S&P changes Lamar outlook to stable

Standard & Poor's said it revised its outlook on Lamar Advertising Co. and its subsidiary Lamar Media Corp. to stable from positive.

The BB- corporate credit ratings, Lamar Advertising's B senior unsecured rating and Lamar Media's BB senior secured and B subordinated ratings were affirmed.

The agency said the outlook revision reflects the expectation that Lamar is likely to maintain credit protection measures consistent with the current rating over the intermediate term following its announcement of a $325 million special dividend and a new $500 million stock repurchase program. In addition, Lamar has $100 million remaining under its existing $250 million share repurchase program established in August.

S&P believes that share repurchases and dividends over the intermediate term could exceed $900 million - a meaningful amount of which would be funded with debt. Although Lamar generated about $365 million in cash flow from operations in 2006, it increased debt in 2006 by more than $400 million to help fund $223 million in capital expenditures, more than $200 million in acquisitions and more than $340 million in share repurchases. As a result, its total lease-adjusted debt-to-EBITDA ratio increased to 5x at December from 4.6x at December 2005, and the dividends could push the ratio to near 6x in 2007.

The BB- corporate credit rating balances Lamar's highly leveraged capital structure and significant share repurchases against its satisfactory business profile as a market leader in small-to-midsize markets, high and stable margins and strong cash flow generation, the agency said.

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