Lamar Advertising Co (LAMR) 2007 Q4 法說會逐字稿

Excuse me, everyone. We now have Kevin Reilly, Sean Reilly, and Keith Istre in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the company's presentation we will open the floor for questions. (OPERATOR INSTRUCTIONS).

In the course of this discussion, Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals, and plans. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call, in the company's reports on forms 10-K and 10-Q, and the registration statements that LAMAR files with the SEC from time to time. Lamar refers you to those documents. Lamar's fourth quarter and year end 2007 earnings release, which contains the information require 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.

I would now like to turn the conference over to Kevin Reilly. Mr. Reilly, you may begin.

Thank you Shontel. I would like to welcome all of our shareholders and friends. I will make remarks about the '08, and then turn the call over to Keith Istre, to review some of the particulars and numbers, and then we will open up the call for Q&A.

Needless to say, the local ad environment is challenging. We have been most affected in our bulletin business. Particularly, our B and C locations. And bulletins, as you recall generate 64% of the company's net revenue. We expect that our bulletin business will be a drag on growth for the first half of '08. The way we see it, it is clearly a Main Street issue, not a Madison Avenue issue.

For '08 on a much brighter note, our digital business is performing well. We look forward to an aggressive rollout in '08, one that will exceed '07. And got an improving regulatory environment, got declining technology cost, and strong customer demand, and all of that leads us to believe we should continue to be first movers in this area. Digital is currently 6% of our book, and growing quite rapidly. As far as how we plan to allocate capital in '08, no change. Digital has moved up ahead of M&A.

So it is digital number one, M&A, real estate, and then share buy backs. And of course, only share buy backs are financed. All of our other activities will be out of the company's free cash flow. In that respect, '08 we still feel we can invest aggressively in our core enterprise, and generate superior returns for shareholders. Regarding our maintenance CapEx, now that we completed several refurbishment programs, you should see a substantial drop in the company's maintenance CapEx in '08. With that I would like to turn the call over to Keith Istre to walk you through some of the numbers.

Good morning, everyone. Just to highlight a couple things on the quarter. As you saw the press release, the quarter came in as expected. Top line pro forma revenue growth was 6.1. We guided to approximately 5% to 6%. Sean will get into the particulars later, but about half of that came from digital, and the other came from static. Expense growth was as expected, approximately 2% for the quarter. As you remember, our historical pro forma operating expense growth is generally 4% to 6%. With that, the EBITDA came in at 11.3. So all things considered, it was a very good quarter for us.

Just to sum up the year real quick since we don't put that information in the release, the top line pro forma revenue growth was 7.3. Direct G&A operating expenses before corporate was 3.9%. Again, that is right at the low end of the 4% to 6% range that we normally guide you to, in forecasting our expense growth on a quarter to quarter, year to year basis. 1% of that 3.9 came from the digital deployment that we did in '08. We expect that to continue into-- I am sorry, '07. We expect that additional 1% added growth to continue in '08, as the digitals continue to roll out. Corporate overhead expense grew 7.6%, and EBITDA for the year was is 11.2%.

Our EBITDA margins went from 44.5% last year, to 46.2%, and of course, a lot of that was due to the very high margin digital business. And the low end of the range, pro forma expense growth. The only other thing you saw in the release, is our CapEx came in at $220 million. We told you on the last call, we expected it to be about $215 million. We were in the range there. And $92 million, in case you didn't notice, was what was spent on digital in '07. With that, Sean, you want to--

Sure, thanks, Keith. I will walk through some of the usual matrices, that we put out, to help you walk through our performance. On number of digital units, up in the air, we closed the year out, '07, with 639 units in the air. That compares to the end of the third quarter '07 of 574 units in the air. Call over call, as of today, we have 670 units in the air. And that compares to last conference call of 599. As Kevin mentioned, we are going continue to be aggressive on our digital deployment. We feel like we can significantly outpace last year's deployment. And our best business judgment is that, even in the face of a difficult local ad spend, that the digital product is being incredibly well received, and we should continue to aggressively deploy.

On occupancy and rate, I will quote these without digital units. This is static inventory only. Occupancy for Q4 '07 for poster was 66%. That compares to Q4 '06 of 67%. Bulletin occupancy was 77%, compared to 78% in Q4 '06. On rate, poster rate was $444 in Q4 '07, compared to $426 in Q4 '06, or an increase of 4.2%. Bulletin pricing averaged $1202 in Q4 '07, compared to $1150 in Q4 '06, or a 4.5% increase in rate. So you can see that we suffered 1% decline in occupancy in the fourth quarter, on both products, but made up for it with rate.

And looking into the first quarter of this year, it appears that we are still doing well with rate, on our static product, and reasonably well on occupancy with the poster product. As Kevin mentioned, the issue we are having, given the strength of local economies out there, is occupancy in our bulletin locations, particularly the not so prime time locations. And we are just going have to manage through that.

On the acquisition front, last year we closed 72 transactions for an aggregate purchase price of $153.593 million. Those were all cash for assets transactions.

On our list of top 10 advertisers for the year of '07, the top 10 went as follows, McDonald's was our largest customer, followed by AT&T, followed by Cracker Barrel, (inaudible) State Farm, Holiday Inn, Verizon, Cingular, Dodge, and Coors. The only one I would point out of note, was AT&T. Of course they went through a massive rebranding campaign last year, with their buyout of Cingular. Their spend with us this year, will revert to normalized levels. They were very aggressive, and a great customer last year, but we do not expect them to be number two again this year. We expect Cracker Barrel to fall back in to where they usually are, which is our number two customer.

In terms of categories of business, retailers were 11% of our book, restaurants 9%, automotive 9%, real estate 8%, hospitals and medicare 7%. Gaming, service, telecommunications all at 6%, hotel, motel 5%. Entertainment and amusement, again 5%. The only thing there of note, is the real estate category of business. We anticipate that as a percentage of our book, it will remain in the first quarter around that 8% level. However, they are traditionally buyers of our B&C bulletin inventory, and they are 12 month contracts. So we will have to watch that one carefully, particularly in places like Florida and southern California.

Again, looking at the first quarter and the guidance, it is clear that if you want to call it recessionary characteristics, in our analog book of business, it is clear that it is beginning to take hold. Of the anticipated 2% growth in our aggregate book of business, we are going to get 3% contribution from our digital rollout, but analog is now approaching negative 1%, it's not quite there, but it's getting there. I would say that question, when we were asked last quarter, has it crept into your book of business? At that stage of the game the answer was no. At this stage of the game I would have to they the answer is yes.

On national versus local, Kevin referenced that this is a Main Street, not a Madison Avenue problem, and that is bearing out in where our national book of business is. We are tracking to the mid singles up in national business. Wireless, in spite of a little pare back by AT&T, continues to be strong. The other top 10 categories of our national book of business are essentially recession proof. And so we feel comfortable there. The only real estate customer in our national book is Remax, and they are actually going to spend more with us this year, than last year. Again we feel good about the national book of business. Interestingly, interest in our digital platform is really picking up at the national level. Last year in total digital national sales we only did $6 million. This year, as of today we have already booked $4 million, so we're pleased again with the way the digital platform is being received by advertisers, and we see an awful lot of activity. On the digital front, particularly nationally. With that, Keith do you want to open it up for questions?

Yes, great Sean. Shontel can we open up the call for questions now?

Yes sir. Thank you very much. (OPERATOR INSTRUCTIONS). Our first question will come from Chris Ensley, Bear Stearns.

Keith, you didn't outline perhaps what your expense outlook was for '08. With a slowing top line, are you still thinking 4% to 6%? You have shown a lot of good cost control, the last two quarters, is that something we continue to expect? And then I have a quick follow up as well.

I think so, Chris. We don't see any-- we don't have any outstanding projects on tap for '08, that would bump that up, other than the normal 4% to 6% as of right now.

So 4% to 6% is still where you would be thinking for '08?

Yes. That is where we are looking for '08 on the operating expense side, before corporate overhead. That is correct.

Two quick follow ups. One in the past you provided sort of a monthly. As the latest month you had, X number of digital boards and X number of revenues. I want to make sure the digital expectations are not running ahead, of where you are seeing it. And the second one is, historically you guys have not gotten any political, but it would seem with digital boards, that could be a real opportunity for you guys. Is that something you are aggressively pursuing?

On the digital count, just to give you some guidance for '08, we expect that we will roll out more units that we did in 2007, and we hope to exceed it by a significant amount. So that should give you some guidance.

I think I was just also you know sometimes you say that in the month of X we had this many boards, and did this much digital. I want to make sure my digital is not running too aggressively. Do you have a December number, or a January number? Which ever your latest month is? Revenues on your boards?

We are pulling it.

Great. Thanks. On the political, is that an opportunity for you?

Basically on the political, our political traditionally has been not driven by the national cycle, because we don't tend to be too relevant in national primaries, either president or U.S. Senate or Congress. We do get a lot of local political. It does not tend to be seasonal in our book, because local elections take place at different times all across the country. It is not something where you would see that sort of TV spike, that you get in the television business. We certainly are getting a lot of interest from political races in our digital product. Again, this is typically not federal. Again, it is sort of typically local. They can do the tit for tat type of, political advertising on digital, and some are using it for that. But, again, I wouldn't put it-- I wouldn't start building it into a model that implies seasonality. The change in our digital book that we are seeing right now is we are getting a little built more national attention. We have 600 something units up, across 120 markets. If you add up the traffic in front of our units, it is about 22 million people a day. I know that some of these people are double counted, because you have multiple units in the marketplace.

And what we are seeing is, some national customers stick their toe in the water. We had an interesting buy around the holiday season, where Coke took some money out of their television ad spend, and just bought two weeks. They had Christmas copy up, and then they changed it for the second week with New Year's copy. And they bought across the entire platform. They called on a Friday, and we executed on a Monday. So, we expect that continued national interest. We are going see a little change in our revenue.

When we started out on this odyssey, our goal was to end up at the end of the day with a network that was relevant for local, regional, and national customers, but we knew we were not going to attract national customers until we got the scale, and could deliver an audience worth considering. As every day goes by, I am more and more convinced, that five years from now, we will have a platform that is relevant for both local, regional, and national customers. I think this year in '08, you will see a higher percentage of national business run through our digital network.

Let me give you December's number you were looking for. In December, the digital billing was $6.8 million. It represented 7.8% of our total book of business.

And how many boards at the start of December? And you had roughly-- more than 600 boards, maybe?

We ended December with 639 in the air.

Great. Very helpful. Thank you.

Our next question will come from Eileen Furukawa, from Citigroup.com.

Thank you for taking my question. I am wondering, is the weakness still particularly in regional areas that have been hard hit by real estate, which is kind of the message you have said in the past, or is today the weakness you are seeing more in your core business now more widespread across all geographic regions? And also, you talked about your core business trending down 1%, do you guys have any insight in whether you-- do you think it is more likely this could be short lived, or do you now think that this core weakness is going spread over at least a few other quarters. And then I have one other question on digital after.

It feels shallow to us because our poster business is doing fine. But we know that we won't-- because it is isolated to our bulletin business, the way those contracts run off, we know we are going to pick it up real quickly. We think we will be impacted at least for the first half of this year. And the weakness in our bulletin business, is more pronounced obviously in those markets, those regions where the housing downturn most affected local economies. Having said that, it is across our entire platform, particularly the B&C locations. If I was going have to go regionally and talk about it, I think the difference from our last call, is some of the economies that seem to be insulated like Texas and Oklahoma and the gulf coast, they are beginning to show the fissures that have been there for several quarters in places like southern California, and Nevada, and south Florida. This is a cold that the rest of the country seems to be catching. The reason I say shallow is we are not seeing a dramatic run off in our books. It is one of these things where, if there is the possibility, that we could actually have a pick-up in the back half of the year.

On digital you mentioned that board costs are coming down. Can you give us a sense of the magnitude of cost reductions. And you talked about the regulatory environment of digital loosening up. is this across the board, or is this primarily larger cities, smaller cities. Just kind of some color around that. Thanks.

The regulatory environment is really being driven by two key states, that we are beginning to see some relief in. New York and Texas. We have a big vote in Texas coming up next week. We anticipate that it will go our way. The industry has been working it very closely, and that will open up the whole state of Texas, which is now, for the most part shut down. We have a similar issue in New York City that we are making progress on-- I mean in the state of New York that we're making progress on. The time horizon there is, probably a couple of quarters away. It's not as in next week. We do anticipate, that we are going get some good news out of New York state. Those are the two primary drivers, of an improved regulatory environment.

And the cost magnitude of the costs coming down?

The cost is essentially being driven by two things. Number one, we have been working very closely with our vendors to improve the product. Primarily from weight, and power consumption, and the like, and that does not drive up cost. When you start talking about resolution, improvements in resolution, which we think we have the product where it needs to be, you tend to counter the normal cost curve in technology. So we have been working with them on things other than resolution, which has helped on the cost curve.

But it's primarily been driven by volume, we have worked with our two main vendors to lay in make or pay contracts this year, of a sufficient volume, that have gotten us roughly a 20% decrease in costs. The most dramatic decrease in cost is in posters, we have had a stated goal for awhile now, to get a cost of a poster down below $100,000 a unit, and we are there. We are feeling good about where we are with our vendors. They are doing a great job. They are great partners. And on that side of the digital deployment, I think all the news is good.

Thank you very much.

I just was informed that the Texas vote is tomorrow, on opening up digital. Let's hope that goes our way.

Thank you. Our next question will come Mark Wienkes, from Goldman Sachs.

In short are you seeing any cannibalization yet with the higher digital penetration. When do you expect to see that if you do at all?

We have been saying for awhile that we wanted to cross that 20% threshold, and see what happens. The modeling suggests that there's marginal cannibalization, what I am hearing anecdotally, is just perhaps we have moved customers from some of those B&C locations on the bulletin side, to the digital product, because they have always wanted to be in the best locations in town, and they've never been able to get there. Digital allows them to get there.

As we model and look forward right now, I don't see it as being greater than that 10% number. I think when you look at what digital is doing for our aggregate same store growth, in the face of a difficult local ad environment, I think that bears that out. Mark, I look at it a little bit differently. The execution across the board is a little uneven. Those managers understand that this is great stuff to call to action, and time sensitive events, are attracting new customers, but we have some managers that are just going to their best customers, and trying to get them to increase their ad spend, or shift their ad spend from analog to the digital. My concern is right now, is not at what point you start-- if you can do that from the get go, from the day one, really the concern is to try to have a more even expert marketing effort to those customers that can really benefit from what we have out there.

I just want to confirm, is it fair to say you are letting occupancy lapse more on the billboard side versus 12 month deals at flat pricing. Is that what's going on?

We have always done that. It would be unwise to lock in low rates long at this junction.

Has the average duration of your contracts changed at all in billboard, or are you not signing those deals?

There is not significant change in the average length of time.

I am sorry. Just one for Keith. Is it fair to say is your leverage trending toward the low end of your 4% to 6% range? Is that the focus now? Leverage go toward four times?

Not really. We are at five times right now. Total. That would be total. We have always said that share buy backs are part of what we are going be doing for the next four or five years. And if there is-- if we are optimistic about our prospects going forward, and we see an opportunity to take advantage of a blip in the share price, we wouldn't be unwilling to tolerate a little bit more leverage.

I think for a company like ours, the credit spreads, it might be a little more expensive but the credit is certainly available to a company like ours.

That is great. Thank you.

Thank you. Our next question will come from Marci Ryvicker, Wachovia Securities.

Thanks. I have two questions. Sean, it sounds like posters are actually coming back, if i'm listening to you correctly. Last conference call you said, posters were a little weaker, and your ad rate year over year was up 3%, now it is up 4%. I want to know if I am hearing this correctly. The second question is, what the s the main driver of acceleration in your digital rollout? Is the regulatory environment, the cost coming down? Is there one particular driver over the others?

On the first question, you heard correctly. Posters are performing better on a relative scale than bulletins in our book. We are up in rate, and for the quarter it looks like it will be up in occupancy. On the poster side. We have isolated the problem to bulletins.

If you listened to our last couple of conference calls, there have been data points that make what is going on in our economy and with what's going on with Lamar today look a little different, than going into the last recession. Typically the canary in the coal mine, is posters. And what we are seeing now is weakness in the bulletin area, which is again counterintuitive, and typically the canary in the coal mine is national ad spend, and not local, and that is opposite going into this one. It has been a tough read, on what is going on out there. You know, I think-- I think we can manage to the issue on bulletins in a way, that we can come out of it stronger. We have isolated that issue, and we will manage to it. Marcia, on the digital question, it is the regulatory environment first. But really all three, are a cause for optimism. The declining technology costs, and the strong customer demand. So you put those three together, and there is an impartive for us to be a first mover. And we need to exceed our deployment performance in '08 substantially, over what we had accomplished in 2007. Sean mentioned we have a great relationship with our vendors, but we are using up most-- Lamar and Clear are using up most of the domestic U.S. capacity at this point.

Thank you.

Thank you. Our next question will come from Jason Helfstein, Oppenheimer.

Hello, thanks. Can you hear me, guys? Two questions. First, on digital, clearly it sounds like the advertisers are more resilient on digital. Part of that, is probably because they are convinced it is more impactful. I'm wondering if the duration of the digital contract, is more of a motivation for them to stay in digital, where as they are hesitant to sign the longer term billboard contracts? And then my second question, Keith, you guys manage expenses obviously really well in the fourth quarter. Much better than we expected, or even you expected. Can you talk about where that came from, and if you have any expense flexibility for the first half of '08? Thanks.

I will answer the digital question first, it could be that short cycle sales could be easier. It is less gross. You may not be getting the same frequency, but it is a less gross dollar outlay, on behalf of the customer. Which is a good thing, but it also creates some challenges for us. It means that we need to be-- work really hard to take the friction out of the sales process. Because when you look at these short cycle small dollar transactions, we want to be able to execute these things in a very profitable way. And so I think you will see by the end of the year, or at least within the next 18 months, that we will unveil a very robust front end, that is extremely useful for all of our customers both national and local, where they can easily go in, create, and insert ads for the time that they have acquired. Jason, I think you put your finger on something important. Our customers, they have the confidence to buy short, and they see a meaningful impact very quickly with digital. You know, if we are sitting down on a bulletin contract, and asking for a year commitment, that is where, at renewal time, there is a little bit of a pause. I am hearing that anecdotally out there, from the field.

Jason your question was about the expenses in the fourth quarter?

Yes.

Jason?

Correct, yeah. So what drove your expense growth was a lot lower than bethought and other people thought. Do you have any flexibility in the same record for the first half of '08?

Well, if you remember in '06, we had some special projects that we had implemented in the field, with respect to maintenance, and vegetation control, and so forth. And we told the market that expenses '06 were going to be running on the high side of the 4% to 6% range. A lot of that-- a lot of those expenditures occurred in the second half of '06. So, we did not have those expenses in '07, so that is why we told the market that in the back half of 2007 our expense growth would lighten up, over the first half of '07, and all of '06. There is not the same type of comp at the end of '08 that there was at the end of '07. Which is why I mentioned at the beginning of the call that I thought our expenses should be in line with our normal 4% to 6% operating performing expense growth. I think it will be a normal year, 4% to 6%. right now, if I had to guess, I would assume it would be somewhere between 4% to 5%.

Okay. Thank you very much.

Our next question will come from Anthony DiClemente, Lehman Brothers.

Two questions. One is on the economy, and one on digital. If you compare Lamar to CBS and Clear Channel, outdoor, CBS is pacing along at high single digits for North America billboards, Clear Channel around mid single digits, and now your guidance is for low. I am just trying to understand the discrepancy. It seems like it's national versus local, or large market versus small market. Is that true? And I guess the question is can you give us a little more texture on that? Why is it that, kind of the local businesses as you see it are, in fact struggling more than national? If that is true, can you break out national versus local revenues for us, just to give us an idea of what is going on?

And the second question on the digital rollout is, is it does seem as though, if you look at the fourth quarter boards per month, it was around 21, 22. and then January, February are pacing along at 17, 18. That is actually a deceleration from the 25 to 30 that you saw in the beginning part of between 2007. Can you help us with what is the catalyst to reaccelerate the digital deployment into '08, as you've guided to at the outset? Thank you.

Thank you. Let me hit the local, national real quick, and then we will discuss the digital deployment. The local, national mix for Lamar for '07 was 82% local, and 18% national. And that is a profile that is different from Clear Channel and CBS.

And you know, I think you put your finger on a little bit of the issue, in terms of the discrepancy in our guidance, and their guidance. They send to have a mix that is 60/40, 50/50. As I mentioned in the opening comments, we don't think this is a Madison Avenue issue. Our national book of business was up 14% last year, and going into this year against that very difficult comp, it looks like it is going be up 6%, 7%. So, you know--

Can you help us with those numbers for the fourth quarter, please?

For the fourth quarter local/national mix?

The growth of national versus growth of local in the fourth quarter.

20% up in national in the fourth. Q4 we were up 16% on our national book of business. The percentage of our total book I will have to get for you, for the fourth quarter. It was 82, 18 for the year. In general, we have read your stuff on, what you are contending is a secular trend away from local. It may, or not be the case. It feels to us like this is cyclical. It feels to us like, that Main Street U.S.A. is either in, or shortly going be in, a recession, and our book of business is behaving like it behaves, when that happens.

Also share shift. If you look at the out of home industry, which is 4% of total ad spend, billboard industry is 1.5% of ad spend. So it is a small piece of the ad pie. On the national level, in you have share shift taking place, because we have such limited capacity, it can have a huge impact on our industry. If you look at our performance over the last several years, we benefited from local ad share shift. I think, you know, we will still benefit.

But one or two decisions by these financial customers can have a huge impact on our industry. If you look at who is using out of home right now, some of those customers are pretty much recession resistant. Certainly the wireless carriers are going continue to compete pretty fiercely. I know there is a $99 all you can eat plan out there right now, that they are promoting. Our industry is going get plenty of wireless business. The customer list goes on. McDonald's, etc.

On the digital front, I wouldn't get too wound up about the quarterly timing of boards in the air. You know, we have-- we track it by boards that have been approved, on order, and going up. And as I look at '08, we will significantly outperform '07 in terms of getting boards up, and in the air. And we are taking delivery-- we are contracted to take delivery on more.

But it is noted that we did get off to a little slow start in Q1 and we will be a little back end loaded for '08.

Okay, guys. Thanks for taking the questions.

Thank you. Our next question will come from James Farrant, Morgan Stanley.

A couple quick ones. The first one is, is your ad up for significant rollout, for digital boards in '08, sort of predicated on getting, regulatory approval in both Texas or New York? Just the second one is, just given the potentials of substantial rollout in digital boards, and give than the cost for boards coming down up to 20%, how do you look at digital CapEx for '08? Do you see digital CapEx up 10%, or 5%? How should we think about that?

I think you will see on the CapEx number, you will see digital CapEx coming in at the $100 million to $110 million level. You will see a corresponding decrease, in what has traditionally been our maintenance CapEx, so that total CapEx will be a slight decrease in 2008.

Okay.

That is how the capex enthusiasm is going come down. We get more units for that dollar, because of the contracts we negotiated with our vendors.

'08 expectations are not predicated on New York or Texas.

That is potential upside if you get approval?

Correct.

Okay.

Thank you. Our next question will come from Jim Boyle, CL King.

Good morning. Kevin, how does the advertising rate discounting by other low cost media, such as radio, weekly newspapers, yellow pages etc., how does that affect your salespeople's efforts, to hold to Lamar's static display rate card? And is digital ad rate pressure in this tough economic time any different?

Digital is a little different, because yield is more important than rate. And also with digital you have different rates. You have daily, weekly, monthly, and annual contracts. There is a premium you pay. The shorter you go the higher the premium. So with digital, it is more yield management, and a little bit less rate sensitive.

This is all new to us. Digital means speed, and speed means capacity. And the ramifications of that, is we have got to get very sophisticated with our yield management. And we also need to have plenty of compelling content. Not necessarily paying content, but other compelling content. Because just to give you a little example, you take our existing platform today. Let's assume all annual contracts, at let's say 80% utilization. That would yield about $75 million in revenue. If you took that same number of units and went 100% daily contracts, you would have an 18%, at a slight premium to your annual rates. It would only require an 18% utilization, to achieve $75 million. So we're focusing on-- but you would have 250,000 transactions versus 50,000 or-- 20,000 transactions. This is how we are thinking about taking the friction out of the sales process, and get the entire organization thinking more in terms of yield management, so you have a certain percentage of book would be short, and certain percentage would be long, and it would be the optimum yield management for the platform, and also optimum for customer advance. Does that sort of-- does that answer part of your question?

Partly. I am probably going have to re-read it to get the full impact. Can you go over the the analog side? What is happening to your salespeople with radio and yellow pages if weekly newspaper cutting their rates?

We are still the lowest cost per thousand and rate is not the issue. It is efficacy. Is this the right thing for me to be doing?

We're insulated because of our cost per thousand. And we don't have audience erosion discussions, and if you look back over our performance over the last several years, clearly there is share shift taking place, in the marketplace. That bodes well for us. You know,Jim, just checking with the field, I am not hearing anybody anecdotally tell me that they are having problems with B&C bulletin renewals because of competitive friction from the other media. I am not hearing that at all.

That is a plus. Also could you give us an update on any further progress on the research front either with GPS or other devices?

We are soldiering on. We hope to unveil-- it's getting a little embarrassing because we keep pushing it out farther and farther. I think we are closer this year, we will unveil TAB's efforts. Nielson is trying to develop a competitive audience measurement system. I think the industry and customers are going to be more-- will find that the eyes on approach that TAB is developing, I think that the TAB, the Traffic Audit Bureau's measurement system will prevail. I think it will do a lot for our industry, especially with our national customers, that want to be able to slice and dice our platform by demographic profile.

If we hit a full blown economic recession, and you are hurt more on the analog side, could you envision in '08 digital revenue flattening out, or going negative, even?

I think it is too early in the game, Jim. We are putting up additional units.

But on a same board digital basis, would a full-blown recession flatten out your digital?

It's not worth speculating on something like that. There is a huge fissure in Yellowstone Park, and what's going to happen to all the houses around Yellowstone if that fissure opens up? There is a huge eruption. I don't really know.

Okay. Thank you.

Our next question will come from Brian Shipman, Jefferies.

Thanks, good morning. A question focused on the digital board you have had up for six or 12 months or longer. The smaller subset, obviously. You mentioned yield management as being the real issue there. How has yield been for those boards that have been up for a longer period of time?

It has been fairly steady along the matrix that we've quoted. For the smaller poster sized units, we are averaging about $6,000 a month. For the 10 by 6 by 36 or smaller bulletin format, we are averaging about $12,000 a month. And for the 14 by 48, we are averaging about $18,000 a month. That matrix has held up, and it has held up for boards that have been up for longer than a year, that we can track.

Jim asked the question about what happens if we go into a "full blown recession". I think a more interesting data point is going to be, what happens in the markets where we have competitive digital product up with more than one company. We are tracking it very closely in Las Vegas, where we go head up against Clear Channel. Both companies have a very robust bulletin network up. And you know, as I mentioned to Jim, it is too early in the game to figure out what is going to happen. We are going have to track that closely, and report it to you, as we get good and better data points. Right now we seem to be okay.

Okay. And if I may, a follow up question. You alluded a little bit to, hoping for a second half recovery in the bulletin business. Is that-- is that statement based on any specific conversations you have had with advertisers at this stage?

It is sort of the way our book comes together. Especially on the bulletin side, it just looks exceptionally weak, in the first half.

And you know, the data points we are getting from large advertisers which they are typically national, are all good. It is harder to get anything other than anecdotal from what is happening to tens of thousands of our local Main Street customers. When you look at the categories of business, and the percentage each represents in our book of business. You just don't see dramatic moves, that would point you to one direction or another. So you know, it is-- again, we are getting good comfort, from large national customers. We see a distinct slowdown at the local level.

Shontel, this will be our last question. Let John Blackledge be our last question.

Thank you, sir. Our last question will come from John Blackledge, JPMorgan.

Thank you for taking the question. Give than we are two thirds of the way through the first quarter, and I know you said the first half is going be weak, particularly on bulletins. I am wondering if you are seeing a deceleration, in overall top line, in the second quarter, from the first quarter. I am trying to identify what a substantial growth growth, or deployment of digital boards, '08 versus '07 means. Is that 50% more boards out of this year versus '07? If you could try to quantify that if possible. What are bulletins? I know you said posters are under 100,000 at this point? What are bulletins costing at this point, we're about $300,000, I don't know if that's come in. Then just interest expense levels, and depreciation, for '08. Thank you.

We have not given guidance for the second quarter, other than describing what our bulletin book looks like for the first half year. Regarding the number of units that we hope to deploy, what was it? Somewhere-- 300 and change last year? 350? 325 units. So we could consider it a very good year if we came in at 400 to 500 units for '08. On the cost decrease on the bulletin side, it depends on what format you are talking about, but 20% to 25% decreases, is a pretty good number.

And then just the interest expense and depreciation?

Depreciation in '08 will be the same as '07. Depreciation and amortization. Interest will be a little bit less. Rates are falling. I don't know where they are going to bottom out. Probably looking at $10 million to $15 million less in cash interest expense.

Thank you.

Thank you, gentlemen at this time, we have no further questions in the queue.

Shontel, thank you for managing the call. I want to thank all of our shareholders and friends for tuning in. We look forward to our next quarterly call.

Thank you. At this time, ladies and gentlemen, this call has now concluded. You may now disconnect. Thank you and have a great day.