% rise.

Margins

As a percentage of revenue, operating expenses dipped 190 basis points while soaring 3.0% year over year. Operating income in the quarter was $46.6 million, up from $39.3 million in the comparable quarter of 2009. Operating margin improved to 16.3% versus 14.4% in the year-ago quarter. Interest expense declined 12.9% year over year to $45.4 million in the quarter.

Adjusted EBITDA was $128.0 million versus $122.5 million in the year-ago quarter of 2009.

Balance Sheet

Exiting the third quarter, Lamar Advertising had cash and cash equivalents of approximately $38.4 million compared with $26.9 million in the previous quarter. Total debt, including current maturities decreased to $2,472.8 million versus $2,547.0 million in the second quarter of 2010.

Cash Flow

Cash flow from operating activities was approximately $97.0 million versus $75.0 million in the third quarter of 2009. Capital spending decreased by 59.5% year over year to $12.0 million compared with $7.5 million in the year-ago comparable quarter of 2009. Free cash flow was $75.2 million versus $83.0 million in the third quarter of 2009.

Outlook

For the fourth quarter of 2010, management expects net revenue to be approximately $275.0 million and up roughly 4.0% on a proforma basis.

Our Take

Lamar Advertising Company is one of the largest owners and operators of outdoor advertising structures in the U.S. It provides advertising services to restaurants, retailers, automotive, real estate, health care, gaming, service, hotel and motel, telecommunication, and amusement industries, including entertainments and sports.

We currently maintain a Neutral recommendation on the stock.