Lamar Advertising Co (LAMR) 2008 Q3 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 those documents.

Lamar's third quarter end 2008 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 an 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. As is our custom, management will open up the call with some brief comments, and then we'll turn to Q&A. Let's get right to the Q4 guidance. The negative 9% surrounds weakness in three areas, auto, real estate, and other media. But I want to take this opportunity to let our shareholders and friends know how we plan to manage through this recession, and my comments are directed to really what we can do right now in areas of CapEx and expenses, and not towards what we think might happen regarding revenue.

We have a plan in place to generate $200 million in cash over the next 13 months. And this is how we're going to get there. We're going to cut total CapEx to $30 million, and that's across all areas of CapEx -- real estate, digital, and analog. And we're going to hold our expense growth to less than zero. And that plan is in place, has been in place for the last three weeks. And we know where it is, and we know how to get it, and so we have a very high level of confidence that we will generate $200 million in cash flow.

What we are also confident of, is that our strong free cash flow against our modest leverage, and Keith is going to cover some details regarding our leverage and our modest fixed charges, this effort will serve our shareholders very well over the next few years.

With that, I would like to turn the call over to Keith.

Good morning. Just to touch on Q3, as you saw in the press release, our revenue for Q3 declined by 3.9%. We had guided to down 5% for the quarter, and August and September came in just a hair better than we expected at the time we gave out the guidance. The good news is that the expenses, direct and G&A expenses for the quarter, were up only 2.7%. As you know, 4% is our normal run rate. And that should hold true for Q4, as well. We should be somewhere in the 2.7 or less expense growth range.

That being said, as Kevin mentioned, we did include a supplemental indebtedness schedule in the release, which is something that we have never done before. But there's a certain amount of misunderstanding and misinterpretation with our credit agreements and our outstanding debt, and we just wanted to clarify with respect to these issues.

There are three common misunderstandings in the investment community. Number one is that our senior credit facility total debt ratio test steps down from 6 to 1 to 5.75 to 1. That is not the case that was in the original agreement, and we amended that ratio to remain at 6 to 1 for the life of the senior credit agreement, the bank agreement, with our bank consortium. So it is at 6 to 1 today and it will remain 6 to 1 for the life of the loan.

The second misunderstanding is that our convertible notes at Lamar Advertising Company, which is $287.5 million, that those notes are included in total debt for covenant calculation purposes. That is not the case. Lamar Advertising Company, that's the holding company, all other debt is at Lamar Media Company, which is a wholly owned subsidiary of Lamar Advertising. So those are not included in any of our debt tests, and are not counted as debt under our debt agreements.

The last misconception and we have it -- we refer to -- it's referred to in the last paragraph on that first page. It says, there's a line, the last sentence of that last paragraph, the supplemental indebtedness schedule says, "In addition, and without regard to any limitations described in the preceding sentence, under indentures, Lamar Media may at any time incur up to $1.3 billion in indebtedness under any senior credit facility."

People read that -- those are in our -- that is a basket given to us in our high yield senior subordinated notes. And what that means is not that we can only borrow up to $1.3 billion under our senior bank credit facility. It means that at any time, regardless of our EBITDA, if the company had zero EBITDA, and we could convince our bank group to lend us $1.3 billion, then that would be permitted under our high-yield indentures. After we exceed the $1.3 billion, then we are on the incurrence test of 6.5 to 1 in those agreements. And as you see in this schedule, our senior outstanding indebtedness to day is $1.328 billion.

So I hope that clarifies it. If there's any questions remaining, please ask them as we go through Q&A.

Sean

Thanks, Keith. I will take the opportunity to run through some of the metrics that you're all familiar with. Let me start with the number of digital units we added during the quarter and call over call. We ended the third quarter with 976 units in the air and in billing. And as of today, we have 1,012 units in the air. We estimate we'll finish up the year with about 1,065 to 1,070 units in the air and in billing.

Kevin mentioned that our game plan in '09 on the CapEx side is to limit our CapEx to $30 million. That plan is in place, and is very easy for us to execute. On the digital side, it means that we will spend about $15 million on digital CapEx in '09, adding roughly a hundred units.

Let me take a moment to acknowledge our vendors who have been working with us as we had to alter our game plan on digital deployment. Det-Tronics and Yesco have been great partners.

They are honoring their pricing commitments to us and allowing us to push out into the future some of the remaining commitments we have to spend with them. I just wanted to acknowledge that they've been great partners, and when times get better in the back half, hopefully, of '09, we'll be able to sit down and revisit our plans for '10 on the digital project. But for now we're anticipating about $15 million in digital CapEx for '09, and again, about 100 extra units.

Let me talk briefly to rate and occupancy in the third quarter. On poster occupancy, Q3 '08 occupancy was 68%. That compares to Q3 '07 of 71%. On the bulletin side, occupancy of 75% in Q3 '08, which compares to an occupancy of 79% in Q3 '07.

On the rate side, our average rate in Q3 '08, on posters, was $456. In Q3 '07, it was $449, a slight increase of about 1.6%. On the bulletin side, rate in Q3 '08 was $1,179, average rate Q3 '07 was $1,194, or a slight down tick of about 1.3%.

So you can see that, as is typical of the way we manage through recession, we are doing our best to hold the line on rate, and the shortfalls are coming in occupancy. It is our experience, as we go through recessions, that occupancy comes back far faster than rate.

Now, where we are having to drop rate to move space, we are doing it on a short-term pre-emptible basis, just like we did very effectively after 9/11. For those who have been following us for a long time, after 9/11, that Q3, Q4 time period was a difficult one, and we sold short and pre-emptible where we needed to move space, and demand came back. We were able to get rate back to where it needed to be.

Our national local sales mix year-to-date is 80/20. I would note that Q3 '08 local ticked down to 78%, national ticked up to 22%. That's not necessarily apples to apples. Recall, we did the Vista deal, which gave us a slightly stronger national presence in New York and Los Angeles. By the way, anecdotally, New York is doing extremely well. It's one of the bright spots in terms of markets for us, Q4.

Acquisitions, to date, and this would probably be about all of them for the year, closed 64 transactions, total cash purchase price of about $233 million.

Let me tick through briefly our top 10 advertisers, and top 10 categories of business and then maybe give you a little more color on them. Our top 10 advertisers year-to-date, McDonald's number one, AT&T number two, Verizon number three, Cracker Barrel number four, State Farm number five, Coors number six, Dr. Pepper number seven, Geico number eight, Dodge number nine, and Holiday Inn number ten. Of note, the biggest customer that has dropped out of our year-to-date top 10, and this would be no surprise, is Chevrolet. In spite of that, when when you look at our year-to-date categories of business, the shift is not that perceptible when it comes to automotive.

So going through our categories of business, we've got restaurants at 11%, that's up from 10% last year. Retail at 9%. That's the same as last year. Automotive at 8% year-to-date. That's the same as last year. Hospital is at 7%, that's the same as last year. Real estate has ticked down three percentage points in our book of business year-to-date. It's at 6% of our book of business year to date, as opposed to 9% in September of '07. Those levels of 6% of our book roughly approximates where real estate was in 2005.

Service industries, 6%, gaming 6%, that's the same. Amusements and entertainment, those are mostly directional, that's the same. Hotel/motel, again used primarily directionals at 5% of our book of business, roughly the same as year-to-date '07. And telcom at 5%, and that is the same as year-to-date '07. So the most perceptible move, of course, has been in that real estate category.

As Kevin mentioned, we have put in place an expense reduction plan that we have essentially already executed. It will show some benefit in the fourth quarter, as well as substantial benefit in 2009. We have targeted and are budgeting, and these are the budgets that our general management is bonussed on, a 1% pro forma reduction in our expense base for 2009. We're getting it in primarily two places. Headcount, which again we have been aggressively pursuing that. We anticipate savings of $6 million to $7 million, or 1% of our expense base from headcount reduction. Aggressively pursuing lease reductions. We maintain a bank of unbuilt leases so that when times are good, we can build and grow. When times aren't good, we can cancel them, and that's what we are doing. We are also aggressively renegotiating, and in some cases, taking down non-performing units where given the current climate, the lease cost actually exceeds the sales on those units. We anticipate that that will likewise generate savings of $6 million to 7 million, or 1% of of our expense base.

Another category of expense that we're going to realize some savings on, the whole industry is moving away from paper and glue and to a substrate on posters that is polyethylene. We will no longer be buying glue and other related expendable materials to our formerly paper and paste poster product. We anticipate that savings to be about $1.5 million. We also will see some benefit from lower gas and energy prices. That, by the way, will not only help us, it's going to help our audience, which is drivers, and many of our customers, who rely any them. So some of the savings you're going to see in fuel and illumination, and the rest of them are miscellaneous. But as I mentioned, they are all real, and actions have been taken to put them in place over the last month.

So Keith, I think that's about all I've got. Kevin, turn it over to you.

When you add it all up, again, again, it equals $200 million in cash, which we will put on our bank indebtedness. And we expect, in '09 on the revenue front, to rely heavily on our low cost per thousand, emphasize with our customers, our audience, which is drivers, which hopefully some share shift will insulate us to some extent. And then, don't forget, one-third of our business comes from highway directional, and the average length of stay of our customer on the highway directional side is seven years. So my expectation for '09 and 2010, is that this company will have plenty of head room in order to operate its business. And remember, we don't have to borrow $0.05 to fund our operations.

With that, I would like to go ahead and open up the call. Chantelle?

Thank you, sir. (OPERATOR INSTRUCTIONS) Our first question will come from Marci Ryvicker from Wachovia.

Good morning. Your suspension in your digital investment, is this a permanent suspension, or just temporary during the current climate?

Yeah, Marci, let me take that. This is Sean. You know, one thing that we remain is very bullish on the digital future. If you look at the third quarter, and I meant to give this out to you guys, but if you look at the third quarter, of the approximately down 4%, digital contributed plus 2% same store growth. So, we remain bullish on the business case, but we also have to be very cognizant of the environment we're operating in. We could not, number one, add a tremendous amount of additional capacity, given what we see in the world of ad demand, and ad spend. And, quite frankly, given the concerns out there about total leverage, right now, if we're going to generate $200 million in free cash flow and pay down debt with those funds, we had to temporarily suspend much of our digital plans for next year.

And remember, Marci, it's not just CapEx. We were investing very aggressively in our front end, and so we had a lot of ancillary, other expenditures associated with this effort, which as soon as we start seeing some daylight, we're going to crank that up.

And Sean, can you talk about pricing on digital in Q3, and also what you're seeing in Q4, because I think you had mentioned at a conference it was down around 9%?

Yes, and I think that sort of range is about where it is. You know, again, we have a lot of confidence in the digital model, but we have been adding tremendous amounts of capacity in the face of pretty tremendous headwinds. So, I think that the prudent thing for us to do is focus laser-like on selling the units we have in the air, rather than adding, or potentially adding, 50% to 60% more capacity in '09. So, that's our game plan, and we feel like it's the prudent game plan. And we also feel that digital will probably be the first thing to lead us out, as things get better, hopefully as we move into the summer.

Great. Thank you so much.

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

As you look into Q4, can you give us the expectation for the digital contribution from a revenue perspective. And then given the expected 9% decline, how much of that is pricing relative to occupancy on posters and bulletins.

I'm going to tell you that in Q4, and I'm guessing here a little bit, but it's an informed guess, that the bulk of the decrease is going to be on occupancy. Again, when we manage through these recessions, and this isn't our first one, this management team has been around for a while, we do our best to hold the line on pricing. You say that in the third quarter. We allow units to go unsold, because when demand comes back, it's occupancy that comes back faster. As we continue to monitor the situation and we move into '09, there may be some isolated customers for whom we make pricing concessions on a short term basis. As I mentioned, we did that with great success after 9/11, and we're anticipating that that strategy can help us out here .

So is the expectation that, as we look into 2009, that the contract lengths are, in general, going to shorten cross the board as you try to manage more on a quarter by quarter basis?

Basic what we're hearing from the field is that people are playing their cards. I'm talking about customers, our local customers. Are playing their cards very close to their vest. They don't know what the future holds for them and their businesses. As a consequence, they are more willing to go short than long, and they are understandably having renewal discusses later on in the contract period so that they can get a little better visibility on what their world looks like. Again, going into recessions, these things are not new to us. We've seen them before, and we know how to work with our good loyal customers to make sure they stay good loyal customers.

And you were correct in assuming that our bulletin contracts will be shorter in duration. Less volatility there and more volatility on the digital and posters. Our digital contracts can be as short as three days, and the poster contracts can be as short as 30 days.

Thank you. Our next question will come from Jason Helfstein, Oppenheimer. Jason, go ahead. Jason, if you have your phone on mute, would you please unmute your phone now.

You can go ahead and move on.

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

Great, thank you. It sounds like the categories really haven't changed outside of real estate, but could you talk to the depths of the advertisers, like the number of advertisers that are in the category. Is it just thinner, fewer clients at the table? And also, what's your visibility now versus typical, at this point in fourth quarter. Business on the books for this quarter and next year, now versus before, how much visibility do you have?

We traditionally don't have a great deal of visibility as w turn the corner in a new calendar years. There's a couple reasons for that. Outdoor doesn't have an upfront like some other media. Our contracts tend to be signed and entered into our system a little bit later than other media, well.

Traditionally, we set our budgets in January, the budgets by which our general managers are held accountable and bonused on. This year, given the environment, we have set our expense budgets, and we did that last month, so that we could execute on the expense savings immediately, and not wait till 2009. So we set our expense budgets. We have not set our top line revenue budgets for next year yet. And that's not new. Year in and year out we set those budgets in January.

As regards visibility for the fourth quarter, it is what it is. Our history is to hopefully under-promise and over-deliver like we did in the fourth quarter. We guided to 5 and we went to 4. Hopefully we're doing the same thing here.

Okay. And then just wondering, on the -- like when you went through your OpEx, your budget for 2009, you said you haven't set the revenue number, but the question is, what percent of your fixed costs are actually fixed for today that may not be fixed as you look out a year from now? How much more variable can your cost structure get if you assume that outdoor follows newspaper and radio, God forbid, but if revenue is down 15% what are the other big buckets of cost cuts?

Let me speak first to that scenario, which we don't see, by the way. The secular story is still in place. We still have customers that are migrating to us, because they're disaffective with their spend in other media. You can look at the percentage down that other media are suffering through, as opposed to us. In the face of a shrinking pie and a difficult climate, we are experiencing share shift towards us.

Then, looking to history a little bit. And I do believe, and I think most of us believe this is more severe than most of us have experienced in the past, but it is helpful to look at history. In 2001, our fourth quarter was down 5, and our full year was down 2. And so you do get this through the calendar year effect when we're going into a recession. The next year we were up 2%, and there was a recovery in the back half of the year. Same thing happened in '91. So I would caution you not to take a down 9 and just say, okay, that's what is going to happen for the rest of '09. And keep in mind the comps we had. Some of your other media were down double digit, on down double digits in '07.

Exactly, with political.

With political. We were up 6.5 last quarter so we're comping against that. As you turn the corner on the easier comps, and our sales force and general management has a full year to sell into the summer of '09, you're not going to see what you fear.

Okay.

Mark, this is Kevin. I'll chime in. Your question about visibility is a good one. Although things are usually cloudy this time of year as we make the turn, I've never seen it this cloudy.

And then secondly, your question about, well, I'm comfortable with the $200 million that you're going to generate, but what if your revenues are down 10 or down 15? This management team has never experienced a down draft of that magnitude. And we would have to manage our expenses. It wouldn't be easy pickings because you'd be focusing on your two biggest costs which is your headcount and your least expense. But those are the two areas that we would have to manage very aggressively to compensate for that kind of downdraft, which is, by the way, not what we're planning on and not what we're seeing in our book of business.

Understood, thank you very much.

Our next question will come from Anthony DiClemente, Barclays Capital.

Just to follow on Mark's line of questioning. In terms of comparing outdoor to other media, like your radio, like newspaper, or spot TV, it seems to me that because you guys have a longer sales cycle that it could be that your revenue that you're reporting and guiding to is actually a lag effect versus something like spot radio, newspaper, and spot TV where it does show up right away. Is that valid? Is there a chance that those double digit declines are just on a lag for you guys, where as we head into '09, just given the three to six month sales cycle? And I have a follow-up, thanks.

Only if you assume that with two thirds of our business is bulletins, and they're on staggered maturities, so you have equal renewals, a little heavy in the first quarter but equal renewals throughout the year. Only if you assume that as those units come available for sale, that we will not renew any of them, and those that we do renew, we'll be renewing at substantial discounts.

Let me speak to it a little differently. Those other media have secular issues with their audiences that are well documented and well known. And when you look at what has happened with outdoor over the last couple of years, in the face of pretty tough local ad climates. I'll go back to '07. Local ad spend and total ad spend was down in the aggregate, and we were up 7. So, we continue to outperform other local media.

And as Kevin mentioned, our audience is not under fire. People will be driving. Gas prices are coming down, and we have good local customers who need to advertise their goods and services. And compared to other media, our cost per thousand is so low. And, again, that somewhat insulates us from the buffeting wind. We have shorter cycle sale businesses, Anthony, that would be leading indicators. Our poster business and our digital business looks more like the other media, and our bulletin contracts renew essentially ratably.

Is it fair to assume to the portion of your business that's a shorter cycle, like what you just mentioned, would be pacing worse in terms of year-over-year comp than the longer cycle for any given time period? Do you understand my question?

In the past, we have seen poster occupancy be the canary in the coal mine. And if you noticed, I think the key statistic is occupancy was down in posters in the third quarter, but rate was right there, and that's a pretty good data point for you.

You're right, it should be pacing worse, but you've got other things happening out there. For example, Chevrolet, when they canceled their national business, that was all bulletins. So it had a much greater impact on our bulletin book of business than our poster book of business.

I understand.

I'll give you a little color on the national side. We don't have an upfront, but obviously we have conversations ongoing. The best description that I'm getting from our national sales folks is they don't see it falling off a cliff in '09. They see it hanging in there, particularly with some of our largest customers in the wireless category and in the restaurant category.

Then one followup and I'll stop, thanks for taking my questions. The cost cutting initiatives, just in general, to what extent could the cost cutting actually impact revenue generation, meaning could you give us some comfort on why the cost cutting is not really coming to meet sales operations that are important?

Yes. Look, our charge to the field is we still have to sell and service our inventory, and we're not doing anything at this juncture that would damage that. We have had, related to digital, and related to other initiatives, we had beefed up our headcount, and we are able to reduce it by the magnitude that I mentioned, and not really cut into our ability to sell and service.

The lease initiatives, the reduced lease costs, are again something we've done before in the past. As I mentioned, when times are good, we have a bank of unbuilt leases, and they're cancelable, so there's no revenue associated with canceling those. When times are tough, as they are now, we also have units that have underperformed for the prior 12 months. Indeed, if you look at our occupancy statistics on the bulletin side, we have units that have gone unsold for the last 12 months. Those are ripe for renegotiation with land owners, or indeed if they have high fixed lease costs, let's just take the unit down.

And we're not diminishing our signal in any way, because one-third of our inventory generates 73% of the company's revenue.

Okay, thank you.

Thank you. Our next question will come from Katrina Fallon, CITI.

Thanks for taking the question, and thanks for all of the detail, too, on the supplemental indebted schedule. That's very helpful. I had a couple of clarification questions. For the fixed charges coverage ratio, is it true that the convertible notes payment in 2010 is also not included in that?

That is correct. It's a restricted payment.

Right. Okay. And then so then it also looks like cutting CapEx would help you on the fixed charges coverage ratio as well?

Oh, yes. You're going to be pulling out $210 million in CapEx on a trailing basis and replacing it with $30 million. On a going forward basis, interest rates, we are paying one over LIBOR today on our bank agreement. LIBOR is 177 this morning. That's down 50%, 60% over what it's been in the past 12 months, or at least last year at this time. So, yes, all of those larger charges will be melting away.

Okay. And then with the $200 million in cash that you hope to generate next year, is the intention to use some of that to pay down debt? You're still well above the 6 times -- even if EBITDA goes as low as, say, 430, but you would still use the cash then to pay down debt and get more room, essentially?

Gives us plenty of head room all the way through '09.

Yes. Okay. And then can you give a little bit of a split. On the digital bulletins that you did put up this quarter, can you give a split between bulletin versus posters?

It looks to me like 75 of the ones that went up in the third quarter were posters, and 59 bulletins.

Okay. And then going forward, with the hundred for next year, do you expect that will also be more heavily weighted towards posters?

It's hard to say. This year we had a big push on posters because we wanted to build out our poster networks in the variety of markets we have them in. We have some Greenfield opportunities in Texas that we need to capitalize on in '09. I suspect many of them will be bulletins.

Okay. And then just two other questions back on the debt. Have you looked at all about buying your own debt on the open market? Because that's even trading at a discount now. Just wondered if you've looked at that.

Yes, we've looked at al that. The bonds on high yield notes are trading in the low 70s, $0.70 on the dollar. We are considering that.

And then I guess another option, would you use some of the shelf to raise capital?

No, we're not intending -- we filed that shelf simply because our old existing shelf was expiring December 1. We put out a press release on Monday. The company has always had a shelf, and we will always have a shelf. But, no, there are no intentions.

And let me make a comment now that you are focusing on the debt side. This company has been out of compliance before. It's been in business 107 years, and in the 30 years I've been here, I can't tell you how many times I had to go to the bank group and ask for amendments. And we are very closely in touch with all of our heavy supporter members of our bank group, and they are telling us, if we happen to coast into default at the end of '09, or sometime in '10, depending on the economy, that they will be there with an amendment. It will cost the company some additional money in the terms of its interest that it's paying, but they are going to be there with us and for us. We have a very good relationship with our group. JPMorgan is our administrative agent, and has been since 1983.

Two of the former managing directors of that bank are on our board of directors.

Sure. That certainly makes sense in that we've seen some of that with newspapers that have been in much worse financial straits, so no doubt that they would be there. Thank you very much for the questions.

I also want to quantify this. First of all, we're not going to coast into default. But if you fake -- let's just take $400 million. The bottom drops out and we do $400 million in EBITDA at the end of the year, and now we're in default. And let's say the max penalty is an extra 300 basis points. That's an extra $40 million in interest on our bank indebtedness. The company would still have $200 million in free cash flow. It's in default, has no access to any credit, and has to pay an additional $40 million in interest, and it's still got $200 million in free cash flow. A friend of mine called in and said, you know, it's kind of open mike night for some of these analysts who talk about default and the sky falling. That's not the case with this company, whether it's in default or not in default. Basically for the next two years, we do not need to borrow money to fund our operation.

Great. Thank you.

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

Thanks, and I apologize before, I was trying to do two calls at once. Did you guys give a breakdown of the negative 3.9 between static and digital? I'm not sure if I missed that.

Yes, I did, Jason. * Roughly 2% up on digital, and roughly 6% down on static.

Okay. And then can you try to gander at the 9% dow, how that would split between digital and static for the fourth quarter?

I don't have that.

Okay. And then just thinking about next year, let's assume bulletin occupancy falls to, I don't know, 70%, something that's like below the last recession, poster to 60%, I think that's just about the low end, maybe goes to 58. Kevin, what do you think is like the worst case for pricing? And you guys talked whether you try to keep pricing flat, but ultimately if you have to capitulate on price, or do you hold pricing and just keep letting occupancy fall? Thanks.

Jason, I did address that a little bit in my opening comments. This is Sean. In 2001, when the world stood still in the third and fourth quarter after 9/11, we adopted short-term preemptible pricing for those customers that we had to help out with lower rates to move space. It served us well, and when demand came back, pricing came back. And so I can anticipate that going into the early parts of next year, that you could see that. Again, it's something we've done in the past when times were tough, and it's worked in the past when times were tough.

And also if you look at it, again, through the course of a year, we were down 5 in the fourth quarter of 2001. And for the year that year, we were down 2. Now, this is a little steeper. It looks like we're going to be down hopefully 8, 9 in the fourth, and for the full year, minus 8 for this year, right? When you circle around the calendar year, in '02, we had a down first, and a flat second, and then we circled around, number one, to far easier comps, and number two, we had a full year to execute a game plan to get customers on the boards. And, you know, we have almost a thousand people on the street talking to customers, and they're going to ask V time next year to make the back half of '08 look better. We have almost 1,000 people on the street talking to customers, and they're going to have time next year to make the back half of '09 look better. And they will. That's been the history of this company as we managed through tough times.

I actually remember when you guys did that in '01, the short term pricing, for the shorter term contracts. Just last thing, what right now is the current price you have been paying for a bulletin and for a digital poster?

I didn't have my digital pricing stats, but I did it for static. Let me hit it for you.

No, no, no, not for what you're charging, what you're paying, your CapEx per unit.

We don't give out that information anymore.

Got it. Thank you guys.

Thank you. Our next question will come from Harry DeMott, Kingstreet Capital Management.

Hey there, guys. Thanks for taking the question. Had a couple of them here. If I could just go back to one of Anthony's questions, DiClemente's question. I'm not 100% sure he got the answer, and he tried it a couple of times, maybe I'll try it a different way. Having listened to God knows how many calls over the last week and a half from TV companies and radio companies, listening to them bemoan auto advertising down, radio, one said it was down 37% this quarter. And the TV guys are saying it's down dramatically going into the fourth quarter. You still have it at 8% so far this year. Have you seen a real steady drop off in that number as these contracts roll over? So, if you roll this thing forward, and you're looking at 8% going to 5%, just like real estate went down, because it fell off earlier and quicker? Or are you seeing still some strength in the auto category there?

I'm going to turn it over to Sean in a minute, Harry. It's tough to call. That vertical is going to be under stress. They were talking about a dealer group in Oklahoma, this was not one dealer, it was a dealer group, got together for a meeting, and they wanted to talk about the month, and they sold one car. The entire group. So we expect that that vertical is going to be under stress. The good news for us is our low cost per 1,000, and also the fact that we're such a small percent of the auto dealers overall ad spend. So when he's looking for relief on that expense line item, he's going to go after the gorillas first, and hence you see the activity on the TV side.

It doesn't mean that we're immune from it, so I do expect that there's going to be some stress on that vertical, but it's hard to call exactly how it's going to be. The other thing is, a lot of times, the auto dealers are using outdoor, not for specific promotions, but just for brand building. They're out there, they're up in the marketplace, they're paying $1,000 a month, and they've got their name bigger than life up on the board. A lot of times they just run with that brand advertising throughout the duration.

I was going to put a little color on that, as well. It has picked on little bit. I'm not talking about the fourth but just the difference between Q2 and Q3. In Q2, auto was down 8% under the same period in '07, and in Q3, it was down 13%, same period. Now, that is predominantly national. It's not, at this stage of the game, it's not as much local dealers.

As I mentioned, when I went through our top 10 advertisers, and I'm talking about not categories here, but actual customers, Chevy disappeared in the year-to-date category, and that is national. I mean, that's a national Chevy buy, it's not local. So, yes, as Kevin mentioned, they're going to be under stress. The way they use us is a little bit different than the way they use other media. Some of them, quite frankly, use us as directional to let you know where the dealership is. And our experience in the past, as Kevin mentioned, it's such a small piece of their ad spend, they tend to keep it.

Right. And just as a completely other topic, I was interested to hear that one-third of your board's produced three-quarters of your revenues. When you look at all of your structures, boards, bulletins and posters, what percentage of these guys would you say are net net, low ROIs, or under water in terms of lease versus what you're actually getting on these things? And as revenues decline in a bad economy here, do you continuously cull these things?

Well, you have to be careful, because you've got a one-year, two-year situation, and you don't want to destroy your -- that's your signal. You don't want to dismantle your business. But to answer your question, we probably have 15% of our structures that are under water. To be more specific about Sean's plans, when he said he could get $6 million out of the lease portfolio, they what he is attacking. He's attacking that 15%. And we measure the productivity of every unit, so it's not hard for us to know how they're doing.

Okay. And last question for Keith. You talked about buying back some of your bonds in the market. How much availability, either with cash and/or availability on bank lines do you have to do that right now? And if you have it, obviously you have to weigh that against what you might need it for otherwise. But, as you guys have demonstrated for a lot of years, you're pretty good cash generators.

No, we've got, actually, in the press release on that supplemental indebtedness schedule, there's a footnote. It shows that we have approximately $219 million available on our $400 million revolving credit line today, so we do have $219 million available that we can draw on to operate the company, buyback bonds, whatever. We would rather buy the bonds back with free cash flow that we generate on a monthly basis, daily, weekly, whatever, if we do that. But, that being said, we are restricted under our bank agreement to only buying back $100 million worth of those notes. So in order to buy back more, we would have to get an amendment.

Right. And how much have you bought back so far, so how much is left?

We haven't bought any back yet.

Okay. Got it. Okay. Thank you very much, guys.

Thank you. Our last question will come from Kit Spring, Stifel Nicolaus.

I think one other opportunity to de-lever in the event that things are as bad as some of these analysts worry about, would be to do asset sales. Any venture to guess if that's available as an opportunity? Would there be potential buyers, or would the multiples just be too depressed. Thanks.

No asset sales, and no pipes coming into this company.

Okay. Thank you.

Thank you. At this time, I would like to turn the conference back over to Kevin.

Just want to close by thanking all of our shareholders and friends for tuning in, and we look forward to next quarter's call. Thank you, Chantelle.

Thank you speakers. Ladies and gentlemen, this call has concluded. You may disconnect. Have a wonderful rest of the week.