Lamar Advertising Co (LAMR) 2009 Q1 法說會逐字稿

Ladies and gentlemen thank you for your patience in holding. We now have our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of our speakers presentations, we will open the floor for questions. Instructions will be given at that time on the procedure to follow if you would like to ask a question.

It is now my pleasure to turn this morning's conference over to Kevin Reilly. You may begin, sir.

Thank you. I'd like to welcome all of our analyst, friends and guests on our Q1 call. I had like to start out as is our custom with some sort of general comments about how we see the rest of the year playing out and then turn it over to Keith for some of the Q1 details and then to Sean for some operational information.

In general, the way we see the rest of the year shaping up is it looks like we're going to bump along the bottom for a while. Don't know exactly when we're going to come out, but we don't see a real sharp V here. On the cost control side, I expect that we will perform on the, on the positive side there, and I want to thank management and really all of our group for their meticulous attention to the cost- saving side of our business. As we manage through the rest of the year in this trough, one important thing we need to do is protect our franchise, and that is very simple. We just need to keep the lights burning and coffee fresh, and that's no easy feat, because we are operating as, on the operation side about as lean as I've ever seen it in the last 30 years. My expectation when we do come out of this thing is that we will accelerate out, probably faster than we have in the past, and my reasons for that are two- fold.

One is digital, and two is newspaper industry. I'm convinced that as the fundamentals of the newspaper industry continue to deteriorate, which represents in many of our markets, almost 60 to 65% of local ad spend that we are going to be the beneficiary of some of that, and our focus going forward is we'll, will refusal be on the local side of ad spend, and if we take care of our customers, especially our automotive customers for the rest of this year, I do think that we will come out of this thing much quicker than we have in the past. With that, Keith, I'd like to turn the call over to you.

Okay. I'm just going to briefly provide a little color on some of the metrics in the press release. I don't really have anything else to add, but just a couple of highlights. As you saw in the sales side, our pro forma revenue was down 15% for the first quarter. That's what we guided to. And that downward run rate was the same for all three months. There were no peaks and valleys, it was basically 15% across the board, and that's what we told investors on the last call, last quarter, it would be fairly stable, no peaks and valleys like we had in the fourth quarter. For the second quarter, guidance was basically the same, down 16. Again, expectations are for a run rate that is consistent for all three months of the quarter as it was in the first quarter. No real peaks and valleys.

On the expense side, again, the press release pretty much speaks for itself. The pro forma expenses before corporate overhead were down 12%, or $20 million, corporate overhead was down 19%, or $2 million, combined basis represents a 12.5% decrease, consolidated expenses. Just to remind everybody on the last call, the guidance for pro forma consolidated expenses for '09 was a decrease of between 5 and 7% over '08, '08s pro forma consolidated expenses operating in corporate overhead was a total of $700 million even. So with the first quarter behind us, we've gotten off to a good head start towards that goal. As you saw free cash flow was $45 million for the quarter. That's an increase of $24 million or 112%. That's obviously due to all the cutbacks and CapEx operating expenses, so forth, and as we told you all this free cash flow is being used used to reduce outstanding debt. Speaking of CapEx, that declined to $10 million in Q1, versus $50 million in Q1 '08, 80% reduction, just to restate our guidance for '09, for CapEx, it will be approximately $35 million for the entire year.

Lastly, during the first quarter, we addressed the previously pending concerns relating to our capital structure as we outlined in the press release, the credit markets eased up a bit, and as we told you on the last call, when we saw an opportunity to access those markets and seek an amendment from our bank group, we would do that so that action now allows us, or allows management to focus all of its attention on the operations of the core business, and operate through this environment as we've done so many times in the past. Sean?

Thanks, Keith. As Kevin mentioned, the whole Lamar team is doing a fantastic job on the expense side. Quite frankly, exceeding my and many folk expectations. One question that investors may have is, is our operating expense run rate sustainable through 2009 and beyond? Certainly through 2009 it looks like our run rate is sustainable. When I look beyond 2009, there are some things that we probably can't sustain, some of the employee benefits cuts we made, like matching our 401(k)s and the like, and then also, as business ticks up, we have some variable expenses, like percentage pay leases and sales commissions, and so we're looking forward to the day when we have to report that those are running a little higher. But the take-home message is the team is doing a great job of getting more done with less, taking care of our customers, and making sure that the copy is fresh and posted on time while at the same time meeting and exceeding our expense goals.

Let me also speak to the CapEx and its sustainability, as Keith mentioned, we'll come in at our below the $35 million level, and as I reflect on that, certainly sustainable through '09, and I believe beyond, because we have spent a lot of money in the last four or five years on the maintenance CapEx side fixing up boards that we purchased through the years so that is likewise a sustainable run rate. Again, it will be a high-grade conversation when we think about in the out years of 2011 and maybe beyond expanding our digital footprint. Which is about the only place where I would see us accelerating in our CapEx as we come out of a downturn.

Speaking of digital, as of today, we've got 1111 units in the air, 562 of them are bulletins, 549 are posters. The digital business model continues to be a pleasant experience at Lamar. We are actually up year over year in total digital bookings, and we are also up in national digital bookings. Of course, that's on a base on more units on the air. On the same board basis, as you would expect, there's a little more volatility and their same board performances probably down in the low to mid-20 percentages. But overall, we maintain a lot of confidence in the digital business model, and think it will help lead the Company out of this current environment.

Little bit of data on occupancy and rate for posters, Q1 '09, 52%. That compares to a Q1 '08 occupancy of 60%. For bulletins, Q1 '09, 68% occupancy, compared to Q1 '08, 74% occupancy. On rate, average poster rate of $430 Q1 '09, as compared to Q1 '08 of $435. That's a decline of about 1%. As is our practice when we go through these things, we try to hold the line on rate, and suffer in occupancy, our experience is occupancy comes back faster, and certainly in posters, we're managing to that expectation.

Bulletins have been a bit more difficult on the rate side. Q1 '09 average rate on the bulletin, $1106. That compares to a Q1 '08 number of $1170, or a 5% decrease in rate on our static bulletins. So we're, we have some work to do on that front and anecdotally, what I'm hearing from the field is that it is, it is a tougher sell out there for our folks on the static bulletin side. There's a lot more supply, it also is a longer term commitment, and our customers are gravitating towards a shorter commitment both on posters and digital and ultimately bulletin renewals, so we are going to have to track that carefully.

On the national sales front, it's been trying, to say the least, for the first half. National is actually down on a proportionate basis more than our local sales base, one thing we are hearing anecdotally is that planning for Q4 on the national front seems to be picking up. So hopefully we'll have better news as the year progresses.

In terms of customers on the national front, the Telecom and wireless is still pretty strong. We've had some good buys on the beverage and fast food front, but, of course, that's been more than offset by the struggles in our automotive and real estate customers are experiencing, I'll speak to that a little more later.

At this point, usually I give a report on the acquisition front. There's nothing to report on the acquisition front. As many of you are aware, we've got a new deal with our senior lenders that has us on a fairly short leash. Doesn't mean there won't be any. But it does mean they will be far fewer than what we usually report.

Let me speak a little bit to the top 10 categories of business, give you a little color on how our customers are doing. Top 10 advertisers for Q1 '09 number one McDonald's, number 2, Cracker Barrel, number 3, Verizon, number 4, AT&T, number 5, Auto Earners Insurance, number 6, State Farm, and Holiday Inn, Motel 6, then Metro PCS and US Cellular. You can see a theme in there that obviously the wireless folks are spending well with us and that is reflective of the fact that the Q1 '08 customer line-up would read like this, McDonald's, Cracker Barrel, Chevy, Holiday Inn, Verizon, State Farm, Cingular, Dodge, Motel 6, and Hampton Inn, so you can see that Chevy and Dodge have fallen out of the top ten by way of customers.

When I go to categories, restaurants at 11%, that compares do 10% last year at this time. Retailers 9%, hospitals 8%, service industry 7%, gaming 7%, automotive 6%. That's 6% Q1 '09. That compares to 9% Q1 '07. So we can see where that's trending. Hotel/Motel at 6%, amusements and sports at 6%. Two new entrants to the top 10, Telecom at 5% and financial at 5%. It's interesting at the local level, we're seeing good activity from local and community banks so that's a hopeful sign, and real estate has fallen outside of our top 10 categories of business. So that's it on the operations side. We'll open it up for Q&A.

(Operator Instructions) Our first question will come from Alexia Quadrani, JPMorgan.

Thank you. A couple of questions. First, if you can comment a bit on the rate of visibility that you have into the second quarter, and specifically I guess, if you could give us some color on your conversations you're having with advertisers, it looks like the rate of revenue decline is beginning to stabilize given your guidance for Q2. Are advertisers maybe a bit more, I'd say less negative now than they were a few months ago? Any color on that would be great.

On the tone of the economic climate out there, what we're hearing from the field is that activity seems to have picked up in terms of proposals. Advertisers willing to take meetings with our account executives, people kind of getting over the shock and looking to the future, I guess is the best way to describe it. It's mixed regionally. I fully expect that as we recover it's going to be an uneven recovery through Lamar land and through the various regions of the United States. And there are some of our local markets where they are not as optimistic as I described that activity picking up, and people, really sort of thinking to what their plans are for the back half of the year. It's uneven out there, and the anecdotal reports in the field, but in general, I think we can say with some confidence that the book of business is stabilized. And we're not seeing declines.

And then you mentioned earlier when you talked about 2011 being possibly a point where you pick you have spending in digital again, what is sort of magic about that 2011 number? Is that when you're assuming the revenue growth will assume? Any color on why you picked that year?

Well, there's nothing magical about it. It could be that the world changes in the fourth quarter, but if you look at our capital structure, and you look at the amount of digital we have in the field right now, relative to the advertising climate, until we see a clear pickup, we're not going to add capacity in a marketplace that in many respects is a wash-in capacity. Nothing magical about 2011, but again, if you look at the promises we're making to our senior lenders and our creditors about what we're going to do with the free cash flow, it sounds about right.

Okay. Thank you.

Thank you, our next question comes from Jason Helfstein, Oppenheimer.

Hi, thanks. Few questions. So first, can you give us an update on the removal of underperforming displays, as well as renegotiations with landowners, kind of how is that going? I know it's two separate projects. And secondly, Keith, I guess all you guys, so historically, when there's a lag, right, in outdoor, when advertising recovers, and in your prepared remarks, you guys said you expect it to recover quicker than the historical lag. Can you give us more color on why you see that? Is it your ability to sell short cycle against a weaker newspaper broadcast industry? Is it a higher number of posters, this recovery versus last recovery? Or is it a function of digital occupancy and the ability to sell that or is it all of the above? Thanks.

Well, taking the second question first, and sort of following on what Kevin spoke to in the opening, we do think digital is a difference-maker in terms of how quickly we can come out of a down turn, it is a shorter cycle sale that requires no production, and our gut tells us that it has a higher beta, I've alluded to the fact that it's in this environment on a same board basis, trailing our other inventory in terms of year-over-year decline, but I expect the snap back will be as dramatic. Digital will have a higher beta. We also are seeing, because we've gone to a new substrait in our poster project, which is a shorter cycle sale, we are seeing some excitement for the quality of that substrait, polyethylene versus paper and glue. So there's reasons for optimism, and as you alluded to, the secular trends are still in place. As other media wrestle with their audience it inures to our benefits because our audience is stable if not growing.

The lease and takedown programs have exceeded our expectations. We're at a run rate of savings as we speak today that has met our goal that we previously announced of saving 10 million or $11 million annualized. And we still believe there's low-hanging fruit out there so I think you're going to continue to see both the financial benefits from reducing capacity, particularly on the static bulletin side, and the operational benefits of reducing capacity. Particularly on the static bulletin side, so we're going to keep up the program and it's been a pleasant surprise.

Thank you.

Thank you you. Our next question will come from Benjamin Swinburne, Morgan Stanley

This is Ben Swinburne, if I could ask a couple of questions. The first one, on the auto side, I don't know if you've gone through this analysis, but I'm curious, when you look at your footprint and look at the GM and probably reasonably looking at Chrysler and Ford dealerships as well, how much rationalization has to go on or will go on, and how does that impact the auto category as you guys ramp out of this downturn? Because obviously it looks like the SAR number has reached somewhere close to a bottom. We may see car sales start to pick up. Obviously, the dealer count has an impact on local advertising. I would love use thoughts on that front, and then somewhat related to your initials comments on the newspaper business and how that, how you expect to take share coming out of this, I guess if a newspaper executive was on the call, they would probably say their declines are cyclical as well. Is there something that you've seen in terms of their pricing or effectiveness or maybe that newspapers have been closing out of your markets, so there's just capacity out of the system that gives you confidence that you've got sort of a share gain story that is better coming out of this than you've had in the last few years?

Let me do share gains, Sean, and you do the automotive dealer count. On the share gain situation, we've been seeing it. We're taking share from the newspaper. We've been taking share from the newspaper for the last three or four years, and we can just point to the real estate agent category and automotive. We've seen, well, actually on the automotive side, it's come out of middle market network affiliate and newspaper, but we've been seeing business leak away from those two areas and come right to us. Our automotive category for years and years was about 4%, and it was restricted to highly directional, where the dealer would just put up a billboard saying turn right to Bowen Chevrolet.

So that really, when we saw that share shift taking place in our analog business, that's what encouraged us to get into the digital business, because we saw where we couldn't meet certain customer needs that wanted to advertise on Thursday, Friday, Saturday only. And our digital business took off from the get-go. Our prices even after all this audience measurement business, when we discounts our audience and cost per thousand goes up, we will be substantially cheaper than newspaper, so and remember, we only represent, best case in the local market, 6% of ad spend. So I just expect that that business is going to come our way when the local customers start opening up their pocketbooks. Of course, it's going to go to search and other vehicles as well, but we do expect to get our share of the business.

Very helpful.

On the auto, local auto side, that continues to be a difficult, really sort of a difficult story for everyone in the country, but where is it more difficult? It seems to be disproportionately hitting smaller communities, and so what we're seeing is, let's say there's a Ford dealer in Greenville, Mississippi, and if they are single line and rely on the parent company for 100% of their floor financing, it's tough, and they're probably in trouble. Conversely, if you're a multi brand dealer, both domestic and foreign in a little larger ADI let's call it Jackson, Mississippi, down the road from Greenville, you're probably going to make it through this thing. So there is some shaking out that remains to be done. When I think about the numbers of dealers that are going to go out of business this year, it's staggering. And we're having to manage our way through that.

What we are seeing in some of the smaller communities is the sort of rebranding of the larger multi-line dealers in the larger communities, buying advertising in the smaller communities, so to go back to the Jackson/Greenville, Mississippi area, they understand that in Greenville, they don't know who the Jackson dealer is, and they are trying to tell folks that if their local Ford dealer goes out of business, here is where you can get sales and service. A lot of that has to shake itself out. We have taken a huge hit already as I mentioned already. It's gone from 9% of our book down to 6% of our book. I don't think that we've made it all the way through that process on the auto side, so we're going to have to watch it very, very closely. But what we are seeing is some of the inventory that they're having to abandon for years and years was our best inventory, and so it's freeing up some of our best inventory for some other categories of business.

Net/net, I think we're still losing some automobile customers. Because I think that shakeout has yet to play all the way out. But we are replacing it at least the same rate we're losing it. On the real estate side, I'm firmly convinced that we've taken that body glove. I think they are now where they're going to stay. I think it's going to stay right around 4, 5% of our book. Most of the real estate customers that we have now are not your developer builders. They are brokers, and as long as people are moving real estate they are going to use it, so I feel good about where the real estate brook error business is. I hope I answered your question.

Very helpful. Thanks, guys

Thank you. Our next question will come from Marci Ryvicker, Wachovia/Wells Fargo

I have a couple of questions on the expense side. I just want to be clear with what's going on in '09. Keith, you had mentioned you're down 5 to down 7% again for '09, but Sean, you said that the down 12, 12.5 in Q1 was a good run rate. The first thing I just want to make sure that we got it that we should be doing down 12, 12.5 for the rest of the year. The second question on expenses is, you were down double what we were expecting. Is the cost-cutting coming from leases? Is it materials, is it people? Where is the majority of the cost cuts coming from? And then lastly on expenses, Kevin, you mentioned a revenue acceleration which should be greater than in previous recoveries. How should we think of expenses going into recovery?

Let me hit the expenses real quick. As we recover, we do have some variable expenses. Sales commissions percentage pay leases. Presumably, we will reinstate our 401(k) match, so as the world gets better there are, some of the draconian things we've done that will automatically reverse themselves or we will make a conscious decision to go back to standard business practice. But that being said, I think we have permanently recalibrated or fixed expense base and we've learned a lot going through this process. We've learned to do a lot more with a lot less. Some of it on the labor side in particular is, was built into our transition from paper and glue to the polyethylene substrait on our posters. And then some of it was just learning to do more with less.

In terms of where it came from, it's across the board. We actually ended up with more layoffs than we previously thought we were going to accomplish. I think we're up to about 370, we're up to 400 on the head count reduction. And that's on a base of 3200, base of 3500 so this has not come without its cost to, on the people side. The, as I mentioned, the lease reduction program has exceeded our expectations, and as I reflect on it, I want people to know this is not just a financial exercise. We've talked about it in the field, we've talked about what it has meant to our operations. And it will end up making us stronger operationally, because there was and continues to be excess capacity out there on the static bulletin side.

And then you're getting down to talking about nickels and dimes. You are really talking about watching every penny, and Keith just handed me a schedule that lays it all out. I don't want to bore you with it. But it's across the board, and it is sustainable.

So the negative 12 is sustainable?

No, no, we're in the going to hang ourselves on negative 12 for the whole year, but certainly we think that we'll surpass -- management has been very meticulous, and we didn't think the little things counted. But they do count and we think that for the rest of this year that we're going to exceed expectations on the expense side. Because we tackled a lot of the big things already, and that's all that's going to be -- whatever we do in those areas is going to be gravy, but it's the little things that have been a real pleasant surprise. And I think it's a real tribute to all of the 190 or so profit centers.

Marci, when I think about sustainability, I'm on the operations side, I'm not thinking about just '09 and the modeling and the financial exercise. The question I have to ask our team is can we operate our business, the expectations of our customers, and our customers ad our own expectations for delivering an excellent product at our head count level as it exists today. And with a couple of exceptions the answer that I'm getting back is yes, and that's, that is good news when you think about what our margins request look like in 2011.

Is it fair to say going forward that the 4 to 6% expense growth that you had talked about in the previous years were not going to see that type of expense growth again?

Well, we have a new base, let's put it that way.

We don't know what the future holds.

We don't know what inflation is going to be in 2011.

The mantra today is you've got aggressive goals that you've set for yourself. Don't damage the franchise to get there.

Okay. Thank you very much.

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

Thank you. One quick followup on the cost cuts. About how much of the lease portfolio is percentage pay leases, and then is there any variability to all the non percentage pay leases? Like are you able to go to the lessors and negotiate lower near term payments that you make up later?

I'll let you handle the percent, Sean. I'll just do the non-percent. We are having good conversations with our landlords for a couple of reasons. One is we have been a reliable payor for 20 some odd years, so when we go to have these visits, at least they will open the door and let us talk. The second thing is we keep meticulous records, so we have the revenue by board, by month, by customer. The productivity of the individual unit that we share with a landlord. And so we have actually been successful in some leases where we have a long-term fixed payment lease, but we've shared our revenue situation and told them tha this situation is no longer viability for us and we need some relief.

We've also been successful in exercise --- we have 60,000 leases on paper and they are not all on the standard form but we do have quite a few leases where we have the right to revert to 5% of net revenue if we, in order to keep the lease intact. If we deem that the lease is no longer productive. So we've exercised in several cases, we've exercised that right. In some cases, we've -- haven't been able to reach an agreement and we've had to take the board down. So these are, it's all over the map, these are individual negotiations, and it looks like given the tenor of the environment for the next quarter or so that we will continue to make -- see some expense reductions in our lease portfolio.

On the issue of percentage pay, these are round numbers, but on a lease portfolio that runs about $200 million in costs annually, our percentage pay leases run about $15 million, so you're only talking about 7, 8%. Our percentage pay. In that regard, we look a little different from Clear Channel and CBS. Your percentage pay leases tend to be in larger markets with larger, more sophisticated landowners, so our footprint and profile in that regard is a little bit different.

Right. I guess as you go back to the lessors, and have conversations with them, it seems like that right to revert to 5% of net revenues is a nifty little option. Are you working that into the contracts as you go forward?

We try -- every single one of these negotiations is one off. They all look different, but obviously we've learned a lot, and we're trying to get the best terms we can for our Company when we have these discussions.

And then just one follow-up on the revenue side. With respect to the competitive dynamics in the larger markets now that you the Vista assets, you said billboard pricing is weaker. Is the pressure there from others that have the bulletin product being -- like offering shorter terms, or what's the nature of the pressure?

Let me, I'll just speak generally to that. In general, it's pretty fierce, the competition in the larger markets. And in some markets with some products, we're doing better with others. So for example, our posters in New York City are doing extremely well. We retrofitted that product to go from paper to polyethylene, and we also changed out all the trim. I don't know for those of you in New York who drive around and look at them, I hope you like the look. We're doing very well with that product. Large format bulletins in New York City are very tough right now. And so it's a competitive and pricing dynamic in the larger markets, sort of anecdotally, we have had some nice wins in the last, quite literally two or three weeks. For example, we just signed a contract for $1.25 million r with a beverage company for the largest painted wall in New York City. Great contract, 12 months, 105,000, $107,000 a month. Really nice contract. So we're seeing some things happen, but it is tougher, and more competitive and pricing is a little more difficult in those larger markets like Atlanta, Chicago, L.A.

It's also, it's in market and cross market, so the guy with the most drops his drawers the farthest. It's an analogy. Thank you.

Our next question will come from James Marsh, Piper Jaffray

Two quick questions. One, I was hoping you could elaborate a little bit on the digital displays, and what categories are doing better or worse on a relative basis within that digital category? And then secondly, talk about all the potential capacity coming down. What percentage of total board are we talking about here? It sounds like it's still relatively small. If you can just quantify that as best you can?

To answer your question, it is a relatively smaller number of units. It tends to be our C&D locations. Nobody is going to miss them I mean these are truly non-performing units. So again, the charge is not to damage the franchise. I'm absolutely convinced we're enhancing the franchise with the takedown of some of these C&D locations. On the digital front, financial is a surprisingly good category. What your smaller and community banks are doing is they are trying to lure deposits so we're getting a lot of small community banks advertising their CD rate and they're changing it daily. This is the perfect vehicle for them to accomplish that goal, digital is.

Insurance is a nice and pleasant surprise. We've got, in particular, State Farm is up with a discount and they put their local agent up there with the discounts they are offering at the moment. And they are using it, I think, very effectively. We're getting a little bit more out of the fast food category, and that's, they are using us actually all across our platform in new and creative and better ways. And I think when we write the story on 2009, you will see the fast food was up in our book of business, not just relative, but also in absolute dollars spent and finally, as Kevin mentioned, we are getting real estate classified- like ads up there where it's the broker picture of the house and price point and if things go well, the sold banner goes across the whole board. Clearly, coming straight out of the newspaper. But those are the categories that are using digital, and as I mentioned we're in aggregate dollars, we're up year over year nationally and locally on the digital platform.

Okay. Great, thanks very much.

Thank you. And our last question will come from James Dix, Wedbush.

Good morning, guys. Three questions, one on the top line two, I guess two on the top line, one on the bottom. First, if you could just walk through in the first quarter the breakdown on that 15% decline pro forma, how much was from digital, and then how much came from posters and bulletins, because when I was just penciling out the declines in rates that you talked about, Sean, with the declines in occupancy, it looked like maybe you were getting around 10% decline for bulletins and posters, and then you had a 15% overall, but those numbers may be off. If you could walk me through that, that would be great.

And then second, on the, just on the rental expense, how much was it down year over year? And would that be a good assumption for the full year that it will be down around the same amount as what you got in the first quarter? And the final one, I guess, it would be for you, Kevin. I guess last year seemed a little surprising, the bulletins slowed down before the posters, do you think when we're on the way back out, when the economy improves, do you think that bulletins will be the first to show the signs of improvement?

Looking at the first quarter, as we track same store, and Keith, correct me if I'm wrong here, but our same-store digital was up. We don't report that on a same board basis. It's integrated into whatever the local market reports. If I'm being clear on that. So your declines on the 15 were primarily coming out of static bulletins and static posters.

Now, what I'm seeing in the book is posters are on a relative basis are more, are stronger. It really is the static bulletin inventory that is struggling the most. And that is counterintuitive to our historical experience, and there were some data points, back in the fourth quarter of '07, and as we progressed through 2008, that were a little bit confusing to us because our book wasn't reacting the normal way. It reacts when we go into the a downturn, i.e., normally national falls first and hardest, it didn't last year. It held up better and fell in the fourth quarter. And normally bulletins would hold up better and it would be posters where we would feel it and again, that wasn't the pattern that presented itself last year.

It's a little bit befuddling to us, but we are managing to it. I have some theories about supply and demand, and perhaps some over building in the static bulletin market that happened latter part of the '90s, and early part of the 2000s that perhaps contributed to that. But I don't have a clear answer for you.

As far as coming out, it really, our bulletin business, one-third is highly directional. No problem there. Two-thirds of our business is in the D&A where we compete head up against everybody else and really, how we manage that two-thirds is going to dictate how we come out. And we certainly want to help our customers that are struggling, but we just don't want to lock ourselves into long-term relationships that retard our ability to capitalize on demand. So we're watching that two-thirds of our bulletin business, and hope that we can accommodate our customers on a short-term basis. But not lock ourself in long.

I think the reason why bulletins declined first is because posters is the shortest sell, and we were taking business from the newspaper and so the secular changes in our industry were masking the downturn in our short cycle business.

Okay. And then I guess -- just one follow-up on the bulletin. Sean, you're saying the stats you gave on rates down 5%, that's only for static, right? And the occupancy, that's only for static. So the occupants fell by around 6 points on the bulletins; is that correct?

I'm sorry. I should have told you that. Those rate and occupancy stats I gave you exclude digital. So that's static only for both products, posters and bulletins.

Okay. So for instance, on the bulletins then, would the pro forma decline have been around 11 points, 5 from the rate and 6 from occupancy, or am I thinking about that wrong?

Is there a direct correlation, Keith, on that? Did you understand that question?

You're saying that the digital--?

No. I'm just looking at statics, and the stats you gave on those. The rates for the bulletins were down around 5%, and then occupancy was down around 6 points, right?

Does that equate--?

Yes, does that mean that they were down roughly 11% pro forma? Just the bulletins, the static ones?

We're going to have to see if there's a direct correlation if you just add those two together and that's your answer.

You can't add them together.

I don't think you can.

You drop the rate in occupancy, and it's going to come to 17, 18% down in bulletins, and in posters, I don't have any of the stat sheets.

That's a good question. I think we can do some pencil work around here and try to get a little better analytics for you guys I understand the question, but we have to work through some pencil.

Just on the rental expense, or lease expense do you have those?

Yes, we do. I don't want you to take this as run rate. Because we take them down at different points during the quarter, right? It was $4.2 million in savings for the first quarter. Off of pro forma actual.

Okay. Do you have a percent on that? On the $200 million annual lease expense, and $4.2 million was just the first quarter amount? Okay.

Historically when times are normal and we can look across the years in a more rational way, our lease portfolio tends to grow with inflation. It just tends to grow that sort of 3 to 5%. This is off pro forma actual, so you can see the work that's been done.

Okay. Great. Thanks very much.

At this time, we have no further questions so Kevin, I'll turn the call back over to you.

Thank you. And I want to thank everybody for listening in, and we look forward to the Q2 call. Thank you very much.

Thank you, ladies and gentlemen. This call has now ended. You may disconnect at this time, and have a great rest of the week.