Operator: We now have Kevin Reilly, Sean Reilly, and Keith Istre in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the Company's presentation, we will open the floor for questions.
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 of 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 the call and 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, www.lamar.com.
I would now like to turn the conference over to Kevin Reilly. Mr. Reilly, you may begin.
Kevin P. Reilly, Jr. - President and Chairman: Thank you, Shantelle. I want to welcome my friends to Lamar's Q4 call. As was announced, we filed our private letter with the IRS in November and we are awaiting word. 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 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 wins at our back.
With that, I will go ahead and turn the call over to Keith Istre to walk us through some of the numbers.
Keith A. Istre - CFO: 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. 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 up 3.6% and our consolidated expenses for the quarter came in at up 1.8% and we had guided to approximate expense growth of between 1% and 2%.
For the full year, including Next for the two months that we owned in November and December, revenue on a pro forma basis was up 3.1%, EBITDA was up 4.6% and consolidated expenses grew at exactly 2.0%. I don't know if anybody recalls, but last year or at the same time we had guided the 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 pro forma operating expenses for 2012 and grow 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 per cent to expense growth for the year. We're not sure exactly when those expenses will hit, we budged 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, it looks like it will come in at approximately $100 million at this time. Last, we're projecting free cash flow of '13 to be approximately $320 million coming off of $267 million in 2012.
With that, I'll turn it over to Sean.
Sean Reilly - CEO: Thank you, Keith and welcome everybody. I guess the watch words for 2013 are steady as you go both strategically and operationally. Keith mentioned the CapEx budget little over half of that will be maintenance and little under half would be growth as we move through the year in 2013.
I want to accomplish 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 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 1693 digital units up and operational that includes 64 from NextMedia.
If you recall middle of last year we began seeing our same board digital go flat and even be slightly negative. In Q4, that turned and our same board digital was slightly up at 0.3%. And given our February book it looks like that's continuing into the first quarter.
Occupancy stats Q4 '12 and Q4 '11 were identical for both postures and bulletins at 66% for postures, 76% for bulletins. Here is another one of those data points that I think might be a green shoot for us. We are finally getting a little bit of our growth out of our traditional platform on rate, as our rate was slightly up Q4 '12 over Q4 '11 for both postures and bulletins. Average rate per panel for postures Q4 '12 428 versus Q4 '11 of 426 and for bulletins Q4 '12 11.24% versus Q4 '11 of 11.19%.
National versus local; Q4 was about local. Our Q4 local book was up 3.4% in the fourth quarter and up 0.1%, for national. For the year, local was up 3.6% and national was up 2.1%.
As I look at our categories of business; again, I think, there is some interesting data points. Number one, retail for the first time was the largest category in our book. I don't know if this portends anything in the future, but if you think about Lamar being more relevant for retailers in their high season that could be a good thing. Retail was 13% of our book in Q4 2012; restaurants were 12%; hospital medical care 10%; service 8%; amusements, entertainment, sports 6%; automotive was 6% of our book.
In Q4, automotive was up 14%. It looks going into the first that automotive will be up low-double-digits that's an encouraging sign. Telecom as you all know was a drag on our same-store growth for much of the year that turned in the fourth quarter. Telecom was up 3.2% and again that looks to be carrying over into the first quarter.
And then finally, and I think this is very encouraging, real estate has turned positive in our book, and that's something we've been looking forward for well ever since the downtime, and that likewise appears to be carrying over into the first. It's a small positive, but it's nice enough to see negative numbers in that build up. So, as I look at all of our customer categories, we really only have one that is continuing to be challenged and that is hotel-motel. Hotel-motel was down approximately 7% in Q4.
I'm encouraged as I look into 2013 and happy to answer any questions.
Kevin P. Reilly, Jr. - President and Chairman: Chantelle, can we open up the call for questions?
Operator: Marci Ryvicker, Wells Fargo.
Marci Ryvicker - Wells Fargo: A couple of questions, the first Sean, can you just kind of outline the next steps, once you get the private letter ruling and talk about whether you still feel comfortable this could come in March, or is there a chance it comes shortly thereafter? The second question is, if you could update us on your thoughts for digital billboards for '13? Then my last question is if you're seeing acceleration throughout the first quarter, or are you seeing more stability versus the volatility you were seeing at some point last year?
Sean Reilly - CEO: I'll take them in reverse order. The book is still showing some month-to-month volatility. As we look out a little bit further into the year there seems to be a smoothing, but the first quarter looks a little lumpy. I think you ought to model about 130 new digital units for '13 and we'll probably still update everybody as we move along, but that is a good conservative number two start out with, and then you know finally on the REIT process it is one that's a little bit beyond our control. We are being told that in terms of meeting our timetable of January 14 was still in good shape. The IRS processes they tell us 3 to 6 months. So, if you count that down from November it is my hope that sometime between now and our next quarterly call we will have some information to pass on to everybody. But it is not perfectly predictable exercise. I would note, as Keith mentioned, that we have penciled out a rough estimate of what we think the conversion expenses will be and we do have our team in place. We have a financial advisor, we have our attorneys, we have our accountants and they are hard at work.
Marci Ryvicker - Wells Fargo: Can you just describe what kind of expenses would be in that 5 million?
Sean Reilly - CEO: Well, probably the largest is probably legal, I am guessing. And then the second largest would probably be our financial advisor who recently retained, and then finally the accounting. But you know until you get the PLR and understand exactly what kind of structuring you are going to have to do it is again kind of hard to predict. We are being told by our experts that as regard to other non-traditional REIT conversions we are a little simpler and easier to get your arms around because of the nature of our business and the fact that we have very little in the way of international operations. So, once we get the PLR it ought to be a slightly more predictable exercise on penciling out expenses and penciling out the timeline.
Operator: Matt Chesler, Deutsche Bank.
Matthew Chesler - Deutsche Bank: Just a question about some of your top categories. Within restaurants, are there any particular trends within the restaurants category that you're seeing that you would want to call out? It was nice to see retail grow and become your largest category. To what extent did that phenomenon take place because other categories were given up some share?
Sean Reilly - CEO: Restaurants are fine. I mean for the quarter, they grew essentially the same amount as the aggregate book, so I don't think it was at their expense. In '13, it's looking strong. McDonalds and Cracker Barrel are both going to be buying for one and two in terms of our top customers in our book of business. So, I don't think the retail growth was at the expense of anybody, I think it was on top. Again for us that's a little bit of milestone, because we traditionally come November and December, we aren't the medium of first choice for retailers and it's encouraging to me to see that we may be more important in their plans at the most important point in their year. So, I'm hopeful that that happens again next year.
Matthew Chesler - Deutsche Bank: Then on to the re-topic. If you don't mind, few things; one, it would be how are you thinking about using your NOLs either before or as a read relative to the timing of the conversion? To what extent would you be using those to manage the potential dividend payout. What are your advisers telling you about the potential for any purge and if so, can you give us any sense of magnitude directionally on that. Then finally just question on the balance sheet, get a sense for what cash interest might be in 2012.
Kevin P. Reilly, Jr. - President and Chairman: Keith, you want to hit the cash interest?
Keith A. Istre - CFO: Yeah, cash interest. We're projecting about $130 million, down about $10 million from 2012. We're planning on doing a little refinancing of some high cost debt during the year and we took advantage of some really low rates last year to knock down some of the higher cost interest debt that we had been carrying along for the past several years, so we'll get a little bit of a break there.
Sean Reilly - CEO: It's a little premature to be thinking about P&E purge and where the dividend's going to be set and how we would use the NOLs. We've just brought as I mentioned, our financial advisor, onboard JPMorgan and they're going to be laying out different options, but I think for us to do the kind of work we need to do to get that right, that's a third and fourth quarter discussion with the rest of our shareholders. The Board and our financial advisors need to do their work.
Keith A. Istre - CFO: Having said that we don't expect any surprises on the P&E purge or E&P purge.
Operator: James Dix, Wedbush Securities.
James Dix - Wedbush Securities: Just two things, I guess, one a housekeeping item maybe, Keith, you can handle it. Just your pro forma full year revenue now including next just that base that we should be using for revenue and EBITDA for 2012 just in terms of our modeling for 2013. If you want to take that and then I will have one follow-up?
Keith A. Istre - CFO: Our pro forma revenue mix is right at (indiscernible).
James Dix - Wedbush Securities: And then just in terms of capital expenditures, if you can give just a little bit more color as to how we should be thinking about maintenance CapEx going forward. More generally I know you said it was going to probably be a little over half of the 100 million you are budgeting for this year. But also just some color as to what can cause that to vary from year-to-year I know people are interested in that as they look out at the reconversion. And then in addressing that if you could talk at all about how you typically budget for repairs for kind of unpredictable things like storms because I know you've indicated that you self-insure for that and then how much variability have you gotten at the most related to that that will be helpful?
Keith A. Istre - CFO: As a general rule you should – as you model it out and look out into future years you should reserve about 5% of net revenues for maintenance CapEx. So, given 1.25 billion-ish, $50 million to $60 million of course that's right around where we are budgeting for this year. Our maintenance CapEx is variable in the sense that we can throttle it back if we need to and we can prioritize different products depending on useful life. The most important one here is digital. The next few years given the way we rolled out digital over the last 10 years. The next few years are going to be a little heavy on digital CapEx, and so we will throttle back on the traditional CapEx, so as to keep it within that $50 million to $60 million band. It's my anticipation that we can keep it there indefinitely. I mean, year-in and year-out that's about what we need to do. We've gotten very good at protecting our units from storm damage. We've learned a lot of lessons over the last few decades. Number one, we have tear away a copy along the coast so that the wind blows the copy out, it doesn't blow structure down, that's proven to be very, very helpful over the last few storms that come shore. So, I don't see that as a risk sort of extraordinary storm damage. We pretty much got that drilled down.
Operator: Benjamin Swinburne, Morgan Stanley.
Benjamin Swinburne - Morgan Stanley: Two questions. One, I would look to hear some more about the trends you're seeing in real estate as you mentioned that was a big headwind for a long time and particularly how are markets like Las Vegas and Southern California performing now, which I think have been drags on the overall book? Then, I guess, unrelated around the REIT conversion and particularly in lieu of the CBS' move, do you think the move towards weak status for the outdoor business in the U.S. for two major players increases sort of consolidation in the industry. In general, obviously you guys have picked up your pace on acquisitions a little bit already, but I'd just love to get your thoughts and what that might mean if there's any relationship there in your mind?
Sean Reilly - CEO: I can't really speak to pace of acquisitions, but I can speak to what it's done in terms of our strategic focus. Obviously, when we get the PLR back we'll have more clarity on what assets are deemed re-qualified and what our operations are, but it's clear that high-quality traditional out of home qualifies. If you limit our universe to that in the domestic U.S., there is a handful of good quality potential acquisitions, but we really are sharpening our focus on high-quality traditional out of home assets in the domestic U.S., obviously conversion to a REIT drives you to that conclusion. The other question was?
Benjamin Swinburne - Morgan Stanley: Real estate.
Sean Reilly - CEO: Real estate, it was interesting. Real estate has been for the last four or five years a double-digit down to single-digit drag on our same-store performance. In December, it went positive. As I'm looking at the first quarter pacing it's slightly positive. That's a good thing. I mean, if we don't have to fight that headwind, then hopefully as the year progresses, we can sell more traditional units and see a return to growth in our same board traditional platform. We've got the whole organization focused on that and as a matter of fact we've tweaked our incentive comp for our AEs and our GMs to focus laser-like on that so. Hopefully, that will bear fruit as we move through the year.
Sean Reilly - CEO: Las Vegas, the western region had been trailing the pack in terms of our region as we reflect on last year as we got to the middle of the pack. So, there has been a little bit of a recovery out there in Southern California and in Las Vegas. As I look at Florida pretty much the same thing. So, they are not leading the pack, but they are not trailing the pack.
Operator: David Miller, B. Riley Caris.
David Miller - B. Riley Caris: First of all on digital. How much did digital rise on a revenue basis in the quarter. In the December quarter on both an aggregate basis and also on a same board basis. And then Keith if memory serves you guys were pretty efficient in taking out a portion of the 6.625% paper on the bond refi, when do you feel comfortable moving in terms of – moving down the capital structure here and taking out a portion of the 7.875% paper?
Kevin P. Reilly, Jr. - President and Chairman: The 7.875% don't return till '18, so we are not that focused on them. At this point we are more focused on the senior notes that we put in place in 2009, the 9.75% that we are going to be addressing some time in '13 probably towards the back half of the year. And there is a make hole on the 7.875% that doesn't go away until April 2014 when we have the right to call those. So it would be very expensive to take those out at this point in time the 7.875%, but we will address that as we move forward.
Sean Reilly - CEO: So, on the digital question, in the aggregate most of this growth was increased units in the air. Digital posters were up 7.3% in Q4 and digital bulletins were up 13.5% in Q4. Again most of that or the bulk of that was additional units. The same board performance, if you recall Q3 was a low point for us. The same board performance was down 1.5%. Q4, same board performance was up 0.3%. So, we did see a little turnaround there and I'm encouraged by what I see in the February book.
Operator: Tracy Young, Evercore.
Tracy Young - Evercore: So, two questions. The first you talked a little bit about geographic performance, but have you seen any difference in performance in your other categories? The second question is, when you do acquisitions like the NextMedia where do you see synergies?
Sean Reilly - CEO: On the acquisition question, particularly for Next, it's primarily on the expense side. It's a fairly predictable exercise when we do something like that. For example, using Next as an example. They had five operating offices and we were able to skinny that down to 2.5 and then of course you don't need the redundant corporate overhead and the like. So, primarily when we do these types of acquisitions you can expect a pretty quick and predictable expense synergy and that's typically what makes them accretive. On the regions, there was a little bit of a flip flop in '12 versus '11. In '11 our strongest region was the Northeast and actually as we closed our 2012, it was our weakest region and you can't blame that one on Sandy, it is what it is. Sandy had a very negligible impact, and our strongest region as the Midwest. So, that includes sort of traditionally as what you would think of as the Midwest, very, very strong performance there. I'm liking what I'm seeing there for sure.
Tracy Young - Evercore: Thank you.
Kevin P. Reilly, Jr. - President and Chairman: Chantelle, that concludes our call and I want to thank all of our shareholders and friends for tuning in and we look forward to the next quarterly call. Thank you very much.
Operator: Thank you very much. Ladies and gentlemen, at this time, this conference has now concluded. You may disconnect your phone lines and have a great rest of the week. Thank you.