Lamar Execs Got Bonuses for Shrinking Revenue; Their Families Got to Use the Corporate Jets

Lamar Advertising’s top three executives earned bonuses last year even though the company’s revenues and earnings shrank. They accomplished this because Lamar’s incentive structure specifically rewards executives for shrinking revenues, and because payouts are linked not to net income but “EBITDA,” or earnings before interest, taxes, depreciation and amortization, according to a filing with the SEC.

That sounds complicated, but the difference is that net income is the bottom line — the profit left after ALL a company’s expenses are taken out. EBIDTA leaves in expenses such as taxes and interest. Obviously, it’s a lot easier to show higher “earnings” (and under Lamar’s formula, higher bonuses) if you’re not worrying about the effect of tax and interest on a company.

The bonuses-for-reduced-revenues plan takes into account company forecasts; in tough times, the executives are considered to have done well if the company shrinks less than expected.

Overall, the total value of compensation earned by Lamar’s top three execs — CEO Kevin Reilly Jr., CFO Keith Istre and COO Sean Reilly — shrank by 80 percent. CEO Reilly’s take-home package shrank from $4.7 million in 2007 to just shy of $1 million in 2008.

None of the three were awarded non-equity bonuses or stock. But they did all get cash bonuses of between $120,000 and $168,000. Their base pay stayed the same. (Click on the table below to enlarge.)

Those payouts were based on a target incentive chart which shows that they get bonuses even if revenue shrinks anywhere between -2 percent and 0 percent. Revenue at Lamar shrank last year by less than 1 percent to $1.19 billion. Net income shranke to just $9 million.

If EBITDA shrinks from anywhere between -8.4 percent to -0.9 percent then the execs can earn up to 90 percent of their bonus. In the EBITDA bonuses, the first 9 bonus bands are for lower performance, only the last four are for growing earnings.

The execs also cut back on use of the company aircraft last year, which is valued under the “All Other Compensation” heading.” But it wasn’t all bread and water at Lamar, the Reillys and Istre still got to use the company’s two jets for personal use with their families.

• Previous BNET coverage of Lamar:
• Lamar Doesn’t See Auto Bailout Money Helping Dealer Ads
• Lamar Takes on More Debt as It Warns of Goodwill Losses
• Lamar: Revenues Will Decline 15% This Quarter
• Analyst: Lamar Revenue to Decline 9%; More on the Way
• Lamar Advertising Manager Guilty of Embezzling $200,000
• Lamar Advertising Still Embroiled in Pittsburgh Ethics Scandal
• Investors at Odds Over Lamar Advertising’s Future
• Lamar Advertising: The Canary in the Coal Mine