Lamar Advertising Co (LAMR) 2005 Q1 法說會逐字稿

At this time I would like to welcome everyone to the Lamar Advertising first-quarter 2005 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. [ OPERATOR INSTRUCTIONS ]

In the course of this discussion, Lamar may make forward-looking statements regarding the Company; including statements of future financial performance. Lamar has identified important factors that could cause actual results to differ materially from those discussed on this call in the Company's reports on form 10-K and 10-Q and the registration statement that Lamar has filed with the SEC. Lamar refers to you these documents. Lamar's first-quarter earnings release, which contains the information required by regulation G, was furnished to the SEC on a form 8-K this morning and is available on Lamar's website, www.Lamar.com. Thank you. I would now like to turn the call over to Mr. Reilly. You may begin your conference.

Thank you, operator. I want to welcome all of our shareholders and friends to our call. I want to start by saying that I -- I like what I see out there. And it's -- it's worth noting three areas. One is the customer attitudes towards our Company and our medium, employee energy and the financial fundamentals.

The customer attitudes toward our company, we continued to see confidence. The customers have confidence that if they use outdoor and if they use outdoor with Lamar, it's a safe place for their ad spend, and that's very gratifying for all of us.

On the employee energy side, I don't think I am talking about spring here. I see a lot of energy in our organization. All of our managers are thinking expansively about how to grow their respective enterprises. They are focusing on the fundamentals of posting and painting on time and servicing our customers. And it's -- that's extremely -- extremely gratifying. And I think it's all against a backdrop of healthy demand for all of our products across the board, which leads me to operating fundamentals.

We -- we expect not only for Q2 but for the rest of the year to see continued healthy demand for posters, bulletins and our transit; and we also expect that if we follow our historical expense growth of 3 to 5%, that our shareholders will see very attractive operating leverage from this Company. And with that, I'd like to turn the call over to Keith to walk you through the Q1 numbers.

Good morning, everyone. I'll just briefly highlight some of the numbers in the release and then give you some color commentary to go with them. Consolidated net revenue, we reported right at 233 million for the quarter. That was all -- all entities. Our outdoor, our logos, our transit and all of the Obie assets that we acquired in January. The consolidated EBITDA of 96.4 million was also the result of all of those entities for Q1. Revenue was up 16% over the first quarter last year on an as-reported basis. EBITDA was up 18%. Obviously, part of that came through our internal growth as we listed in the announcement, and we did manage to close, in terms of purchase price, 104 million in acquisitions in the first quarter of '05. So between those two metrics, that's -- that's what gave us the 16 and the 18. Consolidated EBITDA margins for the first quarter were 41.4% versus 40.7% last first quarter. So we did manage to tick up almost a point quarter-over-quarter.

As far as the pro forma results you saw in the press release that our revenue grew at 6.7% on a same-store basis. Those numbers do not include the Obie transit markets, as we outlined in the press -- press release, or the stand-alone Obie billboard market in Eugene, Oregon. We had guided to approximately 6 for the quarter. EBITDA was up right at 9, on a pro forma basis, and we had estimated approximately 8. Just to kind of round out the first-quarter stats, the -- the 6.7% pro forma growth came on top of 5.9% pro forma growth in the first quarter of '04.

I'd like to highlight a schedule in the press release just so that everybody understands what -- how we're handling these Obie assets and we discussed it on the call last time, but if you'll go to the last page of your press release, you'll see there's a-- a schedule of reconciliation of reported basis to pro forma basis. This is a standard schedule that we put in there every quarter to show you adjusted reported results, revenue, expenses, et cetera. And for 2004, we've added in the normal adjustments for acquisitions, dispositions, and have come up with our pro forma numbers from the as reported.

You'll see in the '05 column that we have isolated the Obie Revenues, expenses, and EBITDA and have taken that out of the as reported numbers. So you get a--a clean comparison on a pro forma basis between Q1 '05 and Q1 '04 and we also give you the reported results for Obie, so that you can see how they're performing. Sean will give you more color on that in a minute. Obie's revenue was right at 9.6 for the quarter. When we gave guidance last time we said that probably be up about-- they would probably generate about 8 million for the quarter; so they did a little bit better than expected.

Last, just to touch on guidance for Q2, you saw in the release we said approximately 8 on the top line and 11, bottom. As Kevin said, we're pretty optimistic; business is quite good, and as far as the -- the comparison to the second quarter of last year, we're estimating 8 on a revenue growth pro forma in Q2 of '04 of 7.7. So-- he -- the -- the comp is certainly a challenging one, but business is good, and we feel good about the tone of things. With that, I'll turn it back over to Kevin, Sean, and open it up to Q&A, I guess.

This is Sean. Why don't I hit real quick on some of the operating indices that are typically part of questions. First of all, on the capital expenditures for the year, you can expect that the CapEx will come in the same as last year, about 85 million. Q1 '05 was slightly heavier than Q1 '04 but that's just a timing issue.

Let me quote you some rate and occupancy numbers. Q1 '04 and Q1 '05. For posters, the Q1 '05 occupancy was 61%. That's four points better than Q1 '04. And the bulletin occupancy was 77% in Q1 '05, and that's 1% better than Q1 '04. On rate, for posters our average rate per panel was $419 Q1 '05, that's a 4% increase over Q1 '04. And for bulletins, Q1 '05 average rate per panel was $1052, which is again a 4% increase over Q1 '04. So we're-- we're pleased with the trends we're seeing in rate and occupancy.

On the national front, as I mentioned in the -- in the call in February, we're looking for double digits, and it appears that we're there. National was up 10% in Q1, and that appears to be accelerating. So we're real pleased with our efforts on the national sales front.

Keith mentioned the acquisition pace. It seems to be very similar to what we were pacing at last year. Year-to-date, we've closed 24 transactions for a total purchase price of approximately 105 million.

Quickly hitting on the top ten advertisers. Q1, 2005, our top ten has one notable category that's moved up, and that's wireless. As I mentioned on the February call, wireless is coming in real strong, and-- and three of our top six advertisers are wireless providers: Cingular, Nextel and Verizon. We're real pleased with-- with their strong support. Just to tick off the top five: it's Cracker Barrel and McDonald's, that's the same as last year; Cingular, Nextel, Holiday Inn and then Verizon coming in at number six.

The categories of business are basically the same as-- as you're used to hearing. Restaurants number one at 11% of our book. Automotive number two at 10%. Retail number 3 at 10%. Real estate and development companies have ticked up one point to 7% of our book. And hotel-motels have ticked down one point to 7% of our book. But those are the top five categories.

And then briefly, let me speak to how pleased we are with the way the integration of the Obie transaction has gone. If you recall, when we announced the transaction, we had hoped that the net contribution to our EBITDA would be about 8 million in incremental EBITDA. Roughly 4 coming from the traditional outdoor and roughly 4 coming from the transit operation. We are pacing to do actually 2 million better than that. It looks like the incremental EBITDA contribution's come in around 10 million, and that's net of absorbing the national sales team and the transit development team into our corporate overhead.

Just to give you a clearer picture of what our transit operations look like now. We had, prior to Obie, about 10 million in net revenues coming from transit operations and about 1 million in EBITDA coming from transit operations; to which we added, again, about 40 million on the top from Obie and a projected four on the bottom, again net of that absorbed overhead. So at the end of the year, you should expect that we would come in at something around 50 on the top, and right now we're pacing ahead of our projected 5 on the bottom; we're pacing to do about 7.5 million. So we've taken those margins from what we thought was going to be about a 10% margin up to about a 15% margin; we're proud of that. And we're particularly pleased with what's going on in Canada. That's been a very pleasant surprise and the Canadian transit operations in Toronto and Vancouver are performing extremely well. With that as a backdrop, why don't we open it up for questions.

[ OPERATOR INSTRUCTIONS ] We will pause for just a moment to compile the Q & A roster. Bill Myers, Lehman Brothers.

A few questions. In terms of the Obie media, those are obviously very good results. Can you talk about the seasonality of the business in terms of the revenue distribution? I don't know if that's traditional Lamar business so we can sort of look at the further quarter estimates. Also on the digital side, I know you hired someone last quarter. Have you had some success in terms of accelerating the deployment? And in terms of your-- what is your current cost of a digital board and at what production level should you begin to see a ramp down in those-- in those payments?

This is Sean. On the seasonality, I'm going to have to get back to you on that one, Bill, because in that number that Keith gives you, there is some traditional outdoor on a free-standing plant in Eugene. But in general, the transit business is more seasonal than our traditional outdoor business, and it's,over time, a tad more volatile, but I'll have to get back with you on the exact percentages by quarter you can expect in terms of a deviation from our normal seasonality. It's going to be about the same?

Bill, it's fairly similar to outdoor -- our outdoor, our billboard. First quarter is their-- their low point.

But it's a little more, right?

Probably a little bit more.

I'll get back to you if it's material, Bill. On the -- on the digital side, we haven't had any legislative wins yet in terms of something worth talking about. We have small wins at -- at the municipality level. This month, for example, we're deploying in Cookville, Tennessee and we're deploying in wheeling, West Virginia, so we'll have two more smart boards up at the end of this month. Our cost has decreased, in terms of buying the units, I'd say about 20%, and we expect if we can, as an industry purchase more of these, that that'll continue. We're -- we're very pleased that Clear Channel has decided to embrace this model of deploying digital and traditional outdoor formats. As you all know they've announced that they're going to be deploying several units in Cleveland and we view that as a very positive development.

Great. And then just as one follow-up. In terms of the second quarter, how much outback do you have associated with Simon Property? Because as I recall, the Simon property revenue should begin to hit until-- until 2006. I'm just trying to get a sense --

Right. I wouldn't model anything for this year although we will have some incremental revenue. We're bringing steel out of the ground as we speak. We're building units. We are also actively pitching wall installations in -- in some top 20 markets. So I wouldn't-- I wouldn't model anything this year, and we're expecting something between 3 and $4 million in incremental revenue next year from the signs.

What about the costs for the second quarter of this are year. Will you be incurring costs associated with those build-outs?

The CapEx will be within our 85 million estimate. So it -- it won't skew the CapEx, and in terms of cost, we've got two people here at corporate now that are working on the project, and it's-- it's added slightly to our corporate overhead.

So the SG&A is not really material for the second quarter?

No. No, but -- I guess the take-home message is -- and Simon's not the only initiative. We have several initiatives where we are ramping up on overhead and CapEx. And we're just -- we're pursuing revenue opportunities, and we've gotten off to a good start with Simon, and we think these other opportunities are going to turn out to be very positive for the -- for the Company. But even with those initiatives in place, I don't think you're going to see a deviation from the historical 3 to 5%.

Jim Boyle, Wachovia.

Sean, how much of the Q2 budget is booked now versus how much last year at this time? And how much of the '05 budget is booked now versus last year? And then a follow-up.

Okay. Let me give you Q2 first. And this is total space sales, posters and bulletins. This year we have, as we speak, 93.7% book-to-goal and that compares to last year same time of 92.6%. So we feel real good about that. We certainly feel good about our quarter coming up. In terms of full-year book-to-goal, we're at 77.3%, and that compares to 77.2% last year. So we -- we also feel good about our bookings for the full year.

Okay. Kevin, does it make sense to spend $100 million on buying Lamar shares that are somehow priced like a radio company or invest $100 million on buying mom and pop operations that are also somehow priced like radio companies?

Well, I think that our performance over the next couple of quarters is going to separate us from radio. I think there's going to be just a real clear, bright line there. I don't know what it will do for our value in the marketplace, but I think we will not only be -- we'll set ourselves apart from radio, but we'll probably also set ourselves apart from the other major billboard operators in the-- in the country as well because of our portfolios -- the portfolio of assets, the markets where we operate, domestic U.S., et cetera. So, you know, we will have to wait and see.

As far as buying back the stock versus acquiring mom and pops, we think that what we're doing today is-- is very accretive. Keith and Brent work very hard at imposing discipline on the organization regarding how we use our capital for the betterment of our shareholders, and right now our opinion is stay the -- stay the course.

One of the things that kind of aggravates me a little bit about -- not shareholder buyback, but let's say a major distribution of capital. It-- it's almost like -- like a trust concept where the shareholders would rather see -- the Company levered to the gills without any financial flexibility, and have us give the -- you know, give the money back. That way they would be 100% assured that we wouldn't go out and do anything stupid. And, you know, my feeling is that as we rapidly delever because the cash is just coming in over the transom, trust me, we've been doing this for 100 years and this is what we plan-- we're going to keep on doing this. And just because we delevered doesn't mean we're going to run out and do anything stupid.

And I forgot to ask you Sean, are you getting close enough to normalized sellout to really start pushing advertising rates up substantially?

You know it -- it -- it just -- it feels good to just be in a place where occupancy is getting to where it's normalized. I think -- I think we still have room on the occupancy front, Jim. And-- and we-- we just want to provide good value for our customers. the-- in terms of -- on the occupancy side, I think we're -- you'll see improvements, and I think we're kind of in the sixth inning on the occupancy games, if that helps at all.

Mark Bacurin, Robert W. Baird.

A couple things. On the-- last quarter I think you had cited that there were some extra expenses you incurred related to the rebuilding of signs from the hurricane damage. Was there any spillover damage in Q1 and can you qualify it?

I don't think it would have shown up materially in the SG&A. It probably did accelerate a little bit of the CapEx number in Q1.

Okay. And then -- I know you'd talked about adding some additional infrastructure at corporate headquarters related to the digital build, but was that the biggest part of the increase in corporate expense year-over-year, or was some of that Obie as well?

I would say Obie was, year-over-year, probably the bulk of it and, again, we're still investing in our national sales effort. We're-- we're touching a lot more national customers and it's paying off. So I would point to those two things, and then there's lots of nickels and dimes, legal, et cetera, that kind of stuff.

So that 9.2 million then for Q1, is that-- is that kind of fully ramped on the additional build and that's a good run rate going forward or should we see some more creep going into Q2?

I would say that's a good run rate.

Great. And then, Keith, maybe you could comment. It looked like there was a big spike in working capital use this quarter. I was just curious what the-- what the adjustments were to get the what looked like a big drain on working cap in Q1?

Well, the -- you're probably looking at the comp maturities of debt. We've become -- our bank credit agreement starts amortizing in '05, and we have got about $80 million worth of required principal payments at the end of each -- well, 80 million in total for the year, about $20 million at the end of each quarter. So that probably added to it.

And then at the end of-- our guys -- a lot of their compensation, our guys in the field, comes from collection of receivables. And they really got out there and worked that -- their [ Inaudible ] balances to death in the fourth quarter to try to rack up as many points as they could towards their bonus at year end. So our receivables were way below, at least at the end the year what they-- they had been running due to that effort. But I think it's primarily-- you're looking at the amortization of the debt.

Great. And then just one other nitpicky question on the asset disposition. It looked like there were some gains. That mostly the-- the FAS 143 adjustments as you've had favorable variance on the cost to-- to take down some of those still billboards or was there actual-- some actual asset sales in the quarter?

Those takedowns from-- for rightaway purposes and so forth where the state reimburses us and some ARO transactions as well.

Laraine Mancini, Merrill Lynch.

A couple of questions for you. Your national is up very strong, although we're seeing the opposite in radio. Do you think that you're taking some share from radio? Or where do you think this business might be coming from? And then also, in terms of your book-to-- book-to-goal being 77.3%, what type of occupancy are you assuming in your goal?

On the first question, national, it's-- it's real strong with customers that have used us before. So it's-- it's hard to say whether we're taking share from other media. You know I've got to think that if national isn't spending money on radio, that perhaps they're-- they're taking another look at us and spending more with us; and then there's probably-- probably some of that. But, again, if you look at our categories of business, they're-- they're so stable and so similar to what they've traditionally been, you know, I'd-- I'd be stepping out there if I suggested that it was a share shift at this stage in the game.

But on the -- on the book-to-goal, you know, we don't release our internal budgets. So, you know, I don't want to speak to exactly what the comp is, other than we assumed going into this year that we would do better than last year. Our budgets are more aggressive this year and our bookings to that budget are better.

Gordon Hodge, Thomas Weisel Partners.

I believe you -- you guys might have acquired Artcraft Strauss. I'm not sure if that occurred in the first quarter or it that's a second-quarter event or if it even happened. Just wondering if you can comment on that and give us a sense of the size? And then also update us on what percentage of your revenue now is national? I believe it 's quite low still, but if you could just give us a sense of that, that would be great.

Sure, yes we did, we -- I guess we did something a tad out of character in that we entered Manhattan with purchase of Artcraft It was a small transaction. For purposes of not embarrassing the seller, I don't want to say exactly what we spent on it.

Was that in the first quarter?

We closed it in March.

Oh, okay.

But for purposes of just kind of understanding what size the business is, we're still a bit player in Manhattan. You're talking about a business that will do, give or take, 4 million on the top and, give or take, 1.5 million on the bottom, 1 million to 1.5 million. So you're not-- you're not talking about a large transaction, but we are happy to have planted the flag in Times Square, and we're-- we're kind of excited about that.

On the break-out national/local. Even though national was up 10 it didn't move the needle in terms of shifting the percentages. Q1 '05, we were 81% local, 16% national and 3% regional and that's exactly how the percentages broke out in Q1 '04. 81, 16, 3. Gordon, we think it's helpful to be in Times Square since we're-- we're fooling around with this digital and we think-- we think we're going to take it someplace and, of course, you know Times Square is-- is a mecca for digital.

Barton Crockett JP Morgan.

I wanted to ask you a question about lease expense which is, obviously, one of your larger expense items. Could you give us a sense of what the growth rate is there? And also looking forward, just so we can understand how this might trend over time, you know, if there's -- how much of a correlation is there between that and real estate prices as reflected in the housing market? For instance, if housing prices start to ease with interest rates, might that suggest a bit of an easing in the growth rate of the lease expense?

And then, secondly, just as a clarification, I was hoping you could address in terms of the acquisitions. I think you said 24 acquisitions, you spent about 105 million. I assume that that's excluding Obie and it doesn't look like any of that really hit in your pro forma reconciliation for the first quarter, so I assume we'd start to see impact from that in the second quarter. And if you could give us any kind of magnitude of what that might mean for the top line, I'd appreciate it.

I'm going to hand the lease expense question over to Keith, but the 105 million did include Obie because we closed that in January.

Okay, so there's really nothing else material?

No. A bunch of little ones.

Okay.

Gordon, this is Keith. On the lease expense, as-- as we've said before, that's our largest expense. In 2004 it was 33%. If you look at our operating expenses, all operating expenses other than corporate overhead, it was 460 million. Lease expense accounted for 430-- accounted for 33% of that 460 million. It is the largest expense ahead of labor, which is about 30% of that 460 million. And last year our lease costs on a same-store-- or pro forma basis grew 3.3%. In '03 it grew right at 4%. We normally say it grows between 3 and 5%, and that is one of the reasons why our expenses on a pro forma basis, before corporate at the operating level, generally grew in that range because this is-- this is a third of the whole enchilada.

Barton, other than the correlation between housing prices and lease rents, there's no correlation other than when there's a downdraft in real estate prices we find that our potential landowners, potential -- not existing but potential landowners are more predisposed to consider using billboards. When things are blowing and going and they're not really looking for incremental sources of revenue a lot of times they just won't consider, you know, allowing us to lease their land for -- for billboard purposes. So it may open up some more possibilities, if there is a downdraft on real estate side. What drives real estate prices -- leasing prices is -- or rates is a couple of things. One is the regulatory environment and competition with other billboard operators.

Jason Helfstein, CIBC World Markets.

Three questions and then just one just technical follow-up. First question, Kevin, on the last call, you had said you were optimistic that occupancy levels could set new records in-- in this rebounding cycle. Could you talk about why you think that is? The second question also for Kevin or, I guess, all of you guys, just any thoughts you guys have on what Clear Channel's intended IPO of their outdoor business; just your thoughts in general.

And then-- then I've got a question on your NOLs and taxes. I guess there's some controversy as to when you guys become a taxpayer, and the thought would be if you're going to use up your NOLs before we all expect, that's probably because you have higher internal profit forecasts. So just review again when you expect to use up your NOLs.

And then, also, isn't there some tax deductible amortization that's no longer on the income statement that you do benefit? So even once you become a taxpayer, you're not going to become a full taxpayer? And then lastly, and sorry for all these. Keith, if you just have the historical for Obie for second, third and fourth quarter for revenue for '04. That would be helpful.

We'll let Keith do Obie and NOL, and I'll do Clear and the first one was occupancy. I'll do Clear and occupancy. Do you want to do --

Okay. I don't have Obie by quarter -- I mean I have it, I don't have it with me, but Obie last year, for the full year, did about 36 million, I believe, in transit and about 8 million in outdoor -- traditional outdoor. The Obie numbers for the first quarter, on a pro forma basis, were up over Obie's actual operating results for the first quarter of last year. And we took their statements and ballooned it. But, again, I don't have the individual quarters in front of me, but that's-- that was the break out of that 42 to 43 million in total revenue for the year from those assets. And, of course, we guided to about 9 for the second quarter in revenues.

The -- the tax question, yes, we've -- we've got about 227 million in federal NOLs, carry forward 240 million in state. We don't expect to come -- become a full federal taxpayer until 2007. A partial taxpayer in '06 on a federal level. And those assumptions are based on pro forma growth of about 7% and expense growth of about 4%. So in your model, if you want to kind of tag along with ours, that would be the number that we would be using to estimate the bottom line for tax purposes. State -- we will avoid state taxes for a while, even though we operate in a lot of states, probably you're looking at a couple of two, three million a year going forward.

And for purposes of how to determine what's deductible and not deductible for depreciation and amortization, you're right, we have depreciation and amortization on the P&L that is not deductible for tax purposes. These were stock acquisitions that we made where we carried over the basis of the acquired company and for tax purposes we stepped up -- we took his basis, but when we allocated the purchase price, we put a lot of it to structures, other assets, and so forth that is not tax deductible. On the balance sheet, there's probably about $1 billion worth of goodwill, and a lot of that is deductible for tax purposes because we paid cash for assets for most of the properties that we bought.

At the end of the day, a long story short, if you take our depreciation and amortization on our P&L and you add in the things that are deductible for tax purposes such as goodwill, and take out things that are not deductible, you'll end up at about the same number. Last year I think that number in D&A was about 280 million. If you do all the plusing and minusing for '04, you would have ended up the day at about 280 million, tax deductible depreciation and amortization. So I think for the time being, you can use that number and whatever numbers we report quarterly going forward through '05, and assume that that would be your tax deductible D&A. So that's about as simple as -- we're just lucky that it works out that way because it kind of simplifies it for you guys that don't necessarily have access to all the internal records that we have.

Regarding Clear and their possible IPO, we think that that would be a good thing for our shareholders because then there'll be a clean comp out there in the marketplace and they can make comparisons. Of course, they'll have work their way around the differences, that they have got a lot more transit in their portfolio, and they have foreign billboard operations; and, of course, we're-- we're primarily North American, and most of our portfolio is traditional billboards. But we think that would be very helpful for our shareholders to have a -- a clean -- a comp out there in the -- in the marketplace.

On the occupancy side, the prospects of blowing through the historical norms, it just has to do with -- I think it's a real possibility, and it has to do with my feelings regarding our customers and their attitudes towards billboards. And, as every year goes by, it seems like buying billboards from Lamar is a very safe and productive place for your ad spend. And as long as we keep them in the right place and take good care of our customers, I think there's a real possibility that we will blow through historical norms.

Shawn Feeley, CSFB.

Keith, two questions. One, can you just remind us what logo is as a percentage of your revenue? And the second question is just on follow-up to an earlier question on the share repurchase potentially, or even contemplating dividends at some point. Are there any restrictions to you guys actually going out and doing something like that? And then, Sean, maybe just you can talk about, you know, should we expect any expansion on the transit side of the business going forward?

Shawn, I'll just throw out the numbers real quick. Transit will account for 50 million total revenue in '05, logos about the exact same, and the rest would come from the traditional billboards.

Okay.

Yes, and should you expect us to grow the transit business? Yes, we have plans to grow the transit business. We hope to be very smart about it. It's -- its a business where the mistakes that can be made are on the bidding of the franchises, and we-- are going to be thoughtful and careful, but we're going to go after it, and we are going to grow that business; because we feel that in the markets below the top five or so, that the bidding is more rational and that there's a -- some running room for us to do well in those markets between, say, 5 and 100. And we feel like we can expand the business and grow it and run it well. On the share buyback and dividend question, there are some modest constraints in our bank agreement, but they're not -- there's nothing-- we can-- because of our leverage, we could cure that with a -- with a low-cost or no-cost amendment. So it's really -- that's not the -- that's not the gating issue. Keith is all over this issue. We have -- we feel very comfortable with our -- our position and our position is this, we will make sure that this Company is in a flexible enough position so that we can move quickly regarding a share buyback or a -- or a dividend program. We're actively talking to -- you know, many of our shareholders regarding these concepts, and we haven't -- we haven't embarked upon a course, but we have the flexibility to do just about anything we want.

And the reason why we haven't embarked upon a course is we still think that domestic U.S., even though there's 15% of the bilboards in America that are unconsolidated; we still think there's some great opportunities for this Company, and in Canada. And we want to make sure that our balance sheet is in a position to capitalize on these opportunities. And, you know, who knows, the Clear spinout may create some opportunities as well.

Kit Spring, Stifel Nicolaus.

As you reach a full level of occupancy in billboards, are you able to achieve a similar revenue growth to the overall portfolio? Or is it harder to get growth through price increases and getting occupancy. I -- I wouldn't think it would matter, but I certainly hear rumblings that your growth could slow as your occupancy hits higher levels.

Let me -- let me talk about that. You know, in the -- in the radio industry, in the late '90s, had a ball talking about how their book was tightening up, and how they were going to push rate. And I -- we've thought about this whole, you know, how we should approach educating our shareholders. And we've decided that we're not comfortable talking about rate and pushing rate and getting occupancy to a certain level. I think it's -- what -- you know, we need to make sure that we provide good value for our -- for our customers, and I think the best thing for our shareholders is, is just sort of to -- you know you can look back based on the occupancy numbers that we give to the marketplace; and I think you can extrapolate when you look at the Company's overall organic growth what the contributing factors are. You know what percentage of that growth is occupancy and what percentage of that growth is rate.

But we-- we think that the radio industry made a big mistake trumpeting their-- what they felt was their ability to, you know, club their customers over the head because their book was starting to tighten up, and they were this -- you know, we -- we want to have the flexibility to go anywhere we want with our rate because we have so much capacity. We have so many unsold billboards that go every -- every month, that small changes in occupancy, huge gains in revenue.

Kit, let me just add something to your comment about as occupancy tightens, increases may slow. Ever since we -- the Company, Lamar, came out of the last downturn in '03, '04, we've posted consistently 7%, 8% or 9% top-line growth; % was in 2000, 7 to 8% is the pro forma same-store revenue every year from '94 through 2000. And, of course, we've been reporting since 1996 as a public company, so you can go back and pull our releases and verify that.

The only year that we didn't produce a 7, 8 or 9 on the top was in 1999 when tobacco was regulated off by Congress of our signage. And we did 6% on a pro forma basis in net revenue growth that year. And that was after $25 million worth of tobacco business went away overnight on April 1, 1999. So I think people should -- you know remember that. That was a pretty long period where occupancy was at a normal level, the normal levels we talk about, and same-store growth continued on unimpeded.

There are no further questions at this time. I will now turn the conference over to Mr. Reilly for closing remarks.

I just want to thank all of our shareholders and friends for listening in and we look forward to the second-quarter call. Thank you.

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