| Cash Flow: In 1Q09, free cash flow was $45.5 million versus $21.5 million in 1Q08, up 112.2% y/y due to decreased capital expenditures.
Management began taking steps to significantly reduce expenditures in several areas, including operating expenses, capital expenditures, and acquisitions. The company expects to generate free cash flow in FY09 by continuing these measures and intends to use the funds generated by these actions to reduce existing indebtedness.
One analyst (BAS-ML) expects that LAMR will deploy its FCF to reduce debt which provides the company with a higher margin of safety with respect to its bank debt covenants.
Balance Sheet: At the end of 1Q09, LAMR had $381.0 million of total liquidity consisting of $193.8 million in cash and $187.0 million available under its amended revolving senior bank credit facility.
During 1Q09, LAMR announced that it has agreed to sell $350.0 million aggregate principal amount ($314.9 million gross proceeds) of 9.75% Senior Notes due 2014 through an institutional private placement by its wholly owned subsidiary Lamar Media Corp. LAMR used the proceed to purchase Series B 2.875% convertible notes due 2010 for cash of approximately $153 million principal amount, with a purchase price of $920 for every $1,000 principal amount of convertible notes, plus accrued and unpaid interest as of April 20, 2009.
Lamar Media Corp. also initiated an amendment to its existing senior credit facility, effective on April 6, 2009. The amendment to its existing credit agreement included a reduction in the amount of the revolving credit commitments from $400 million to $200 million, an increase in the interest rate margins for the revolving credit facility and term loans under the credit agreement, changes to certain provisions regarding mandatory prepayments of loans, amendments to certain financial covenants, and a pledge of additional collateral by Lamar Media and its subsidiaries, including certain owned real estate properties, to secure the loans made under the credit agreement.
Capital Expenditure: During 1Q09, capital expenditures were $10.1 million versus $50.2 million in 1Q08, including $4.3 million on digital displays. For FY09, management reiterated its confidence in being able to sustain capital expenditure at about $30.0 million level for the next three years.
Share Repurchase Program: During the quarter, the company did not repurchase its Class A common stock under its current share repurchase program. As of December 31, 2008, the company had approximately $127 million of authorized repurchase capacity remaining under this repurchase program. The program expired in February 2009, with no repurchases occurring in FY09. Share repurchases under the program were made on the open market or in privately negotiated transactions. The timing and amount of all shares repurchased were determined by Lamar’s management based on its evaluation of market conditions and other factors. All repurchased shares are available for future use for general corporate and other purposes.
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