Lamar Advertising Co (LAMR) 2002 Q4 法說會逐字稿

Good morning. My name is Beth (ph) and I will be your conference facilitator. At this time, I would like to welcome everyone to the Lamar Advertising fourth quarter year end earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. If you would like to ask a question during this time simply press star then the number one on your telephone key pad. If you would like to withdraw your question, press star then the number two on your telephone key pad. In the course of this discussion, Lamar Advertising Company will make forward-looking statements regarding the company and its future performance. The company has identified important factors that could cause results to differ materially from these discussed here on their reports form 10-Q and 10-K and the registration statements filed with the S.E.C. and the company refers you to these documents. Mr. Reilly (ph) you may begin your conference.

Thank you Beth. I want to welcome everyone to Lamar's '02 year end conference call. As is our custom I'll keep our remarks brief so that we can open up the call for Q&A. Regarding last year, we ended up right where we told you that we would end up, at the beginning of the year. So that's encouraging. I guess the last two quarters of the year, the primary drivers there, in terms of same-store growth was, we had easy comps of course, but we also our poster business was improved considerably. Primarily our -- perhaps because of the amount of political ad spin that was injected in the system for October and November. Moving on to '03, I'll start with the guidance for the first quarter. Although it appears we're off to a slow start for the first quarter, we are very comfortable with the consensus estimates for same-store sales growth that the analysts have. The same store growth is in the mid single digits. One interesting data point as we start out the year is that it looks like the larger markets are off to a better start than the smaller markets, and of course you've got a little bit of higher national ad spin than the national markets. So it leads us to believe the national business is coming back a little better than the local business. In advance of our quarterly earnings call, we have a bring-down call with the regional managers that are responsible for all of the billboard profit centers. And in that call, we try -- we not only go over the numbers and go over the projections for the next quarter and the following quarter, but we also try to get some anecdotal evidence from our regional managers as to what's taking place out there in the field. And I thought I'd share two things for you. First on the expense side for '03 they feel comfortable, and I think you know, the expense control is reflected in our first quarter expense growth estimates. Regarding business, for the next two quarters, anecdotally, they have said a lot of our local customers have postponed their first quarter plans because of the Iraqi situation, and that they do expect that business to show up in the second quarter. And these anecdotal remarks are consistent with our bookings. So it does -- and almost to a man, and a woman, the regional managers are looking for a second quarter that's significantly better than the guidance that we're giving you for the first. So if that's -- we thought that bit of information might be helpful to you. With that that, I'd like to current the call over to Keith Istre (ph) our CFO to take you through the numbers.

Okay just to quickly recap some of the numbers on the press release. We came in on the top line for the fourth quarter consolidated net revenue at 194.7. If you remember our guidance, for the quarter, was somewhere between 192 and 195. So we were within that zone. On the consolidated EBITDA we came in at 81.2. Again, looking back at the guidance, we said 80 to 82 is where we felt comfortable and of course we were right in the middle of those two numbers. The margins for the quarter, the consolidated margins were 41.7. The outdoor companies probably were in the 46 to 47% range. Just on the operating side. Before any other overhead, any other printing production cost, logos, transit et cetera. So you know we're still pleased that those guys are still producing margins in the upper 40s even with the state of the economy. Just to kind of refresh everybody's memory, remember the fourth quarter for us and all of the other outdoor companies, is the beginning of the seasonal downturn in this industry. December, January and February are our leanest months, making our fourth quarter probably our second slowest or lowest quarter, and our first quarter our lowest. So that just please, to refresh everybody's memory. Are Free cash flow on the first quarter -- I'm sorry fourth quarter, cash basis we were up 49% our Q4 '01, and on a free cash flow per share basis we were up 50%.

Looking at the year as a whole as Kevin mentioned we ended up 2% on the top and even on the EBITDA line on the same-store basis. That's very -- the reason that we committed to that number at the beginning of this year was that's basically how we performed coming out of the downturn in 1990 and '91 as we had I think told you all before. So this year was very similar to 91 '91 in terms of coming out of that recession. For the year, the company did approximately $776 million in consolidated net revenue, $334 million in consolidated EBITDA, and that was as best as we can determine, the approximate analyst consensus for the year. Free cash flow for the year, on a cash basis, was a 34% increase, and a 30% increase in free cash flow per share. Let me just throw this number out. These are the pro forma net revenue and EBITDA numbers of for the year, '02, so you can get a handle on '03, I guess, from a comparative standpoint. Our pro forma net revenue was $780 million and our pro forma EBITDA was 336. Obviously it's not much different than the actual results. We did have some acquisitions in '02, but our pro forma and our same-store are starting to look a whole lot alike. Looking at the debt side, just wanted to make sure that we clarified something in mid December of '02, the company issued an additional $260 million in high-yield debt, and we used the proceeds of that debt to pay off an existing $255 million of high yield debt that we had issued back in 1997. We did that because of the coupon. The new debt carries a coupon of 7.25, the old was 9 and 5/8. Because we closed that transaction in December, under the terms of the old high-yield note we had to give the holders of that debt a 30-day heads-up that we were going to pay it off and that meant that we would not be able to pay it off until sometime around mid-January. So going into the end of the year we carried an extra $260 million in debt on our balance sheet.

When you -- we didn't include a balance sheet on the press release, but on the asset side, right under cash on hand, there's a cash on deposit for debt extinguishment of 266.6 million. And those are the proceeds from that issue that we put with the trustee to pay off the old issue at the end of the 30-day waiting period. So when you look at our debt on our balance sheet in our (inaudible), you're going to see right at 2 billion in debt. The actual debt was 1,745,000,000. And that has not changed at all since the last earnings call. The only difference is that we did pay down 74 million in October of this past year, out of cash on hand, high-yield note that we had inherited several years ago and we paid another $60 million down throughout the year on our bank line. So we paid down approximately $130 million in total debt in '02 from free cash. Even with the extra $260 million on our balance sheet at year end including converts and all other debt we are still below six to one. Capex last, lastly for the year, we ended up at $78 million, and that's where we had predicted we would end up at the beginning of the year. That was compared to $85 million in 2000. And the difference there was primarily in the -- in the billboard side. We spent $7 million less on our billboard assets in '02 than we did in '01. And that's consistent with what we have been telling everybody, that as acquisitions slow down, or at least until they pick up again, we will spend less money on the billboard side because of the fact that we are -- we're not having to fix up these acquisition assets that we buy to get them to our standards, or we fix them up and then that's it, we move on. Again as we, I think, have told folks over the past few months, we're looking to -- for '03, to be in the capex range of somewhere in the mid to the upper 60s, so we're looking for another ratcheting down of our capex, which will also help our free cash flow. With that I'll turn it back over to Kevin.

Beth, now we've gone through the numbers we would like to go ahead and often up this call for Q&A

At this time I would like to remind everyone if you would like to ask a question press star then the number one on your telephone key pad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Jim Bowl (ph).

Good morning. On the pro forma 2002, could you give us the quarter by quarter numbers?

Jim, I don't have that. All I have is the annual in front of me.

Okay. We can get that later.

Okay.

Kevin, could you give us a feel for, given what you've heard from the regional managers, sort of inventory sellout trends both in posters and bulletins, as well as advertising rate trends on renewals as well as the month by month?

Let me defer to Sean. He handled the bring bring-down call.

Yes, Jim, I guess there's a couple of ways to handled that. First and most important way would be actual book business today, for the full year, compared to previous years. And that may give you a little flavor. You know, on the third and fourth quarter we were mentioning that the shorter cycle products were performing a little better year over year than the bulletins. And I'm happy with the trend I'm seeing on the bulletin side, because space bookings for the full year are up a full percentage point today, comparative to last year, same time. So I think that's an encouraging sign. Boaster bookings are the same as they were last year at this time. So I think our longer cycle products are beginning to show a little bit of recovery.

And could you quantify what range that would then end up?

Well, these are numbers that are comp to budget. So you know, we're feeling, you know, when Kevin says, at the outset, that we're comfortable with the consensus top-line growth for the full year in the mid single digits, it is primarily that data point that gives us that confidence.

In terms of inventory percentage I guess is what I should have said.

Occupancy?

Yes, occupancy.

I don't have occupancy for January yet Jim. We don't have that data available to us. But I can look back at the fourth quarter and you can extrapolate some trends there. The fourth quarter poster occupancy was 64%, in '01 it was 57. And the bulletin occupancy was 74%, and in '01 it was 72%. So you know, that trend that the shorter cycle businesses were up year over year better, certainly was the case in the fourth quarter.

And the advertising rates?

Up slightly on posters and even on bulletins, I think is pretty much what we're getting. You know, Kevin mentioned a little bit you know the anecdotal comments we're getting from the field, that some advertisers are sitting on their hands in the first quarter until they see some resolution to the war situation. And you know, I think that's an understandable reaction given that people don't want to be lost in the clutter of a war when they're trying to get a message out there.

Are you seeing any increase in cancellations?

No, no. I think we can feel pretty good about where we are there. And you know, again, the best data point is the book to budget percentage as of today. Which has ticked up relative to where we were in '01 at this time and '02 at this time.

Thank you.

Your next question comes from Drew Marcus.

Good morning, gentlemen. The question is, you mentioned Kevin that the larger markets are seeing differing growth pattern than the smaller markets. Can you quantify that a little bit the growth delta difference?

I'll let Sean answer that, Drew.

Drew, again, it's pretty early in the game. But what we're seeing is, at least on a comp to budget basis, the best-performing markets in virtually every region are the larger ones. So in the southeast, at lan Santa, in the southwest Houston and Dallas, in the west Vegas, Chicago, hearth Ford and Providence. Again, these are January performance to budget.

It like 200 basis point or there growing everybody else four everybody is one, can you quantify it a little bit?

It would be a wag. I haven't done it where you actually pool all of them and try to get an aggregate growth rate in the larger markets. And you're talking about one month.

And the second question is, do you -- obviously pricing power is what you're looking for. Obviously in your optimism for acceleration, you think that given the capacity utilization numbers that you're looking at you're going to start seeing CPMs improve a little better or is your optimism more unit oriented?

It's more on the occupancy side not as much on the pricing side.

Thank you very much.

Next question comes from Don Hodge.

Question on expenses. Refresh my memory, first quarter you have a lot of expenses that don't recur for the rest of the year. I'm not sure if it is settlement on percentage rents. First quarter going to be the high expense quarter for the year? Maybe that would give you the comfort with the rest of the --

Yes, it generally has trended that way, Gordon, you have certain expenses the percentage leases obviously, that's the big settle-up month coming off the calendar year. Other expenses, operating permits, you know, those are the permits that we have to renew every year to keep our locations legal, and conforming. And other, you know, miscellaneous items that just come in the beginning of the year, in the first quarter. And that's a question that we get every -- have gotten every year on this conference call, is that it looks like expenses are somewhat higher in the first quarter and that's the explanation.

That just makes it a more volatile quarter because you have higher expenses and obviously the revenue --

It is always the toughest quarter. Revenue is, expenses are at their highest.

Space bookings are up 1%, you're ahead of it by 1%, is that the way to read it?

What we do is get a feel for how the whole year is going to look is take a snapshot in time on our bookings to budget this year. And look at the same number for last year. So let me give you the actual numbers.

Okay.

In 2002, total space sales, bookings to budget, were 51%. In other words, at the end of January we had booked 51% of our goal for the year. This is actual, right? Going into this year exact same time we booked 52%.

Got it.

Okay? So that's -- and I think when you -- you know, if you want to try to get your best glimpse of how the full year is going to look, that's probably your best matrix other than what you're getting from the field from the tone of the business.

And presumably your goals are higher this year than last.

Correct.

Great, thanks.

Your next question comes from Tim Wallace (ph).

Thank you. In trying to understand reaching this goal of mid single digit, same-store sales, if your pricing is running ahead, and I don't think you said this, but let's say 1%, I'm assuming that a lot of the lift is going to come from occupancy. So maybe you could give us some thoughts on where you think occupancy will end up by the end of end of the year. And then in terms of your expenses, of course first quarter is higher expenses. But what would you -- what would be a good annual goal for expense growth, and then the last question is, your comps are going to be getting progressively harder through this year. So maybe you could give us some thoughts on how you think things are going to play out relative to the tougher can comps. Thanks.

Speaking to the last question first, tougher comps, you know, we've -- we're certainly confident going into the year, and we budget to beat last year. So you know, and our guys aren't wavering on that. So you know we certainly know where the comps are and we know what we need to hit to beat them. And you know, as of where we sit right now we're going to stand by the mid single digit. On the occupancies, let me give you the full year last year. And then we can, you know, sort of extrapolate on where we need to be to hit our goal this year. We ended the year in '02, this is an annualized number, at 62% occupancy on posters, and we ended the full year annualized basis of 73% occupancy on the bulletin side. And if you look at '01, that was a 2% increase on the poster side, and flat on occupancy on the bulletin side. The good news is, if you take the trend of the fourth quarter occupancies, the percentage up in both categories is accelerating. Now, it's not accelerating hugely. In the fourth quarter, bulletins were at 74% occupancy as opposed to 72% in '01. But that is an improvement over flat. And we see that continuing. And on the poster side, in December, the December quarter of '01, we were at 57%. In the December quarter of '02 we were at 61%. So that's again better than the annualized improvement. So you know, I think you can extrapolate from that an upward trend in occupancy in both categories. I wish I had occupancy available for you right now for January, but we just don't have that data available to us yet.

And Tim, this is Keith. On the expense side I think it's reasonable to expect somewhere in our normal operating expense range of between three to 4% on a pro forma basis, in '03 over '02.

Okay. And then one just last follow-up. Is your guidance for the first quarter assuming that a gulf war occurs in the first quarter and it dislocates your business for some period of time?

No, I don't think that would be the right way to look at it. I think when we -- because number one, our first quarter's almost over. When you really look at our business, I mean we've already got 90% of our first quarter goals are already sold. And under contract and booked. So you know, I think it's more a question of, you know, buying cities that are being made in January and February that may have closed and hit the books in March. You know, I think it's more of a -- people are kind of sitting on their hands until they see how this thing resolves itself. We are not anticipating cancellations because that's never been our experience. Either in war time or as a result of 9/11.

So the impact of the war could lag, sort of lag behind, say, the radio business, by a quarter or so?

You know, again, I think the way to view it is, you know, business booked is business booked. And it stays and it sticks. It's really just a function of how people feel about opening up their wall et cetera to grow their businesses. And you know that's sort of a psychological impact. And I think it affects all media quite frankly. Not all media equally but it certainly affects people's willingness to promote themselves and deliver a message when the public is fixated on CNN.

Okay, thanks a lot.

Your next question comes from Paul Sweeney (ph).

Thank you very much, good morning. Two questions please. First, guys, on the bulletin business, where you mentioned a little bit of an he an acceleration in the occupancy in the fourth quarter. Where does that bill tin occupancy need to be where you can in fact go out and start to drive price, number one. Number two, Sean, if you could talk about the M and A environment, you guys obviously slowed your activity level last year and how are you thinking about '03, is it simply a function of what the sellers are looking for in terms of multiples, in terms of price or is there just not much supply out there? Thanks.

Sure. Let me hit the occupancy first. You know, if you look back ten years, and try to get sort of a feel for normalized occupancy in the bulletin category, it tends to run 84, 85%. And you know, our way of looking at where we ought to be on bulletin occupancy on an annualized basis is right there. And we believe that in a normalized ad environment, that we've got roughly ten points of improvement. My view is, we're not going to make that all up this year. I think we're going to make some of it up. But if you look at the way we came out of the '91 recession, it took us a couple of years to get back up. And actually '94 was the blowout year for Lamar and overall. Our goal is to get back to 84, 85 capacity and my view is it is going to take two years to get there. On the M and A side there are a couple of things going on. There is still good inventory to be acquired that would be accretive financially and operationally. We are having a little bit of a bid-ask spread out there because the way we do our pricing is we have our local general managers prepare a very rigorous pro forma that tells us what they're going to do with the inventory in the year after we buy it. To the extent they're not optimistic, those pro formas get more conservative and they have been getting more conservative in the last 18 months. And when we apply our acquisition map to the free cash flow from the assets, and they believe that free cash flow is going to be lower than what they thought previously, it results in a smaller number that we offer to the sellers. And I have had more than one seller be a little disappointed with the number we put on the table. You know, the good news is we're not losing for the most part we're not losing these transactions to other buyers. These are successful business people that just tell us, hey, look, I appreciate you working hard to value my business. I don't like the number. I'll run it 'til things get better then I'll come back and talk to you. So that's a fairly common occurrence.

So should we think about your '03 acquisition activity somewhat in line with '02?

Yeah, I see the pace much the same, you know. We do have other uses for our capital that are extremely good financially for the company. You know, of our projected $200 million of free cash flow this year, we've earmarked give or take 100 for new acquisitions and give or take 100 to reduce debt. And I think that's a prudent mix in this (inaudible).

Great, thanks very much, guys.

Your next question comes from Richard Rosenstein.

Good morning. I was wondering if you could describe the seasonal pattern if at all in pricing in both posters and bulletins. I understand the occupancy in, is there -- pattern in pricing from quarter to quarter throughout the year?

Well, on the bulletin side no, but on the poster side yes. The -- Rich, this is Kevin. Our utilization of course is at its lowest in the first quarter. And so with those customers that are just buying short-term, white sales and things like that, we will go out there and package the inventory in a way that makes it very attractive to the customer. But it doesn't put us in a position where it's -- the rate breaks to the customer are sort of -- they're disguised if you will, they're in a package. And so it doesn't put us in a position where, one, we've trained the customer to wait until the last minute, and they only buy if they can get that kind of package. Because you know, you can unbundle these packages and repackage. And that gives you a totally different offering to the customer in terms of circulation, reach and frequency. So -- but the short answer to your question, yes. We're a little bit more depressive on price in the first quarter on the poster (ph) side. On the bulletin side we can't because those contracts are much longer-term.

Okay, that's perfect. And then was there anything different in the -- the seasonal pattern this year from the fourth quarter to the first, versus what you were expecting given what you were seeing in upturn in poster occupancy throughout if year last year?

No, I think if you -- if you look back on our comments over the last four, five months, the kind of -- when we described the tone of business, we said look, we're coming out of this thing and we do expect some same-store growth. But it's not real sexy and we're not accelerating out. And we've been fairly consistent over the last four months when we described the tone of business. And of course when we talk about our poster business, we say yeah, our poster business is up, we're up in utilization and price. But we're not so sure that one of the drivers there was a one time event, political ad spin.

Okay perfect, thank you.

I do have some real time data just came in, the courteous and faithful staff in Lamar has produced January occupancies on a comparable basis to last year. And you know the news is, as reported, in '02, in January, we were at 51% occupancy on posters, and this year January closed out at 52%. So there is some improvement there. And on the bulletin side, the improvement is actually more dramatic. In '02 we were at 69% occupancy in bulletins, and January just past, we ended the month at 72% occupancy. So you know, there is a little -- there is a little lift there and we expect it to accelerate into the second.

Yeah, if you want to read between the lines, our bulletin business is about if 70% of the company's net revenues. And all last year I pounded on the table saying we had to move utilization before we could start moving price. And we didn't -- we weren't really that successful in the bulletin category. But now we're starting to see some improvement there and that's why we stand by the analyst consensus estimates just on the bulletin category alone, we can -- if we keep showing this improvements on a month to month basis, we'll be in the mid single digits.

Another question?

Your next question comes from Bill Burns.

Good morning. Keith, could we continue with the timing of the refinancing? For instance, I guess in the first quarter, we'll have a debt extinguishment charge, is that correct?

Yes, that is correct.

Okay.

For the take-out premium on the $255 million high-yield notes, that's correct.

The 9 an 5/8. The new credit facility is in place?

It is being finalized as we speak. I've got a letter from our lead bank yet showing the commitments from the various institutions and commercial banks and the allocations that they're recommending. We are scheduled, so all the commitments have been made, all the am occasions have been put down on paper, and I'm going to review those probably this morning after we finish up here. And then we will issue a draft of the credit agreement, the final credit agreement to everyone, give them a week or so to look at it, get back with comments and then close the transaction probably in two weeks from today.

Okay. Are there any highlights you might could give us about differences between the new and the old or you want to wait until you finalize it?

Yeah, well, it's pretty much the same. There's really not a lot of difference. The pricing is the same in most cases. The -- with the exception of some of the term B line. The covenants are -- have been readjusted up ward to what we had in the old agreement. You know we had been ratcheting down and so forth.

That's what I was thinking, the ratcheting down, this is kind of backing up.

we're backing up. In the old agreement the revolving credit facility ratcheted down. This one is fixed for the term of the agreement you know, so we don't have to worry about that cutting and running on us. And the amortization is basically the same under the old agreement, two years interest only and then amortization on the term A over the next four to five years, and then the term B is pretty much all back-ended just like it was in the existing agreement. So it's pretty much a carbon copy.

Okay, thank you.

Uh-huh.

Your next question comes from Michael Russell (ph).

Thank you. I was wondering two things. One could you give us an idea how the hotel-motel business was doing? I think you mentioned in the last call it was about 8% of your revenues and it had been improving. I was wondering how it was doing particularly in the first quarter.

Just try to -- given that we were able to grab our occupancy for January, I'm trying to get our categories for business for January as well. But let me give you the year-end and that will give you a little bit of flavor on the hotel-motel side. Traditionally it's been 9% of our book. 2000-2001 it, in 2002 it ticked down a% to 8% of our book. I don't have the percent for January. I can tell you that the bulk of the issues seemed to be in the southeast in 2002. The tourism businesses were hit particularly hard in Georgia and Florida. Our -- that region has budgeted aggressively, and they feel like things are coming back. So you know, sort of anecdotally, you know, assuming, you know, gasoline isn't 2 bucks a gallon for the whole summer, people are feeling a little bit better about the tourist and destination type businesses at least in Georgia and Florida. Because our businesses there are up over last year, and are feeling better about the world.

Help us understand how the willingness of people to commit to contracts is at the local level. I mean, we're seeing the network radio, the network television business with their up front, admittedly have more cancellation opportunities than commitment to a bulletin is. Is there something about the local advertiser that might be a little bit more reluctant making a six month or more commitment than a national advertiser who is making a commitment with a lot of outs, is there difference in psychology between the national and the local and are you seeing it in your own national?

This is Kevin. I would say part of that is in the national side the planning cycle is much more 76 fist at this sophisticated and there is a (inaudible) lead time. So they're just -- they're hard-wired to make commitments once they just sort of work through the planning cycle. Now, they do have outs that they try to build into their contracts, which sometimes makes that business more volatile. On the local levels, you're not looking at real long lead times. You know, a lot of the advertising decisions are seat of the pants. And it's a gut check or it might be directly related to how much inventory they've committed to take on for the -- in the coming months.

Okay.

But the good news on the local side is, what is it, Sean, we've got 45,000 customers?

: 48,000 customers last year. So, I mean, you know, you're talking about a wildly diverse and varied customer base. Lots and lots of little customers, you know, making decisions. And you know, if our -- our, you know, talk about how people feel about, you know, the war is really anecdotal. I mean, we don't have anything scientific. To tell you, you know, how many customers and how many contracts. It's just sort of a sense that people are being cautious out there until they see resolution.

We were going to be really impressed of Keith's ability to give forecast because the guidance has been spot on. But mentioned that 90% of the quarter is sold maybe less impressive. Sorry Keith. So could you help us understand how the guidance of last quarter for 6% and 8% growth which showed some operating leverage, how did that turn into a five and five this quarter is this probably you're (inaudible)spot on in your guidance, this is where you're off a little bit. Can you give us why there wasn't an operating leverage, what happened in the last bit of the fourth quarter that went wrong?

Well, you know, those -- that's why we gave a range. And when we go -- when we went back and, you know, tied every acquisition back in, and pro forma (inaudible) bit, you know, those were -- that's where the numbers came out. Now, I will tell you this. In the fourth quarter, of this year over last year, there were some expenses that we incurred that we did not have in last year's fourth quarter. Our bad debts were about a half a million dollars more in this fourth quarter than they normally run that we were not expecting our guy's normally dead on. We normally write off 1% a year. And it was a little higher in this fourth quarter than we normally expect. But we told the guys to get out there and make sure they combed through all those receivables and anything that they knew was dead in the water, to get rid of it. We did incur an additional half a million dollars for a new printing facility that we have established in Las Vegas, in the fourth quarter, that I guess we really -- it's a small amount but it adds up. We really hadn't taken that into account when we gave guidance. And that was an extra half a million dollars to get that thing up and running. We have our main printing plant.

This is -- the printing operation that prints the vinyl for our customers that we stretch across all of our bulletins. And we have our main shop here in Baton Rouge but we opened up one in Las Vegas at the end of the fourth quarter so we could supply our western operations with our own resources instead of having to go through third party vendors. And the other thing that kind of caught us a little by surprise was our taxes and licenses. They were 700,000 more than they were last fourth quarter. And the primary reason for that is acquisitions. When we buy a competitor or a freestanding operation, it's just like anything else, you -- a piece of real estate, you transfer the ownership papers, and at the end if you buy it in January you transfer the ownership papers. And in December of that year, you get a property tax notice for the period you owned it. Well, in the billboard business, it takes between 12 and 18 months to get that process completed. And the valuation of the assets and the tax or the mileage put on them and the bill sent to us. So that added another 700,000 to the quarter from the acquisitions that we -- the $330 million in acquisitions that we did in '01 and early -- late '00. So that's almost $2 million that did catch us kind of by surprise.

Last question, I think it was Sean mentioned your goal was to reach 84, 85% occupancy, goal taking a couple of years. If that's kind of the normal level that we're aspiring to, is there a seasonal pattern on bulletin occupancy that would fit that kind of normal 85% level of occupancy and just help us understand the -- what you would consider a normal seasonal pattern versus all the ones that we have now that have all these shocks in them.

Yeah, you know, I think, you know, as I look at, you know, a 72 for January, I think normally that ought to be a few clicks higher for January, because you know, we pretty much sell out in the summer months. So, you know, the 84-85 is an annualized number, taking into account the seasonality. And like I said, I don't think we're going to get there this year. I think -- I mean if we did get there that this year that would be a blowout. $60 million sitting on the table, ten points of occupancy. I think it's going to take us two years to get there. By the way, I did just pick up the January categories of business, and hotel-motel is ticked back up to 9% of our book from the 8% annualized. Now, you know that's 9% of January. And January for the rest of the category tends to be a low month. So I don't know if that's going to hold up throughout the year.

Great, thanks very much.

Your next question comes from James Marsh (ph).

Two quick questions, guys. First on the acquisitions, could you give us a sense for the blended multiple you paid in 2002 roughly and secondly as we think about the cost structure do you have a good rule of thumb that we could use, what percentage of cost are typically variable as opposed to fixed or discretionary.

James, what was the second part of that question? I'm sorry we missed that.

Second part of the question related to as a percentage of your total cost is 15% a pretty good number to use for the variable component or should we be thinking of a different number?

Let me answer that and Sean can do the multiples. The variable, we have shown this over the pass couple of months, our cost structures. You're probably looking at, as far as variable, there is very little variable cost in our business. Obviously, sales commissions to the sales force, are somewhat variable. The printing of the ad display itself, the message that we print for our customers, and we also do buy some from third parties, obviously that is a variable expense. If sales go backwards, people aren't buying inventory, there is no need to buy or print the displays, the message, so that could go down. If sales take off, that's going to go up, just like newspaper. Leases are contractual, as we've talked about. Labor is pretty much fixed. Remember at the beginning of our call, I said that our outdoor companies are running 46, 47% in operating cash flow for the year. Even in a lousy environment. So you know, those guys are still cranking out pretty high margins. It's not the 52 that it was in 2000 and '99. But all things considered, it's still pretty high. Other than that, there's just not a hell of a lot of variable costs. You know I talked about property taxes. There is nothing that we can do to tell these municipalities how much to charge it you are us or how much we're going to pay. Insurance, that's been dogging us this year and last year. We're paying for the twin towers and we're paying for the rise in health care. Now, we can do something about that, in that we can reconfigure our benefit program, and that is something that we're taking a very hard look at as everybody else in the country's taking a lard look at. And we're going to do something with that in '03. That should reduce costs and hopefully it will reduce it significantly. But you know, everything else is the lighting on our structures, just to get down to something as simple as that. You can't cut those things off at midnight. The customers will want a rebate because they're paying for 12 hours worth of lighting for that ad display.

James, I would say that the number you threw out is a good number for variable, 15.

Great, thanks. On the acquisition side?

Yeah, on the acquisition side, as you know, our goal is to bring them in at ten times forward free cash flow. And you know, our -- as I mentioned, our general managers are getting a little more cautious on the pro formas they're giving me because they missed that over the last 18 months. Near as we can figure, we've been bringing them -- we brought in the last 18 months, we brought them in at about 10.8 times forward. And you know, that's a little off the mark in terms of our goal, and it's because they've been trying to do pro formas in down environment.

Understood, great, thanks guys.

Your next question comes from David Banks.

Thanks guys. Two questions. I guess the first one is, if you can talk a little bit about what your experience was like in 1991, and what you saw in terms of -- in terms of advertising sort of pullouts and the slow-down in advertising in the gulf war in '91 and then sort of a follow-up to that.

Well, it's mixing apples and oranges, we were a different company. Back then tobacco was 75% of our -- If you take the tobacco out --

It doesn't have to be quantitative. It can be more squishy.

Let's look at the raw numbers. During the year the gulf war, the company was down, was it down --

Almost" to last year.

Occupancies were identical to last year but the company was flat in terms of sales, unlike this year we were up, up a couple of points.

Right. But the economy was in sort of bad shape anyway, and you know, I don't think '91 was set out to be a great year anyway. So I guess what I'm getting more at is the actual impact, when the war started, what was the disruption from the invasion?

Not much because we were actually up one in '91. What you said is right. If the economy had gone in the ditch in '90 so we were down 1 in '90 and during the gulf war we were up 1. That was a three-week conflict?

There was a big build justify to it. But the thing you got to note is the occupancy. We went into a downturn, the economy went into a downturn in late 1989. And we were, or the fall of '89, if you will. And with the gulf war, I mean, we were down going into '90 and we didn't deteriorate any further down in '90 due to the war, or at the beginning of '90, than we did going into '01 without a war. Going into the downturn in late 2000. It was just an almost identical picture, '01 and 1990. If you put them side by side, in terms of occupancy, the amount that we went backwards, on same-store basis, and then coming out of it, the amount that we ticked up on a same-store basis. So you know, the war really didn't have an impact on us, just like 9/11 didn't have an impact on our third quarter like it did with radio and TV with a lot of cancellations and television being absorbed with it for a week after the attacks and so forth.

Because you were down so much anyway.

We were down anyway. The war had no impact on us.

Do you think this will happen this time around?

The last time around there wasn't the threat of terrorism, the trade centers hadn't been knocked down. There wasn't talk about biochemical attacks in the subways of New York. Your guess is as good as mine.

Okay, one quick follow-up if I could. Just wondering if you -- I may have missed you talking about this but did you cover any particular regional strains outside of city-size, understand that the bigger cities are -- sound a little bit stronger but any pockets of regional strength or weakness that stand out?

Not really. I did mention that in terms of year-over-year budgeting and sort of feeling that (inaudible) outstrip the top and bottom line of the whole country the most aggressive region was the southeast. And they tell me they're going to hit it. So you know, hopefully we'll be able to look back at the end of the year and say that you know, Florida and Georgia have recovered, you know, their tourism and destination-type businesses are -- have recovered from what was a very difficult 2001 and 2000, to -- the rest of the regions, their budgets are, you know, kind of mirror the overall companies growth projections and you know by and large, they feel like they're going to, you know, do what they said they were going to do.

Thanks a lot, guys.

Your next question comes from Jason Helstein (ph).

Has the average length of contracts changed since two years ago, versus call it fourth quarter or today?

I don't think so, Jason. You know, I think, you know, on that matrix, I don't think there's, you know, a data point that you could look at and say that that fundamental is any different than it was two years ago.

All right. I guess the reason why I ask is, if you're trying let's say to get that incremental advertiser who's nervous to make a commitment, would you let them, you know, take, I don't know, a six-week contract when normally you would want a three-month contract?

No, for bulletins we wouldn't do that. The production cost start to compete for the space cost. And it's not -- it would be bad advice to give to the customer for bulletins. Now, for poster, sure, if we're pitching 90 days and they only want to buy 30 days, we'll do that all day long.

It is not something you track?

Well, actually we do track the average length of a contract and there's about on the bulletin side, there has been no significant change in the average length of our contracts. On the poster side, they're sold in 30-day increments. And the -- there may have been a little bit -- I don't have the numbers in front of me but there might have been a little shortness there. I mean account if the average length, the average length going into the 2000 -- going into '01 was probably about 60 days, and it's probably been short by about 15 days for '01 and '02.

Jason, another way to look at it is to go back to that stat that I quote you on business booked at the end of January to goal, for the full year. And if we're up a point in business booked to goal, and you know, we still got 11 months left, you know, I would suggest that that's not a sign of people going short. You know, I would suggest that that's probably a healthier long sign.

Okay, thank you.

There are no further questions at this time. Do you have any closing remarks?

Thank you, Beth. I just want to thank all of our analysts, shareholders and friends for listening to our year-end call and we look forward to visiting with you on the next quarter. Thank you very much.

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