In a conference call on October 15, 2001 with institutional investors, Obie Media reported on operations for the third quarter of 2001. Obie is an outdoor advertising company primarily operating billboards and transit advertising displays. Some of the comments in the conference call were directed specifically at the billboard side of the business.
The company reported that billboard sales remained “strong and relatively within original budget parameters at $1.8 million this year, a 6 percent increase over the $1.7 million from last year.” For the first nine months of 2001, sales were $5.4 million, about 8 percent above the prior year results. Management stated “Our outdoor advertising sales are solid, maybe a little soft on the hospitality side but not much. Our billboards are primarily permanent highway painted billboards that are out there on longer term contracts and we still run well above 90 percent and have a very good outdoor advertising plant and one we can depend on.”
A question was raised about the value of the company’s billboard division based on a multiple of 14 times cash flow or Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). Management reported that the projected EBITDA for 2001 on billboard operations is about $3.1 million. Company representatives went on to say that the value of the entire plant would be $31 million if valued at ten times EBITDA. Next year, the EBITDA quick view is about $3.3 million. The value would be $33 million if forward EBITDA in 2002 is used in the equation. At multiples of 14 times EBITDA, the plant value would be “a little over $43 million on this year’s numbers and $46 million on next year’s numbers.” Management was also asked to use a Gross Income Multiplier of 6 times net revenue to estimate value. “Further, in doing the math on six times revenues, six times current year projected revenues, would be a little over $43 million and six times next year’s projected revenues at this point would be slightly less than $47 million.” This question reinforces that opinion that multiples of EBITDA and effective gross income are the common measures of fair market value in this industry.
Management also reported on the prices of their recent acquisitions: “As to the billboard acquisitions, there were three of them and we paid approximately $4.5 million and those ran somewhere in the neighborhood of 5 to 6 times revenues. It’s pretty much similar to what’s been going on in the industry.”