Lamar Advertising Co (LAMR) 2002 Q2 法說會逐字稿

Good morning, welcome, ladies and gentlemen, the Lamar Advertising Company Q2 earnings call. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company we will open the conference up for question-and-answer after the presentation.

At this time, I will read a Safe Harbor statement. In the course of this discussion, Lamar Advertising Company will make forward-looking statements regarding the company and its future financial performance. The company has identified important factors that could cause actual results to differ materially from these discussed here in the company's reports on forms 10-K and 10-Q, and the registration statements that the company files with the SEC and the company refers you to those documents.

I will now turn the conference over to Kevin Reilly, Chairman, President, CEO.

Thank you. I would like to welcome our shareholders and guests to our second quarter earnings call. I want to kick it off by touching on a few things and turn it over to Keith for the numbers and then we will open up as is our custom we will open up the call for Q & A.

We finished up the second quarter as expected. We do expect in the third quarter that we will again end up in positive territory. So we are showing in a difficult environment continued improvement sequential improvement.

And you are looking at a company that has a tremendous free cash flow and it is by any measure that you want to choose, any measure you want to choose, I think you will find that Lamar will lead in our peer group across all the indexes. What we will continue to do for the rest of this year and into '03 is monitor the activities of our local sales force and we will rely on main street to continue to generate growth for the organization going forward.

We are also going to pay very close attention to the company's balance sheet and make sure that we have plenty of liquidity, not only for the rest of this year, but for the out years, because we feel like in this environment, the companies that will be rewarded are the companies that have strong, visible cash flows and strong balance sheets.

So with that I will turn the call over to Keith.

Let me recap the numbers that you got last night on the press release you got last night and add a few you didn't. First of all the consolidated net revenues as you saw was 202.5 million. The guidance on the call was 201 million, approximately. The 202.5 represents a 6% as reported increase over last quarter. Last year's second quarter, I am sorry.

Consolidated EBITDA was 96.5 million, the guidance we gave for consolidated EBITDA for the second quarter was 96 million, the 96.5 represents a 3% increase on an as reported basis. Consolidated EBITDA margins were 48% for this past quarter, for 2001, they were 49% for the second quarter, and for 2000 second quarter they were 49%. So from the best to the worst of times, the company has managed to lose only 1 point in its consolidated EBITDA margins and at times were normal. We feel we would be north of 50% in the second quarter that we just finished up.

Free cash flow you saw was up 19% over 2001 Q2 to 47 million. Free cash flow per share was 46 cents, that was a 15% increase. For those two measures for the year-to-date, six months into June, free cash flow was up 34%, free cash flow per share was up 30%. Same-store as you saw in the press release we were up 1.7, we had guided to -- on the revenue side we had guided up 1, EBITDA was even, and that is what we had guided. For Q2 2001 last year, in revenue on a same-store basis we were up 1% and in EBITDA, we were also up 1%. So we did manage to continue to be positive, over positive.

In the Cap Ex for the quarter, it was right at 21 million, the -- from an operational standpoint on a national sales mix basis for Q2 -- actually for six months into June, our local mix was 86%, our national was 14, last year, through six months, '01, it was the same, 86 local, 14% national, and in -- for six months into 2000, it was 85% local, 15% national so there has been absolutely no change in our mix again through the best and worst of times.

Last, as you also saw in the press release acquisitions for Q2 came in at 32 million.

With that I will turn it over for Q & A.

Ben? Ben, you want to start the Q & A.

The question-and-answer session will begin at this time. If you are using a speaker phone, pick up the hand set before pressing any numbers. Should you have a question, please press the 1 on your push button telephone. If you wish to withdraw your question, you may press the pound key at any time. Your question will be taken in the order that it is received, please stand by for your first question. Our first question comes from the site of Drew Marcus with Deutsche Banc, Alex Brown Inc.. Go ahead, please.

Two things. One, can you give forward-looking data as a percent of budget? And second, your expenses in the Q3, you know, what kind of things are you spending money on that you are choosing to do that for long-term as opposed to cutting back for the near term?

Drew, as far as the bookings to budget, I don't -- I don't have that in front of me, what we do have -- I am sorry, yes, I do. Let's see, we are -- for the -- for the full year, this year as of June 30th, for 2002, we are book-to-budget 77%. In posters. And 2001, we were booked 67%, in 2000 we were booked 77%.

So we are trailing to budget exactly as we were trailing to budget in 2000 on posters, 2001 we were tracking 10% behind budget at 67%. On the bulletins, for the rest -- for the actual six months into June, and going forward, six months to December, our bulletins to budget are 86%. As of 2001, the same time period, we were 83%, and in 2000, same measuring period to budget we were 86%.

So to budget, in 2002, we were tracking percentage-wise the same as 2000 and of course the budget is less in 2002 as far as the same-store growth basis. But, you know, we are still confident that we will come in and reach our internal goals based on that.

And expense growth in the third quarter?

Yeah, we are going to have some expense growth, total expenses for Q2 was 106 on a consolidated basis. We are looking at 110 for Q3, approximately 2 million of that on logo franchise fees that we will owe to the various states, you could call it franchise fees, right of way rental, whatever, that was not in the second or first quarter, that is a recurring expense like an annual lease cost. Some of the states do charge for that. Our health insurance went up approximately 40% effective July 1, that translates to a million dollars a quarter more in health insurance coverage. So 106 was the actual, the two numbers I just gave you, adds that up to 109, and we just rounded it off to 110.

Okay, thank you very much.

Thank you. Our next question comes from the site of Tim Wallace with Bank of America Securities. Go ahead, please.

Thank you. Could you talk about the difference in tone between your short-term contracts and your longer-term contracts and if you could put numbers on the kind of price increases you are getting on your longer-term contracts? And secondly, could you talk about the impact of 9/11 for you guys in Q3 and then finally, if political is meaningful for you in the third quarter. Thanks.

This is Sean. I will field that one. There really is very little in the way of price increases on the longer-term contracts, particularly the bulletins. If you look at what we are averaging in terms of rate, it is essentially flat. On essentially the same occupancy. We are getting, on the shorter end, we are getting actually a little better news on the rate, because we are up about, you know, give or take 2 or 3% on poster rates. And on a year-over-year basis, about the same percentage on occupancy. So we -- we are seeing a little bit of good news on that front. That is on the shorter front.

On the longer front, has that changed over the past couple of months?

Not really. Maybe marginally, but not really. I mean, it is -- it is a little frustrating out there in terms of how the hotel-motel business is doing.

You know, some of those folks, after 9/11, have been struggling a little bit. It has not shown up in terms of the percentage of our book that represents hotel-motel, because that is still 9% and it has been 9% the last three years. But anecdotally, we hear that some of the roadside businesses are struggling out there. So that is where that would show up. On the long end.

In terms of 9/11 we really didn't have much of an impact in the third quarter of last year with the exception of our Vegas market. Vegas got hit pretty hard, you know, with a lot of cancellations on the conferences and the like. And what we are hearing out of Vegas is that, you know, it is slow and steady improvement there. So there may be an opportunity for a little bit of an up-tick in Vegas. But -- and then political, as Kevin reminded me is basically year round. We are not like television in that regard, and we are getting a little bit of help on the political side, particularly in the Southeast.

One final question, on occupancy, could you just update us where you are in the third quarter?

I don't have a third quarter. I have got it broken out monthly in front of me. To give you color on July, 2002, our poster occupancy is 66%, and as I mentioned in 2001, it was 64%. So you have a 2% up-tick in July poster occupancy. And on the bulletin side, it was 75% last year, this month, or July, and 75% July '02. So the occupancies have not changed on the bulletin side, with a slight improvement on the poster side.

Okay, thank you.

Thank you. We will take our next question from Michael Russell with Morgan Stanley Dean Witter. Go ahead, please.

Thank you. I was wondering, if you given any thought to giving better proforma quarter guidance given the acquisitions you are doing? Could you be more specific about what proforma quarters we should be using, beyond just the annual proforma numbers?

We have not. In the past we have given it post-earnings release, we have not given it prior earnings release. We give it without giving specific numbers, we try to guide in terms of this is the revenue we bought, this is how the revenue was accumulated, these are the margins, and then we just assume that the analysts and Wall Street will take that and add it to the previous quarterly guidance that they have.

Okay, and just wondering, last time around you said that you your stronger geographical regions were in the Northeast and Midwest. Northwest and Southeast were kind of struggling, lagging in the recession liked they lagged in recovery. Is it still continuing that same geographical trend?

It is. And I would only add that certainly in April, we felt that things would be a little more robust in the back half in terms of the economy, so we are not getting a lot of help on that front, and it is -- in terms of where at least I have noticed things haven't been as robust as we wanted it, it seems to be now the Northeast. We are not seeing a double dip, we are not seeing, you know, real, you know, ugliness out there, but if I had to suggest where -- we are not as robust as we had hoped I would say the Northeast now.

What about the large market, small market difference, is there strength or weakness particularly note-worthy in either?

I don't think so.

No, except for the larger markets have easier comps, just like the Midwest and the Northeast had easier comps. So we do have -- relative to the budget, some of the smaller markets are struggling because they just sort of sailed through things in '01, and then you have got some larger markets that are -- have -- that are doing pretty well but they are coming off a fairly low base.

Okay, thank you very much.

Thank you. Our next question comes from the site of Paul Sweeney with Credit Suisse First Boston. Go ahead, please.

Thank you very much. Good morning. A couple questions. First just on the bulletins, historically, those have had a roughly 90% renewal for you and I know that last year, you know, that weakened up. I wonder if you could give us a sense of where some of the rate renewals are. And then second, as we try to look out to '03 at all, do you have any of your longer term business or your longer term customers giving you any sense of how she are viewing kind of their ad outlook into next year? Thanks.

Let me hit the second question first. It is a little early in the cycle, but what we are hearing is that it is pretty much steady as she goes. I will tick off our top five largest customers, and kind of give you a sense of what they have done year-to-date. It might give you some insights into what they will do next year.

Cracker barrel is our largest company. At the end of July they are up 17% on their ad spend with us, they are up -- they spent year-to-date $4 million with us, and they are doing extremely well, and, you know, we believe that they will continue to increase their business with Lamar.

McDonald's is our second largest customer and they are up year-to-date over last year and it is sort of steady as she goes there.

We have got Nextel is our third largest customer, they are up year-to-date, I was glad to see that their last quarter's release looks like they might be pulling out of the woods there, so that is good.

Holiday Inn is our third largest customer they are up year-to-date marginally and, you know, that is sort of steady business and steady as she goes. And then Miller Brewing is our fifth largest customer, and they are actually up year-to-date as well marginally, they are up 1% with us year-to-date.

So it is -- that is the profile of our top largest customers and what we are hearing is it is, you know, steady as she goes next year.

Okay, and then some of the renewal rates on the bulletins.

Yeah, we have stopped quoting that number, because last year, it became difficult for us to have a lot of confidence in it. What I am hearing anecdotally is that with the customers that kind of had trouble last year, that, you know, that kind of washed through last year and this year the renewals are not such a big problem. So, you know, I don't want to quote 90%, but it would not surprise me if that's what it was.

Great, thank you very much.

Thank you. Our next question comes from the site of Jim Boyle with Wachovia Investments. Go ahead, please.

Good morning. The Lamar revenue guidance for Q3 is 2 to 3%, you did 1.7 in Q2. If you had gazed into your fuzzy crystal ball about two months ago, would you have guessed 2 to 3% at that time?

Well, Jim, let me answer that question by talking about the whole year and what our hopes were for the whole year, our hopes were that our business would accelerate in the back half.

It is going to -- we are going to show improvement, granted some of that improvement is coming off of some easy comps in the back half, but we thought that occupancy would tighten up a little bit, substantially, actually, in the fourth quarter, and then as we looked forward into '03, the company would experience 6 to 8% organic growth. And we were a little bit more confident of that two months ago than we are today. I am not discounting the possibility that business could get substantially better in the fourth quarter and, you know, we are showing improvement quarter-to-quarter. In terms of same-store growth.

But it is not coming kind of at the pace that we expected, and so we are just going to have to wait until the fourth quarter before we can really give our shareholders a sense of, you know, how we feel about '03.

Okay. 32 million in acquisitions, so that sounds like a bunch of Mom and Pop tuck-ins and probably most likely done at reasonable multiples, since Lamar is one of Outdoor's big three, you have critical mass, so in an investment environment that is focused on as much free cash flow as possible, is that the best use of your capital or a close second now-a-days?

Well, in terms of what our game plan is, it is -- it is pretty much the same, Jim, and if you look at sort of year-to-date what we have done on the acquisition front, year-to-date we are a little north of 115 million, and if you think about just pure cash, about half of that was cash and half of that was stock, and the average price that the stock was put out was probably about $40, because a lot of those deals were done the stock deals were done in the first and early part of the second quarter.

You know, probably not going to be putting out our stock at these levels, for acquisitions, so if that's part of the question, then that's probably an appropriate answer. We do have a high-grade problem, Keith, I don't know if you hit this number in his earlier comments but we have $55 million hanging in the bank, so, you know, we are generating lots of cash, and we are not putting it out as quickly on the acquisition front as historically we have.

But, you know, the game plan is steady as she goes, if we have good accretive tuck-in acquisitions we will do them.

But to your question -- Also to your question is we are extremely sensitive about the company's leverage. And as we talk to our shareholders we are becoming more and more convinced that those companies that have options going forward and plenty of liquidity will be companies that are going to be rewarded in the marketplace.

Sean, you said roughly about 150 million year-to-date on acquisitions, approximately what was the multiple paid?

I am pretty -- I feel pretty good about our acquisition math in terms of being very disciplined on our proformas going forward so I will say we brought these in at 10 times forward, and I think I can say that with a great deal of confidence. It was a little harder last year to do an accurate proforma in a falling ad spend environment. But our management out there is now very comfortable doing the numbers in a difficult environment.

And, you know, it has resulted in a couple of sellers telling us they don't like the number we put on the table because we are being very, very cautious when we think about how we will perform with additional assets.

Sean, you have done the centennial visits to your various local places, what is the mood in the trenches of the sales people besides the fact they are happy they have a job?

Actually, you know, it is -- it is very good. You know, we operate in a lot of places where people don't obsess over what is going on, on Wall Street, and, you know, they are just -- they are enjoying what they are doing for the most part, they are hitting their internal goals, so, you know, we have got particularly on the account executive front we have a lot of happy campers out there.

And that has been very refreshing, you know, to get out there and visit with folks that aren't day in and day out fixated on the share price. They are more day in and day out fixated on how they are doing in their local community and hitting their internal budgets and doing well out there where, you know, real people live.

Thank you.

Thank you. We will take our next question come from the site of Bishop Jean with Wachovia Securities.

I am the other side of the balance sheet. On the 1.840 of debt that includes the 287 [half] of converts, Keith?

Yes.

And is that the total debt that is not net of -- I think you said you have 55 in cash sitting around right now?

Right, that's not net of that. That is gross.

Okay. And a couple housekeeping things, there is no other big outflows that we can anticipate a big tax payment or anything, there is no overhang out there for this year?

No, we are not taxpayers, Bishop.

And what could we assume for the next six months in terms of debt paydown?

Well, our big facility is unwinding now of amortizing now quarterly. This year it was $15 million a quarter.

Right.

Next year it will be $30 million a quarter. And our revolver steps down slightly, $350 million revolver we have in a bank line has begun unwinding this year as well. Right now, on our revolver, we have got 329 million available, and none of that is drawn, in addition to the 55 million in cash on hand.

Which goes to as you started off the call having ample liquidity is one of your priorities?

Yes, that's right. So we don't obviously there is -- with roughly -- I am not -- let's see, let's just say a little north of 200 million in free cash flow next year, and the amortization of 30 million a quarter, plus the revolver that we have, if the bank markets shut down tomorrow we would have no problems over the next 18 months.

Right, which has always been one of your core strengths.

Right.

Okay. Just one other question, and [INAUDIBLE] I have e-mailed back and forth a couple of times and, Sean, I don't know if you or Kevin had a chance to do this. One of the things dangling out there for better measurement in the outdoor sector is what Arbitron is allegedly trying to do. Can you give us color on what you see as better measurement in your future and what that shareholder would mean for Lamar?

Arbitron is trying to take the outdoor industry to the next step. Right now we have credibility with our advertisers in terms of the accuracy of our traffic counts. It is not hard to count cars in front of billboards. There is a lot of confidence in the numbers we deliver to our customers.

But we are pretty much clueless, other than the census that is taken every ten years, which is, you know, we develop demographic information by zip codes, and the billboards are fall into certain zip codes, we are clueless as to who is in those cars and what are they thinking about and how are they behaving and what are they likely to buy in the next few months? And that is where Arbitron is trying to take us.

They are trying to take the entire -- this is where we are thankful that Viacom and Clear have big stakes in this industry and are also on the radio side, because we are getting a hell of a lot of cooperation from Arbitron on this. Obviously they will get paid for it but we are getting a lot of cooperation from them on this and I think that at the end of the day they will deliver a very credible product to media planners and both nationally and regionally that they are going to give our customers even more confidence than they already have, in buying outdoor advertising.

It will help them, you know, it will make them look good because they will be able to bring this information back to their customers and talk about how they are going to, you know, use outdoor on their behalf. And it is, you know, I have been -- I have mentioned this on several calls over the last 18 months, but it is for real.

They have launched a study, they are spending the money, the entire industry is behind this, all of our people out in the field are collecting data for Arbitron, Arbitron is coming up with a valid way to measure some of these qualitative things, and, you know, they have not committed to a specific date when this is going to hit the marketplace, but they are definitely on track.

How about a specific beta test? Is there any markets that they have targeted to start the betas?

Yeah, this is Sean. We have got it up in four to five markets, and the initial feedback is good.

The account executives are enthusiastic about it, and the real test of that is we are not buying this service at corporate and forcing it down to the local markets. The local markets have the option, whether or not they want to pay for it and whether -- and whether it makes a difference to them hitting their budget.

And so far what we are hearing from the markets that have the opportunity to purchase the data, and use it, in their presentations to customers, is that they like it and they are buying it, and, you know, I think that's the true test.

But you think this is going to be a slow rollout over the next few years?

Oh, I don't think a few years.

Oh, really? Okay.

Two years.

Okay, great. We will stay tuned. Thank you.

We will take our next question from the site of Richard Rosenstein with Goldman Sachs. Go ahead, please.

Thank you, good morning. I just want to, if I can, ask a little bit more about occupancy levels. I know you provided the snapshot before, can you give us a sense of what the trends have been? Where were levels back in 2000 in both products and what have those trends done in the past couple of months, and how would you expect in a recovery for occupancy levels to improve and pricing to improve sort of together? Thanks.

I don't have 2000 in front of me, so we will have to do that one off-line but I do have four months of data for 2002 and 2001. And as I mentioned earlier, what we are seeing is essentially flat occupancy in the bulletin category, really from April, May, June, and July, when you look at it month-over month prior year.

On -- so that is the bulletin side, and, you know, I don't have 2000 in front of me but historically, we have averaged in the mid-80s on the bulletin side, so, you know, when I look at that, I see room for significant improvement when the ad spend climate gets better.

On the poster side, we are up month over prior year month in May, June, and July, by essentially 2%. For example, June was 65% occupancy in 2001, and it was 67% 2002. And July was 64% 2001, 66% in 2002. So we are seeing a slight up-tick on the poster side.

And again, thinking about where there is room for improvement, when the ad spend gets more robust, our historical occupancies are in sort of the low 70s, low-to-mid-70s on the poster side.

So the shorter cycle businesses are seeing some improvement in occupancy, you are not seeing it yet in bulletins?

Correct.

Are you in the last down cycle and in the recovery, over what period of time did occupancy improve back to normalized levels realizing I think if I remember correctly that occupancy levels didn't dip as low as they did this time?

No, this is Keith. They basically tracked pretty much the same if you go back. I don't have those numbers in front of me, but it -- in 1991, the first part of the year looked almost exactly like the first part of this year. The first quarter was flat-to-down, the second quarter was slightly up, and then we cycled through in the back half of the year. And that was due to occupancy, and again I don't have those numbers in front of me, but I just instinctively I can tell you it pretty much tracked out just like we are tracking out now.

The pricing lag and its recovery?

The last recovery? Yeah, pricing lags, we get -- we get the occupancy back to normal, and it does -- it does lag, Rich.

Thank you.

Thank you. We will take our next question from the site of Jason Helfstein with CIBC World Markets Corp.. Go ahead, please.

Thanks. Kevin, can you review any shifting in category that you are seeing? I think like the telecom in particular like cellphones are probably expected to slow in back half of the year, but just give us any color you have got I guess in the top categories, restaurants, retailers, you had already commented on hotels and motels and maybe auto.

Sure, this is Sean. I will hit that real quick. I have three years of data here. And the top category is restaurants and it has been 12% all three years. Year-to-date.

And you see no -

2001/2002, we don't see any change there.

The second largest category is retail. Retail has ticked up year-to-date 1% over last year, so in 2000 retail was 10% of our book, in 2001, it was 9%, and this year, it has ticked up -- back up to 10%. So that is probably, you know, it is probably a good indicator there.

Automotive is our third largest category and it has ticked down from 2000 from 10% down to 9% in 2001 and it is 9% year-to-date 2002. So automotive is down 1% from 2000.

Hotel-motel I already touched on, it is 9% all three years.

Hospitals has our sixth largest category is ticked up 1%. I guess that is indicative of the fact that the whole health care industry is doing well right now.

Gaming has ticked up 1% to 6% of our book from 5% last year.

And the rest of them are the same, with the exception of telecom, telecom was 2% of our book in 2000, it was 4% of our book last year, and year-to-date this year it is 3%.

And just to make sure, and you are seeing no change in the categories between the second quarter and kind of what your expectation is for the third quarter?

No, no changes.

Thank you.

Thank you. We will take our next question from the site of Gordon Hodge with Thomas Weisel Partners. Go ahead, please.

Good morning. Not much left to ask. I did have a question, Keith, about the balance sheet, just in terms of days receivable and so forth you guys are usually pretty tight on that and based on your working capital number it was probably true again. I would be curious if you could talk about that a little bit.

Yes, we are very diligent with respect to our receivables, especially when times are tough, we watch ta very closely. In fact, we look at it from a delinquency standpoint, we have certain goals for current 30, 60, 90, and over 190 aging, and we improved our delinquencies outstanding from the end of the year through the end of June by about 2%.

And you have got to remember that our managers make the bulk of their bonuses on the cash metric not on the financial states metric so they are incentivized to get out there and collect.

And as the year goes on, and they get closer to the end of the year, the more pressure they put on the receivables, and that is why you measured by days receivable, we measure by delinquencies outstanding, and our guys are actually at the end of June better than our target expectations.

That is great, thanks.

Thank you. Our next question comes from the site of Bill Meyers with Lehman Brothers. Go ahead, please.

Thank you. Two questions. The first one, Keith, can you point out the monthly revenue transfer the second quarter. Of the 1.7% same station, how did April, May and June track and how did July finish? And I will give a follow-up when you are done with that one.

Well, we had noted that the back on the last call that when we guided to 1%, that April, the reason that we were optimistic was that April, when we had the conference call in May, April was up 1.5%. May was also up 1.5%, June was up 2%, so you just average that out and that's how we get to the 1.7. July's in positive territory, we had said last go-around that the reason we gave out monthly numbers was to give the market a sense of why we were optimistic about going positive. We would rather not get back into the game of giving out monthly numbers because a lot of folks would call at the end of every month last quarter wanting to know how the month -- how that particular month ended up. So we just hope that you trust our guidance when we say 2 to 3, we have got reason to expect that that is a valid number. Just to avoid having to give you guys a nonanswer when you call about the monthly numbers. We would rather do it by quarter.

As a follow-up are you still selling bulletins on a pre-emptable basis, what is length of your average bulletin contract right now?

You know, the -- I don't think there is a lot of pre-emptable contracts being written these days. There were a few last year, and, you know, on the average length, there is probably no change there either. You know, 6 to 12 months.

It is helpful to kind of look at the bulletin business as a highway bulletins and then general coverage. Highway bulletins, that's all 12-month business and then the general coverage, the average on the general coverage is more like six months, and it is half and half in terms of contribution to net revenue, it is 70% of the company's total contribution, half is -- of that 70% is highway bulletin and half is general coverage.

Interestingly on the bulletin side the shorter cycle contracts our pricing is up on a month over prior year's month so it is validating the shorter cycle is doing better than the longer-cycle contracts.

Thank you.

We will take our next question from the site of Ellen [Humphler] with Lamar.

Good morning, Kevin, Keith, and Sean, this is Ellen from the Chicago office. How are you?

Great.

So fortunate to be on here, this is my first time listening. I had a quick question and some of this was definitely covered before, I was curious if you could share with us your current feel for acquisition growth. Is it regionally targeted or is it sporadic and how is it faring to your plan?

It is going fine. You know, it is not -- we don't target it regionally, we target it opportunistically, as you know, the folks that generate the deal flow are the local general managers, who like to drop out at inventory every day and they like to be running it and they put together a proforma and it gets checked by the regional managers and it is sent on here. So it is generated by the local general manager and if it is a good acquisition and it fits our pricing parameters, it is a go.

A-ha, okay, that is interesting to know. If there is an idea out there it should be forwarded to the regional?

Absolutely.

Okay, thank you so much.

Thank you. Once again if you would like to ask a question, please press the 1 on your touchtone phone. We'll take our next question from the site of Todd Morgan with CIBC World Markets, go ahead, please.

We have heard scattered reports of smaller billboard companies taking down faces rationalizing their plant, could you talk about your sense of that level of activity and I guess how much -- how does that really impact you going forward? Are they taking down stuff that is really not making a difference, how does it help or hurt you?

Well, you know, the inventory management is sort of the kind of thing that goes on day in and day out in the billboard business. You have got roads, changes, and different traffic patterns that evolve over time in any given market, so that is something we just kind of do in the ordinary course of business.

I have not seen any -- anything that I would deem as extraordinary happening in Lamar markets, it is just sort of steady as she goes, the same old inventory management that we have been doing for decades.

Great, thank you, then.

Thank you. At this time there are no further questions. I will now turn the conference back to Mr. Reilly. Go ahead, please.

I just want to thank all of our shareholders and guests for listening in. We look forward to the next earnings call. Thank you very much.

If you wish to access the replay you may dialing 1-800-428-6051 or 973-709-2089. Once again that was 1-800-428-6051 or 973-709-2089. This will be with an ID of 254279. Once again, the ID is 254279. This does conclude our conference today. Thank you for participating and have a great day. All parties may now disconnect.