Markets

Lamar Takes on More Debt as It Warns of Goodwill Losses

By Jim Edwards

Updated on: March 24, 2009 / 3:54 PM EDT / MoneyWatch

Lamar has taken on $350 million more in debt as it expects to see net income in Q1 and Q2 hurt by write-downs of goodwill.

Lamar said the new debt will "reduce the amount of revolving commitments under our senior credit facility."

In addition, the company said its market cap had fallen below its book value:

Because our market capitalization has been below our equity book value for a period of time without recovery, we believe that a triggering event has occurred and it is possible that the fair value of one or both of our reporting units are below their carrying amount.
As a result, we are currently testing our reporting units for impairment of goodwill.

Any goodwill charges will reduce the company's net income:

As of December 31, 2008, we have $1.4 billion of goodwill on our balance sheet. This testing may result in an impairment to a reporting unit under SFAS 142 and a non-cash charge in either the first or second quarter of 2009. ... any such charge could have a material adverse effect on our net earnings.

Lamar's stock is currently trading around $9 range. The company predicted its Q1 revenues will decline 15 percent. For Q4, revenues decreased by 8.4 percent to $279 million.

Also, CEO Kevin Reilly and COO Sean E. Reilly are not getting raises on their 2009 base salaries of $700,000 and $500,000, respectively, they told the SEC.

Lamar is not the only company writing down goodwill. Valassis, ValueClick and Clear Channel Outdoor have all either warned of goodwill write-downs or have already done them.