Lamar Advertising Co (LAMR) 2003 Q1 法說會逐字稿

Good morning. I will be your conference facilitator today. At this time, I would like to welcome everyone to the Lamar Advertising's first-quarter 2003 operating results conference 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 and the number 1 on your telephone keypad. If you would like to withdraw your question, press star and then the number 2 on your telephone keypad. In the course of this discussion, Lamar may make forward-looking statements including statements about its future financial performance.

Lamar has identified those important factors on this call that could cause actual results to differ materially from those discussed here in the reports on forms 10-K and 10-Q and the registration statements that have been filed with the SEC and Lamar refers you to those documents. Lamar's first-quarters earnings release which contains information required by regulation 17 was furnished to SEC on form 8-K this morning and is available on Lamar's web site, WWW.lamar.com.

Now I would like to turn the call over to you are host and President and CEO of Lamar Advertising, Mr. Kevin Reilly, Jr. Sir, you may begin.

Thank you, I want to welcome our shareholders and friends to our Q1 conference call.

As is our custom, I am going to turn the call over to Keith, and then I will make a few comments, then we will turn the call over for Q and A.

Keith.

Okay, Good Morning, everybody.

Let me just start off by talking generally about the press release. It's slightly different than we put out in the past, as you guys know. You have seen all the other companies that reported better in this sector.

There is a new regulation by the SEC that requires that we not use nonGAAP terms in the press release, and so we've added some new terms, deleted some old terms, tried to provide some reconciliation and information that will give you the same basic information that you have gotten in the past when it comes to valuing our business and judging our results.

With that, let me go through a couple of the highlights in the press release. As you all noticed, our revenue was approximately $184 million. Versus $176 million last quarter. About a 4% increase. We had got on the revenue side to $183 million for the quarter. So we did dip over that slightly. Consolidated EBITDA was $69.8 million versus $68 million last year. Our guidance for that number for the first quarter EBITDA was right at $69 million.

On a free cash flow basis, we were at $28.2 million for the first quarter versus $32.6 million for the first quarter of last year. You should have noticed in the press release there was a couple of reconciling items there, the biggest one being a $5.2 million tax refund that we received from the IRS due to a NOL carryback last -- first quarter. That was one thing that we didn't have in the first quarter this year, and the other thing was a slight increase in Cap Ex on the billboard and logo side of $3.7 million.

On a pro forma basis, our pro forma revenue Q1 over Q2 -- actually Q1 over Q2 grew 2.9%. Our guidance at the beginning of the quarter was for 2% up and on the outdoor operating income side, although we didn't call it that on the last call for guidance, but it basically would be the same. We were up 8/10 of percent and we said on the guidance call last quarter that we would be basically even with that -- that metric.

Our debt has not changed at all. It's basically where it was at the end of last year, approximately $1.74 billion in total, including converts. That's a total debt ratio of 5.16.

Our Cap Ex was $17.8 million for the quarter. And that's pretty much on track with the guidance that we've given. We said that we would do somewhere between $65 million to $70 million for the year, and our Cap Ex spend spending is a little heavier at the beginning of the year because we like to get the units in the ground that we have planned for so that we can get the revenue that we hope to generate throughout the year.

That, I think, is basically it as far as the highlights. I am going to give it back over to Kevin. If you have any other questions on numbers, please holler out.

Okay, thank you, Keith.

Our Q2 guidance looks a lot like Q1, and for the same reasons. So I thought I would just tick through the reasons and talk a little bit about each one. First, big markets versus little markets. The bigger markets are doing very well right now. Atlanta, Pittsburgh, Detroit, high single-digit increases in sales, primarily driven by national and regional business.

So our local business in our smaller and middle markets are holding up, but we are not -- we are not seeing the regional and national business. Just to give you some examples of some business that we know eventually will get our way. It seems that the national ad dollars stopping at about markets 25 and larger. But eventually, that business will come our way, Hefty Trash, Kraft Foods, Tide, Coors, Coke, and Dodge. These are all customers we had last year that we are expecting to have in the second quarter. And that ad spin haven't come our way but we do expect it come our way before the year is out.

Military markets. They are lagging for the obvious reasons in Q2. And, of course, we expect that problem to be mitigated as our troops come back home.

Travel and tourism. Las Vegas, just to give you a little color on the Travel and Tourism side which is holding us back a little bit. Las Vegas is down hotel room 12% and occupancy down 20%. We did get a break on gas prices. They spiked and then came back down, so that's encouraging. We will see what this number holds for us as with Travel and Tourism. A reminder our hotel-motel business is about 9% of the company. So on the encouraging side, our local business is holding up well throughout the system. Our poster business is doing well, and we consider our poster business a leading indicator because we have lots of little small retailers that buy our posters, and there is no change in our bulletin business either in utilization or in rate and that is of course to be expected with the Travel and Tourism holding us a little bit back and also some of the national and regional business that has not arrived, but we expect will come this way. I would like to start Q&A now.

At that time, I would like to remind everyone in order to ask a question please press star and the number 1 on your telephone keypad. We will pause for just a moment to compile the Q & A roster.

Your first question comes from Bishop Sheen with Wachovia.

Good morning, Kevin and Keith. A question on the balance sheet and on some forward spending. What is your availability now from credits [ Inaudible ] --

Availability on the ... Bank line.

Yeah, on your bank line.

We have about $180 million on the revolver as of today. $225 million.

225, so you figure about 180.

Yeah, about 180 and then we have a $500 million incremental facility on our new bank credit agreement that we -- we closed out -- closed up, refinancing our old credit agreement in February.

Right, and that's [ Inaudible ] --

No, the $500 million.

That's not drawn?

No, that's just increment.

That's undrawn and the 82 is undrawn.

Right, got it. Going forward to Q2 on the Cap Ex, how much do you think you are going to earn this current quarter?

Well, you know, if you take $17 million and run it out over four quarters, that's roughly, $68 million.

Pretty even-handed.

We do spend a little more in the first half than in the back half. Like I say, we try to get the units up that we planned for to get the revenue from them. So at the end of the year, normally it trails off a little bit, but, you know, it should be something like about first quarter.

And you didn't talk about -- on the categories that you are seeing, how important they are to you, what they are doing, where you see strengths --

Sure, Bishop, let me speak to that. This is Sean.

In terms of our top ten advertisers, Q1, '03, Q1 '02, very little change at the top, Cracker Barrel still number one. McDonald's still number two. I guess indicative of the -- of the travel and tourism issue, Holiday Inn our number four advertiser Q1 '02 and dropped down to number six. That may be a little color on what's going on in the hotel/motel business.

A couple of bright spots in terms of categories. Retailers, small retailers have ticked up 1% from 10% last year to 11% of our book Q1 '03 this year. And real estate companies and developers have kicked up a point. Last year at this time it was 4% of our book, and this year it is 5% of our book. And, you know, all that sort of I think points in the right direction in terms of categories of businesses that seem to be doing well in this environment.

What about the phone companies and technology companies?

Sure. In terms of individual customers, our number three customer last year at this time was next tell -- Nextel in year number four. Our number three customer is Verizon. So, you know, if you take that as sort of indicative that they are still in the game, they are still good customers, I think that category is remaining pretty strong.

Yeah, they are in the game with the exception of Cingular which has been a little bit of a disappointment this year. And also speaking about telephone business, the telephone books are big vendors in the outdoor space, and we've gotten good business across the -- across the landscape with the exception of Yellow Book. That's been a little weak.

Well, thank you, gentlemen.

Your next question comes from Drew Marcus with Deutsche Bank.

Good morning, guys. A couple of questions.

First, is there a lot of inventory left in the second quarter to sell? Second, you talk about the top 25 markets being stronger than the others. Is that in posters and bulletins? Or one or the other. Third in the accounting question -- well, not accounting, but a below line item. Keith, for your D & A in the fourth quarter $71 million, this quarter $67.5. Where should we expect it to trend out for the rest of this year?

Which line was that, D & A?

Depreciation amortization.

Oh, for the year? Is that what you are asking?

Yep.

I think that's probably -- you know, between 67 and 70 and a quarter.

Okay.

I think that's fair number. Of course, that depends on, you know, the acquisitions that we do. That should be a ballpark.

For Q2, we have plenty of inventory to sell, Drew. May was -- although we feel good about the -- June, May was a pretty weak month for us.

May should be the weakest month of the quarter, do you think?

Yes.

Yeah, definitely. What was the other question?

In the top 25 markets versus the small markets, is the strength more in bulletin side or the poster side?

Across the board -- but remember in a lot of the major markets, we don't have posters. Pittsburgh it is across the board where we have posters and bulletins. Detroit and Atlanta, we don't have bulletins. We have posters only. A clear bifurcation there. Our business in the larger markets, almost every market, with the exception of Las Vegas, is on plan. And producing very attractive results for us. And the primary driver, of course, is the national and regional business. And, of course, as the economy picks up, that -- those customers buy deeper and deeper. The encouraging news for us is without that business in the middle markets, our local businesses are still holding up fairly well.

As the directional business held up?

No, that's the hotel-motel side of things. And, of course, that was the business that allowed us to perform so well in '01 when ad spend was falling off a cliff, and now that ad spend is starting to come back a little bit, we are -- we have that directional piece that we are dealing with. And the primary customer universe that we were concentrating on, of course, is that hotel-motel piece. Other -- our other Travel and Tourism categories are doing okay.

Cracker Barrel, McDonald's.

Yeah, all of the gas and food side of things are doing just fine. It is just lodging. And even the tourist attractions. They are spending with us is healthy. Disney World, Six Flags, et cetera.

The Motel Sixes of the world.

Very isolated to the hotel-motel business.

Great. Thanks a lot.

Your next question comes from Paul Sweeney with CSFB.

Thanks very much. A couple of things.

You talked about the large markets, smaller market phenomena which is clearly evident in the first quarter and second-quarter results between you and some of the other public outdoor companies. You know, when do you think this is going to converge? I mean, is this a timing issue for you? I mean, obviously the comparisons start to suggest that they will converge in the back half of the year, but what are you really looking for to kind of get your business -- what categories per se are looking to get your business to find of firm up so we can, in fact, look for that convergence in the back half of the year.

And then second, just in terms of the contracts, you know, you had mentioned last quarter that kind of -- last several quarters that across the board contract lengths have been shortening up. Is that still the case in your business? And do you expect them to kind of lengthen back out when and if -- when demand comes back to your market? Thanks.

Good question, Paul. Let me do the second one first. In our larger markets, the contract lengths tend to be shorter. And so the business is better, but these are customers that come in and out fairly quickly, and so that's why overall we we do have a shorter contract length throughout the system, but it is primarily in the larger markets.

When are we going to see some convergence? There is nothing in our book that -- that could allow us to tell our shareholders when they are going -- the regional and national business is going to start buying past the top 25 markets in the U.S. What we have to do as an organization is to concentrate on that local business. That's what we have to do. We have to -- we have to figure out a way to compensate for our hotel-motel weakness, which we may not be able to get that locally, because these boards are -- they are a little bit farther out. They are not in the heart of the DMA's where we operate. They are a little bit farther out so we have to find highway customers. Truck stops, food opportunities, other tourism opportunities.

We have got to look for those type of customers to help us out on our hotel-motel book. And then we just -- we are not going to sit back and wait for the national business to buy deep. We are just going to keep pounding the streets at the local level, and we feel good about the progress we have made on the poster front. We just have got to sell more of our bulletins right in the heart of our DMA. We have very good inventory that is available for sale and we have to start moving that inventory.

Do you think there is anything structurally happening or hearing anything structurally happening from your national advertisers or agencies about how they think about outdoor in middle America that suggests that, perhaps, this -- you know, they won't begin to buy deep?

No, I have never seen that happen before. I have always -- when the national business comes back, it always comes back this way. It starts in the top ten, and they go -- they keep going deeper and deeper. I don't think anything that's out there that would lead me to believe different. Actually quite the contrary. If arbitration is successful in their Atlanta test and they are able to penetrate the community and get past the buyers and to the planners, then I think the large national customers are actually going to take a different point of view about outdoor.

Great. Thanks very much.

Your next question comes from Jim Boyle with Wachovia Securities.

Good morning.

Lamar is coming up on 101 years old. You have gone through many of these sluggish periods. What sort of operational sales trends or even sales team chatter would indicate an upturn in the book is actually happening or what sort of data points or chatter would indicate to you that -- that the book could start to turn down?

The chatter is in the up direction. The -- what they are hearing from customers is given the geo-political clutter in the first quarter that kind of had everybody watching CNN instead of doing business in March. Given our sales cycle, if we are selling for May, a lot of that beating the streets is happening in March. I would point to that as the primary reason our May was so disappointing. What the sales manager and account executives are telling me is an awful lot of customers are saying mid-summer. They had marketing plans in place but they just didn't want to pull the trigger. So what -- what I am hearing is cautiously optimistic, and that's the direction the chatter is in.

And on the posters, since they are more of the lead-in indicator. Are those being placed even later than pre-war?

That is -- that business is, as you know, a shorter cycle sale, and I am actually pretty pleased where that is. We are 3 percentage points up in occupancy on poster side, with rates holding steady. So, you know, on that particular product, we are pretty pleased with the way that one is doing.

At plus 3%, is that prior quarter or prior year?

That's year-over-year same quarter.

How would that compare to normalized times?

Normalized, it is still low. You know, I -- I believe that in an annualized normal year, we've got seven points of improvement in our poster occupancy. So I would have to say that, you know, we are not -- we are not normalized in our occupancy yet but it is moving in the right direction.

Since you brought it up, can you update us on the Arbitration Atlanta test?

They -- they passed out the diaries. They decided to go with diaries rather than people meters, and they have gotten the information back. They are processing the information. And they are verifying the location descriptions that the outdoor industry gave via Arbitration folks.

There were discrepancy in the location descriptions and they have to get these location descriptions perfect because it has an impact on the integrity of the kind of data that they are going to present to the advertising agency. Preliminary indications are that the numbers are going to look pretty good. And that the outdoor industry is going to be pleased, so Arbitron is off to a good start. We just need Nielsen to get in the game and we need Atlanta behind us so we can roll this thing out, get it out in the top ten markets as quick as possible.

Second half of this year or first half of next?

I am thinking next year, just -- they -- they -- their sample included every outdoor stick in Atlanta, plus other forms of out-of-home. So a lot of units. And it ended up taking up more time than they expected to verify the physical descriptions. I think next year.

Okay. Thank you.

Your next question comes from Richard Rosenstein with Goldman Sachs.

Speaking on behalf of Rick. Can you give us two key trends of rates and utilization for bulletins. You talked about poster, year-over-year compared to what would you expect others to be.

Can you give us your best guess, perhaps, of how long you think normal occupancy levels will come by? I seem to remember that you mentioned in the past that one percentage point translates to about $10 million worth of revenue. Has that changed? If you can give us an update on that. That would be great, thanks.

Yeah, I think that answering the last part first. I think the one point equaling $10 million is -- is a good number across the platform, including both posters and bulletins. Focusing in on the bulletins, the story there is occupancy has picked up a tad from 71% to 73% Q1 '02 to Q1 '03.

Echoing Kevin's comments about how the longer term bulletin directional carried us in '01, still down from 74% occupancy in '01. And looking at rates, rate has also picked up marginally. But in '02, it was down from '01, and '03, we basically caught back up with '01 at about an average rate of $975.

The April numbers are picked up slightly. Bulletin rate picked up from an average of F 1 of 975 to 982. And posters, likewise have picked up in April from an average of about 400 to an average of 416. So it's moving in the right direction. It is not moving as quickly as we'd like. The normalized -- it ought to be for bulletins it ought to be mid to low 80s. Average annual. And for posters, it ought to be mid-70s, average annual. So, you know, I believe that -- that, you know, there is seven or eight-point improvements in both categories. In terms of annualized occupancy. When things get back to normal.

Great, thanks.

Your next question comes from Gordon Hodge with Thomas Weisel Partners.

Good morning. A couple of questions. One, Keith, can you just give us a base pro forma EBITDA for second quarter '02. That you will be working off of. Also -- if could you talk about whether you -- you've got a sense from Arbitron of what it might cost to roll out across the top in markets and if you are incurring any costs now developing?

Let me -- I'll do Arbitron first, Gordon. The test in Atlanta was 300,000 and I think it was almost a three-way split, top three companies. We had some other participants. Wasn't quite a three-way split. I don't know if that was a lost leader in terms of the pricing. I expect the pricing will go up for the other -- as we as they develop a more comprehensive proposal. So, you know, I don't want to mislead you on the cost to roll it out because they haven't showed their hand.

Sure.

But it is going to be more than 300,000 a market. It could be as high as a million a market.

But split --

How the industry pays for it, it will be interesting how we, you know, get together and pay for this thing. But it is going to happen. The industry is going to pony up. we, you know, get together and pay for this thing. But it is going to happen. The industry is going to pony I think the industry is committed that this has the potential to make a significant difference in our business. And in the national advertisers perception of our business. So it's going to happen, but I think we need to wait until they figure out, you know, what it really costs them to do Atlanta, and then let them come back to us with a number where they can make a little money, but, also, affordable.

This is Keith. Let me answer your question by referring everybody back to the as-recorded numbers for Q2 of '02 last year. And the as-reported in pro forma, because acquisition activity has not been as heavy as it has been in the past, are not very far apart.

Okay.

The only thing I can tell you -- I will tell through, that on a net revenue basis, if you factor all the acquisitions and so forth that have taken place, you would be adding approximately a million --

Sorry, I didn't hear that.

Approximately three million.

Three million, okay.

In addition to net revenue Arizona-reported -- as-reported revenue and you know how the margin goes.

Great. Thanks

Your next question comes from Bill Meyers with Lehman Brothers.

Thanks, a couple of questions for you, Keith. First off, if you can explain the charge for the cumulative effect for the accounting principle in the quarter. And I guess number two, in terms of working capital, about a $33 million swing in the quarter. Seasonal first-quarter adjustments but should we expect a reversal at the balance of the year since you ended the year with flat [ Inaudible ] Capital.

I don't -- let me answer the first one and -- the -- the first question, the cumulative effect of change in accounting principles, that's a new FAS-143 that just became effective in this quarter, and it makes us account for the reclamation cost of restoring sign sites to their original condition when and if we dismantle a structure. This was -- really applies more to the oil and gas industry, where they go in and they really -- and the mining industry, where they really go in and do some -- some heavy damage to the -- to the drill site or the mine site, and contractually, with the landowner or the government, whoever they are drilling on, when they take away their mining or drilling equipment, they've got to -- there is a cost involved to restore that -- that property. So this was something that we had to adopt and account for because contractually, under our lease agreements with our landlords, we are obliged to go and restore that site. And the way we did this is we took -- we did an analysis under the guidelines of FAS-143.

We estimated the price by reclamation by looking -- talking to our -- to our sub-contractors that do that for us. And we just ran the analysis. And came up with the number. And it is just going to be a number that will be recurring every quarter, and it will also be written off in depreciation and amortization over a specified period of time. So that's what it in a nutshell. And again I refer to you FAS-143. The other question was ....

In terms of the working capital. There was a $33 million swing in the first quarter. Do you expect to wash out during the course of the year?

Yeah.

So you expect that the flat working capital on a four-year basis?

Yeah, if you look at -- yeah, I think -- part of it -- and I don't think you have a balance sheet yet, but part of it is pre-paid leases of about 12 million, accrued expenses of about $15 -- right, the bonuses paid and so forth. But yes, in answer to your question -- when you get a balance sheet when we file the Q which will be shortly -- give me a call back and I can walk you through it. But, yes, in answer to your question, that will wash out.

And just one last thing, I know that may is soft, but how much of Q2 is on the books versus where you stood a year ago?

Q2 on the books ... 75.4%. Is book for Q2. And last year, at the same time, it was 73.7%.

Great, thank you very much.

Your next question comes from SHREE from Wachovia Securities.

My question relates to your bond issue. Now that you have done some refinancing, I was wondering if you could talk us to about -- your thoughts about the convertible and tangible by [ Inaudible ] --.

We don't really have any thoughts on that subject.

We are not prepared to discuss that at this point in time.

Thank you.

Your next question comes from Kit Spring with Stifel Nicolaus.

Good morning, give us an update on the acquisition landscape where you are seeing any change in asking prices. What your appetite is?

Sure, let me just sort of update you on total closed to date. We've closed slightly in excess of $50 million worth of transaction to date. I think we are on pace to slightly exceed the -- the guidance that we gave last quarter. If you'll recall, we -- sort of announced a goal of using -- give or take $100 million of our free cash flow this year for acquisitions and give or take $100 million to retire debt.

And I -- I am still holding to that goal, at least on a cash front, to the extent we do over $100 million in acquisition, some of that will be using stock as acquisition currency and we will still have that available cash for retired debt. So that's the pay thing.

In terms of pricing, it's -- you know, the way we go about our business on the acquisition front is we do a highly disciplined pro forma and analyze what we can generate in terms of free cash flow from acquisition, and we try bring them in at a ten times forward or lower number. And I feel pretty good that we are going to be able to accomplish that as well this year.

Okay. And just a very quick follow-up. What does Nielsen stand in the outdoor ratings process?

They are trying to figure out a way to participate. Obviously they -- they want to generate the revenue. Their first test is actually in South Africa. And so they are doing a test on out-of-home in South Africa. We are not participating in that, but they hope to bring those results to the table and come up with a pricing model for the industry.

Okay, thank you.

Your next question comes from James Marsh with SG Cowen

Good morning, gentlemen. A couple of quick questions.

One require noticed that you discussed in your guidance on a pro forma basis now rather than the old same structure. I was wondering why the change there. And secondly, just wanted to talk a little bit about the cost and when you guys expect to start seeing positive operating leverage and anything on the cost numbers in the second quarter that we should be worried about? Thanks.

Let me do cost first, James, and I will turn it over to Keith for the -- for the new change in the rules. The positive operating leverage is going to come from top line. And we need our top-line growth in the 3% to 4% range before we start demonstrating popular operating leverage because our cost year-in and year-out will cost anywhere between 2.5 and 4%.

Oh, yeah, on the pro forma, since, you know, everything has got to be reconciled now through a GAAP number, we just felt because same store -- two reasons. Number one, same store and pro forma basically, as I mentioned earlier to a question are almost identical. Especially most of the acquisitions that we have done in the past year or two have been fill-ins and existing markets anyway, and since you have got to reconcile to a GAAP number, we thought this might be easier for everybody to follow rather than trying to do it on a same-station basis. It is not all revenue is included in same-station. Not all expenses are included in same-station, based on our definition of "same-station." For instance, if you would have taken the acquisition in '99 and taken that out of same-station, as well as the other acquisitions to have one number, and several other numbers that you just have to guess at to get back to reported net revenues. We just thought this would be easier and clearer for everybody to follow.

Thanks, great. Thanks, guys.

Your next question comes from David Murphy with SG Cowen.

My questions have been answered. Thanks.

Your next question comes from Doug Kahn with J.P. Morgan.

Good morning, guys. Most of my questions have been answered, but just two real quick ones.

First, last year, some discussions about the acquisition properties you had in trying to bring their utilization rates up to what historically had been the rate. Can you just give us an update on. So more recent acquisition properties and how they are doing?

And second, will you be sharing with us or disclosing either now or with your filings what the new covenants are on the new --

On the new what?

The covenants under your bank facility.

Why don't you hit that one, and then I will talk about acquisitions. Covenants on bank facility, generally we don't list all of those. I think we may list some of -- some of the predominant ones, but, you know, the -- if anybody would care to get those, you are more than welcome to call, and I've got a summary of it that I can E-Mail it to you.

Okay, great, thanks.

Not something that we publish on a normal --

Okay, great.

On this sort of utilization of acquisitions done of late, sort of just a couple of broad-brush comments. Our guys in the field have been a lot more careful about building their pro formas. They had a hard time in coming out of 2000 and going into 2001 with the downturn.

Since that time, I feel real good that they've been cautious and they have been able to deliver with -- kind of the results that they have promised us, when they build their pro formas and ask us to buy inventory in their patch. And I think I can say that was a pretty good deal of confidence for the last couple of years. That there was one place where I would say perhaps we didn't do as well as we thought we would, it would probably be the deals we have done in Vegas. And everybody is familiar with the impact that 9/11 had on Las Vegas, and what the impact of the general downturn in Travel and Tourism has had in Las Vegas. For the inventory that we purchase there and the money we spent there to start generating the returns that we hoped for, we need for Vegas to come back. And it is pretty much as simple as that.

Okay, so going forward, I guess, on any acquisitions you might be looking for, is there any, I guess, areas of the country or types of acquisitions that you are inclined to look at and less inclined to look at?

Well, let me just sort of talk about what we did in the first quarter and that will give you some color because we did focus on some very high-quality inventory in market.

Almost exclusively, what we are buying for the first half of this year are extremely high-spot, high-quality bulletin in markets. And we are tending to shy away from inventory that's directional in nature and out in the country because we have a lot of that, and as we discussed, we need to sell what we have. So I would say that if there is a -- if there is a focus that we have, it is more on that prime high-spot bulletin. In the DMA. And that's -- that's where we are trying to find it.

Okay, thanks very much.

Your next question comes from Marc Nabi with Merrill Lynch.

I have one. You talked about on your last conference call you had felt comfortable with 5% growth for 2003 for the -- obviously for the full year. And I was wondering, you know there are light of the expectations that you have for the second quarter and your comments about the second quarter, does that still -- is that still a realistic expectation out there?

Well, the way we got to 5% on that call was that we committed that we were not going to allow our expense growth to outstrip our revenue growth. And so when we started zeroing in on the expenses it was clear that 5% was going to be what it took. Given our pace, 4% to 5%. So, you know, that's how that number came about.

Where we are now is, we are going to be flat in the second guidance that we are given, so in order to get there it will all be back-end loaded. And the fourth quarter of the year is not one of our largest contributor to the year. So we've got a -- in order to get there, we are going to need the wind at our back, because it will be a back-end loaded proposition.

But also, I guess -- also, you had some harder comps, obviously last year. You had positive territory, revenue growth being between 3.5 and 5% as well. So you are saying you are you expecting a really good second-half recovery.

We would need in order to generate the kind of percentage increase that you are talking about. I don't want to make -- there is a bifurcation taking place in the larger markets versus smaller markets. The regional/national business -- but I don't want to -- we shouldn't overlook a that the comps for the other two big outdoor companies were a lot easier than our comps going into the first half of the year. So, you know, the percentage increases that they are posting are coming off of some pretty -- pretty down quarters last year.

Great. Thanks very much.

That the time, there are no further questions. Mr. Reilly, are there any closing remarks.

Yeah, Ametrus. I want to thank all of our shareholders and friends for tuning in to our Q1 call, and we are looking forward to our Q2 call.

This formally concludes the call. Thank you.

Thank you for Thank you. Thank you for participating in today's Lamar Advertising first-quarter 2003 operating results conference call. This call will be available for replay beginning at 12 p.m. Eastern Standard Time today through 11:59 p.m. Eastern Standard Time on Monday, may 12, 2003. The conference ID number for the resupply 59198. Again, the conference ID number for the resupply 59198. The number to dial in for the resupply 1-800-642-1687 or 1-706-645-9291. You may now all disconnect.