National Cinemedia Inc (NCMI) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the National CineMedia Inc. fourth quarter and year end 2007 earnings conference call. Today's call is being recorded. Following the presentation we will conduct a question and answer session. (OPERATOR INSTRUCTIONS). I would now like to turn the conference over to Mr. Brad Cohen. Please go ahead, sir.

Good afternoon. I'd like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the Company's expectations are disclosed in the risk factors contained in the Company's filings with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors. Now, I'll turn the call over to Kurt Hall, CEO of National CineMedia.

Thanks, Brad. Good afternoon, everyone, and welcome and thanks for joining us for our fiscal fourth quarter and full year 2007 conference call. Today I'll be providing you with an overview of our progress against our quarterly and annual operating targets and key growth strategies. I'll also share my thoughts on our 2008 growth plans. Gary Ferrera, our CFO, will then get into a more detailed discussion of our financial performance for the quarter and full year. And then, as always, we'll open the line for questions at the end.

I'll start with a quick review of our fourth quarter. Consistent with our solid performance throughout the year, we exceeded our Q4 internal targets and analyst consensus expectations with adjusted EBITDA growth of 18.2% over pro forma Q4 2006. Despite lower Q4 CineMeetings revenue, higher advertising revenue resulted in an increase in our adjusted EBITDA margins to 56.3% versus 51.4% for pro forma Q4 '06.

Our advertising business continued to benefit from the expansion of our network reach and broadening of our client base as media buyers look for new ways to market to their- - market their brands. Our Q4 national inventory utilization grew to 104.4%, while at the same time we increased our Q4 national advertising CPMs by 2.1%. We also continued to see strong local advertising growth of 21.2% over pro forma '06, while local newspapers, spot television and radio advertising growth slowed or even declined.

It is important to note that our Q4 revenue growth was achieved during a quarter where the theater industry attendance was down year-over-year, illustrating how our revenue is not as sensitive to attendance fluctuations. During the quarter, we managed our inventory very carefully to ensure we maximized the quarterly revenue potential.

Our operating performance for the year also exceeded expectations, reflecting the fact that we delivered on virtually all of our strategic operating goals set forth during the IPO process. We strengthened our market position by expanding our network screens by over 8%, broadened our advertising client base and continued to improve the quality of our FirstLook preshow by increasing the depth of our content partners.

We also began to plant some growth seeds for the future through our investment in IdeaCast and prepare for the launch of our internet strategy in 2008.

With a continuing reallocation of media spending and a strong effort by our advertising sales group, we significantly increased our 2007 national inventory utilization to 87%, positioning us very well to absorb the over 1 billion additional annual advertising impressions we will bring on in 2008, with a full year of Goodrich and the addition of Kerasotes and Colorado Cinemas, and of course Lowes starting on June 1.

While there continue to be quarter-to-quarter volatility in CPMs as expected, our CPMs for the year were up 1.6%. This was consistent with our plan to first focus on increasing sell through by strengthening our network and building market demand to create more favorable supply demand economics that will drive CPM growth.

While there has been a lot of discussion in the marketplace about the effect of the softening economy on the media business, as reflected in our Q4 advertising revenue growth, the softening economy did not appear to have an impact on either our national or local advertising business. If we are being affected, we believe it is being offset by the overall shifts in media spending to new more measurable and effective digital media platforms like ours that are being viewed as increasingly favorable by media buyers.

With the expansion of our client base we also now have several clients who operate in businesses that we believe are not as sensitive to the current economic slowdown, such as the military, personal care and telecom, to name a few.

We also have very little exposure to the real estate and financial markets.

Our local business may also be benefiting from our lower out of pocket price point, as local clients can buy specific theaters in the trade area surrounding their business, rather than the entire DMA.

In addition, given our improving individual market coverage, our regional strategy has begun to more effectively compete with spot TV, radio and newspapers for entire DMA or multiple DMA buys.

While all of these factors are important, our solid national and local sales execution has been the most critical factor behind our success. Our national sales team has both expanded the marketing commitments of our current clients and broadened our client base in categories that have not historically advertised in cinema.

Our 2007 national client base included approximately 40 clients above the $1 million level across 22 categories and several clients that spent over $10 million with us. During 2006, we only had 33 clients above $1 million.

We made great progress in expanding under penetrated categories as well, such as packaged goods and personal care, quick service restaurants, food and computers, while significantly increasing revenues in some existing categories, such as the military, telecom, movie studios, import auto and games, toys and electronics.

During the end of 2008 and early 2009- - sorry, 2007 and early 2008, we also completed new multi-year content partner deals with A&E, the History Channel, Warner Brothers and Disney. In some cases, these were former Screenvision clients and thus will shift spending to our network in 2008.

The broadening of our content partners and higher quality ads has contributed to the increasing quality of our FirstLook preshow, which has improved audience acceptance and even approval based on customer surveys over the last several years.

We were particularly pleased with the 27.4% year-over-year growth of our local and regional advertising business in 2007, especially given the effect that the softening economy seems to have had on other local advertising businesses. As was the case with our national business, sales execution played a significant role. The effectiveness of our local sales force has improved as we focused on training and reallocating personnel to ensure that markets were adequately covered.

While we also benefited from a strong summer file slate, our Q4 performance was still solid, even without many tent full films.

Our annual meetings and events revenue increased 11.4% over prior year and, for the first time, generated annual positive EBITDA. While 2007 CineMeetings revenue declined due to a significant Q4 2006 event with one client that was not repeated in 2007, Fathom events exceeded all expectations, as we continued to expand our live network capabilities and diversify the sources and improve the quality of the programming.

During the second half of 2007, we significantly expanded our live broadcast capabilities to approximately 350 locations in 140 markets versus the approximately 130 locations in 75 markets during 2006 and most of '07.

While the meetings and events business made up a small part of our total revenue and an even smaller part of our EBITDA in '07, it is providing incremental EBIDTA growth with very low capital expenditure requirements. These businesses have also become an important factor when circuits are considering joining our advertising network as an affiliate.

As we continue to expand this business, as well as broaden our client base and digital programming sources, we expect revenue and EBITDA to continue to grow, but to remain somewhat volatile quarter-to-quarter.

Looking ahead to 2008, our growth strategy is consistent with that laid out during our IPO process. We will continue to strengthen our digital network by expanding our reach and market position relative to Screenvision and television networks, expand our advertising client base across all categories, improve our preshow for the benefit of theater patrons and advertisers and expand our meetings and events business, and create future growth engines by selectively investing in extensions of our advertising business that leverage our core competencies.

It is our policy not to give specific financial forward-looking guidance, however, it is important to note that we face difficult comparisons with the first quarter of '07, when our pro forma advertising revenue increased 46% over Q1 '06, driven by high inventory utilization in the generally low demand first quarter and a strong increase in CPMs. Part of this strength was related to a single large client who advertised heavily with us ahead of an important product launch. This campaign will not be repeated in the first quarter of '08.

In addition, as we mentioned on our call- - last call, Regal began acquiring only 60 seconds of inventory in January, rather than 90 seconds for its Coke obligation. This 30-second reduction is expected to lead to a small committed beverage revenue decrease over the first few quarters of '08, but as market demand builds, this could provide revenue upside as we are able to sell this premium unit at a higher CPM over time.

Therefore, we are anticipating that much of our 2008 growth will be somewhat back ended, due to the challenging Q1 comp and the integration of Lowes starting on June 1. While we are on track to meet our internal Q1 goals, the First Call consensus estimates for the first quarter may prove to be slightly aggressive, given our difficult comparisons with the prior year.

Our local and regional advertising business continues to perform very well and we expect good Q1 revenue growth compared to the prior year. Our Fathom business is performing well in the first quarter with our new season of The Met and the surprise success of the Spirit of the Marathon event.

With all that said, we are comfortable with current First Call consensus revenue and adjusted EBITDA estimates for the year.

While we expanded our network in each of the last three years, 2008 will be a very exciting year for us, as our network will grow to over 16,500 screens and our market share in the top 10 and top 50 DMAs as a percentage of total NCM and Screenvision attendance will grow to approximately 70% and 65% respectively.

In addition to the growth of our core business, as previously mentioned we have begun to execute on specific revenue and EBITDA growth initiatives for the future that we have indentified during the IPO process, including our $7 million preferred stock investment in IdeaCast and the launch of our internet initiative.

While the early stage IdeaCast investment is not expected to have a meaningful effect on our results for a few years, we believe our internet initiative that will be launched later this year will provide more of a near term opportunity. Our ability to expand our FirstLook preshow programming to the internet and wireless devices provides our national and local sales team with unique inventory that can be immediately bundled and sold with our in-theater products or on an individual basis.

With our ability to drive traffic, with our in-theater marketing assets and leverage our existing sales, digital media and technology infrastructure, incremental revenue can be created with very little capital or operating cost investment.

It's been a very busy but successful year for us since our IPO. While there is always room for improvement, I am very pleased that we exceeded both our operating and our financial goals in 2007 and have laid the groundwork for continued strong growth in the future.

Now I'd like to turn over the presentation to Gary to give us some more details concerning our financial performance.

Thank you, Kurt. And I'll now spend some time reviewing our fourth quarter and year-end financial performance in a bit more detail. My discussion will focus on our pro forma results that assume that the IPO and related transactions and the $805 million senior secured credit facility were effective as of December 30th, 2005.

In addition, you should also note that the effect of the Lowes integration agreement is now included in our operating results, as the net payments are reported directly to our equity accounts. The Lowes integration amount was $3.7 million for the fourth quarter and on a pro forma basis, it is $11.7 million for the full year period ended December 27th, 2007.

For the fourth quarter, total pro forma revenue grew 7.8% to $94.5 million from total pro forma revenue of $87.7 million for the comparable quarter last year.

Advertising revenue increased 14.6% to $85.6 million for the pro forma ad revenue- - from the pro forma ad revenue of $74.7 million for the comparable quarter last year, offsetting the slower growth of our meetings and events business.

Advertising revenue for a founding member of 10D grew 26.3% to $0.72 from $0.57 in the fourth quarter of 2006. This advertising revenue growth was primarily due to an improvement in both national advertising utilization and CPM. Increases in local advertising time sold, growth in the other on-screen, non-inventory based revenue and higher led and lobby sales and the addition of Goodrich Theaters as a network affiliate during Q3 2007. All of this was somewhat offset by a decline in fourth quarter founding member attendance.

Advertising revenues for the fourth quarter of 2007 were made up of approximately 67% national advertising revenue, 21% local advertising revenue and 12% beverage agreement revenue.

Pro forma for the year, these were 66% national, 19% local and 15% beverage.

Pro forma national ad revenue, excluding beverage, grew 18.2% in Q4 '07 versus Q4 '06.

Inventory utilization grew to 104.4% compared to 93.7% in Q4 2006 and from 77.5% in 2006 to 87% in 2007.

Our Q4 inventory utilization in excess of 100% reflects an increase in national inventory units above our standard eleven 30-second unit loads to meet market demand in November and December.

TPMs grew by 2.1% over Q4 2006 and 1.6% for the full year 2007, reflecting strong demand for our inventory that more than offset any competitive pressures.

As Kurt previously mentioned, our current focus on increasing inventory utilization will continue to result in quarterly CPM volatility.

It is important to note that our 2006 CPMs in inventory utilization have been recalculated to conform to the current year presentation.

We entered the quarter with approximately 830,000 of make goods and, as of the end of the fourth quarter, we had approximately 4 million of make goods, compared to 2.6 million at the end of 2006, a modest increase, considering the drop in quarterly market attendance and very comfortably in line with our attendance based national advertising revenue.

Despite the softer film slate compared to last year's fourth quarter, local and regional advertising had a strong quarter, with pro forma growth of approximately 21% over Q4 2006. This growth was primarily driven by the improvements we made within our local and regional sales teams and a small increase in the number of screens.

Our meetings and events business had a slow quarter, as revenue decreased 31% to $8.9 million from Q4 '06 pro forma revenue of $12.9 million, due primarily to a significant Q4 2006 CineMeetings event with one customer that was not repeated in 2007.

The CineMeetings decline was partially offset by a very strong quarter for our Fathom events business, due to an increase in events and an increase of 42% in revenue per event. As we work to develop sufficient recurring event flow, revenues and profitability in these businesses will continue to be volatile quarter-to-quarter.

Turning briefly to our pro forma expense line items, advertising operating costs decreased to approximately 3.4% of advertising revenues from 4.3% in the fourth quarter of 2006.

Meetings and events operating costs increased to approximately 59.6% of meetings and events revenues in Q4 '07 from approximately 51.2% in Q4 '06, primarily due to the drop in revenues and the fixed nature of a portion of these costs, as well as allocation issues related to circuit share costs.

Network costs declined to 4.2% of total revenue in Q4 '07 from 4.8% in Q4 '06, reflecting the scalability of our network.

Theater access fees declined to 12.5% of advertising revenue in Q4 '07 from 18.7% in Q4 '06, due to decline in theater attendance, as well as comparability issues related to circuit share costs.

Selling and marketing expense increased to 13.8% of total revenues in Q4 '07 from 11.7% in Q4 '06, due to a variety of factors, such as the increase in the higher commission based local and regional advertising revenue, as well as a decrease in the zero commission based beverage revenue.

Administrative expenses increased slightly to 6.3% of total revenue from 5.9% in Q4 '06, due primarily to the costs of being a public company.

Total Q4 pro forma adjusted EBITDA, excluding the Lowes payments, increased 18.2% to $53.2 million from $45 million in the fourth quarter of 2006 and increased 31.7% to $182.1 million from $138.3 million for the full year.

Adjusted EBITDA margin was 56.3%, up from 51.4% during the same period in 2006 and finished the year at 53.9% versus 50.2% in 2006.

Adjusted pro forma EBITDA, including the pro forma Lowes payment, for the fourth quarter and year was $56.9 million and $193.8 million respectively.

We continue to make great progress expanding our network. We have recently completed the digital deployment of approximately 725 Kerasotes screens, which we discussed last quarter, and have started the deployment of an additional 125 screen Colorado Cinemas with anticipated completion by the end of the first quarter.

As of December 27, 2007, we had 15,265 total screens in our network, of which approximately 87% were connected to our digital network versus 81% at the end of 2006. These digital screens generate over 90% of our attendance.

Our screen count now includes 2,004 network affiliate screens, which include the Goodrich and Kerasotes screens, but not the 125 Colorado Cinema screens operated by Kerasotes, or the approximately 1,200 Lowes screens that will be added in June of 2008.

Pro forma for all of our announced screen additions, network affiliate attendance will now approximate 10% of our total attendance. As we have noted in the past, EBITDA margins on affiliate revenue are lower than that from our founding member advertising revenue.

Concerning the issue of potential share dilution or accretion related to changes in screen count and attendance at our founding members theaters, these calculations are expected to be completed toward the end of March. Based on the timeline in our agreements, we will be sending notification to the founding members in late March and the adjustments will settle in early April and will be disclosed at that time.

We believe there has also been some confusion regarding the addition of Lowes screens in 2008. To be clear, we will not have to issue additional equity once Lowes becomes part of our network. AMC received NCM, LLC units related to Lowes as part of the IPO and we have been receiving a payment from AMC to compensate us for the fact that we cannot sell advertising in Lowes theaters on an exclusive basis.

We also wanted to clarify the agreement between us and Screenvision pertaining to the sale of advertising in the Lowes theaters leading up to the June 1st conversion date. Through May 31st, the Lowes inventory has been divided between us and Screenvision, so it can be sold in an orderly basis by each of the sales teams. We control the seven minutes closest to the film start time during the run out period. These seven minutes will include inventory for Coke ads and the content segment. On June 1st, the Lowes screens will join our network on an exclusive basis and thus any advertising that's been sold by Screenvision as of May 31st for the period from June 1st through November 30th will be distributed over our network and we can then sell exclusively any unsold inventory.

Our capital expenditures for the fourth quarter were $6.5 million and $15 million for the full year. This was lower than the guidance we previously provided, as some of the expenditures related to Kerasotes and the internet initiative have been shifted to 2008 and included in the 2008 budget.

We estimate the 2008 CapEx will be in the range of $16 million to $17 million, assuming no additional network affiliate agreements are signed during the year.

Regarding our balance sheet, our total debt outstanding as of December 27th, 2007, was $784 million.

The revolver balance, net of NCM, LLC cash and cash equivalents, was approximately $51 million.

The interest rate on our $725 million term loan was approximately 7% for the Q4 period and 6.9% for the full year, while the interest rate on the revolver borrowings carry a slightly higher interest rate of 7.5% for the Q4 period and 8% of the full year.

Our average total cash interest rate was 7% for both the quarter and the full year.

As we have previously mentioned, in addition to the interest expense generated by the outstanding debt balance, there will be approximately $1.9 million per year included in our interest expense related to the amortization of debt issuance fees and expenses, and approximately $11.3 million of amortization related to our tax sharing agreement.

Our pro forma leverage at NCM, LLC as of December 27th, 2007, is approximately 4.1 times, trailing four quarter adjusted EBITDA, including the Lowes payments down from approximately 5 times at the IPO date. While we do not anticipate paying down our term debt, we will continue to de-lever over time through EBITDA growth and do not envision dropping to a leverage ratio of much less than 3 times before reevaluating our capital structure.

We announced our quarterly dividend of $0.15 per share, equating to approximately 60% of our Q4-related cash distributions from NCM, LLC, after adjusting for estimated income taxes and tax sharing payments. This dividend represents and annual yield of approximately 2.7% to 2.9% based on recent trading levels of our stock.

That concludes our prepared remarks. We will now open up the lines for any questions you might have.

Thank you. The question and answer session will be conducted electronically today. (OPERATOR INSTRUCTIONS) We'll go first to Eric Handler with Lehman Brothers.

Thanks. Couple of questions. Just to clarify, you said you're comfortable with First Call revenue and the revenue and EBITDA for FirstLook for '08. I'm just wondering if you can clarify what exactly are those numbers. And then secondly, when you look at your advertisers that have been coming on lately. You've been doing a good job there. I'm just curious, what is the retention rate of those advertisers? Or more likely, how many of the advertisers that have run ads in the last year, how many of them return to run another set of ads?

Well, I'll take the retention one and Gary can do the First Call numbers. The retention's been, Eric, very seldom- - in fact, I can't even think of a national client that hasn't come back. Now, they may not come back right away because they don't have a product launch or they don't have, you know, some sort of marketing initiative that fits our medium. But, we haven't had anybody, you know, do us and then call us back and say they're never going to use us again. So, you know, I'd say the retention rate is very, very high.

Eric, I think the First Call number- - I can't remember what it was on revenue. I think it was around 206 on EBITDA. We'll check that and answer it during another part of the call.

Thank you.

Thank you. We'll go next to Hunter Dubose with Morgan Stanley.

Hi, guys. Thanks for taking the question. Couple of ones actually for you. The first one is, I believe that when you originally reported 4Q '07 you indicated that utilization was 100.2%. You're now saying it's 93.7%. I think you said in your prepared remarks that there was some restatement. Can you talk to us about what that restatement was? What drove it? And how the calculation is done differently? And does that have any implications for how CPM is calculated?

Yes, no problem, Hunter. Basically, you know, just what we did was we went back over time, because you had a new accounting team here in the public company, we went back over time and tried to go back and parse through it and make sure added value was being treated consistently throughout the year and that attendance in the calculations were being treated consistently throughout the year. So, we literally went back and pulled all the contracts, went through everything and made sure that everything tied out and so that when we were reporting 2007 versus 2006, that everything was on an apples-to-apples basis.

One other thing in there. On the CPM side, I think the biggest thing on the CPM side is just making sure that added value, when the national sales team goes out and sells, sometimes they'll sell a whole package and it will include the land and the lobby and there won't be a stated price for it. So, we wanted to make sure we went through and had all those treated accurately. So that, that's basically what we did.

It's just consistently treating the allocation of the contract revenue to all of the individual components. So, if you, you know, a lot of times, as Gary mentioned, the deal will be we'll give you so many units on the big screen, so many units on the land, maybe some concessions and so on. And it was making sure year-over-year that the allocations when they weren't specifically identified in the contract, which they're often not, were done consistently year-over-year. So, that was what caused the downward conversion.

Said another way, for the '06 numbers, we obviously weren't allocating as much to those other items as we had- - as we were in '07.

And when did you start using this new calculation format? Is that new for this quarter?

Yes. No. We've actually been doing it throughout this year.

I see. So from 1Q '07 onwards?

Yes. No. We didn't start doing it until reported, '03--

Q3, yes.

Q3.

Q3, okay. Right. And one more question for you guys. It looks like your network affiliate screens were up about 735 sequentially. I'm just wondering where that came from.

Kerasotes screens are probably most of it. There's a little bit of Goodrich in there, obviously. The Kerasotes, 725 of them joined us actually on December 10th, so that's why they're in the yearend balance.

I see.

There's still another 125 screens that are part of their sort of sub-network, Colorado Cinemas, that won't join until 2008.

And the 725 were not digital. They came on in December. We don't typically install over the holidays, so those are the ones that we just mentioned have been recently fully digitized.

Right. And to what extent would it be fair to assume that they were drivers of revenue for the quarter?

Not much. Very, very little. Because by the time they joined us on December 10th, you know, most of that inventory had already been sold.

Right.

So, there was a little bit, but not a lot.

Got it. Okay. Thanks, guys.

Yes. Thank you.

Thank you. We'll go next to Scott Barry with Credit Suisse.

Hi. Two questions. Kurt, you mentioned you weren't seeing much in terms of the weaker macro environment. Maybe you could comment on how the presidential election year and the Olympics may impact your business for better or for worse. And then secondly, is there anything specific you can do to drive revenues in the seasonally weaker periods like the 1Q? Or is it just a function of continued expansion of the customer base? Thanks.

Yes, I think the second question, Scott, is just continuing to drive the customer base and, you know, the more people we can get on board. Obviously everybody has certain parts of the year that they focus on. You know, one of the things that we did in '07 that really helped is that back to school, sort of September, October period were very strong in '07, because we were able to build the business with J. C. Penney and, you know, other folks that focused on that time of year. We've got to do the same thing in the January through April period, because that's obviously the other sort of soft period, if you will, of the year. And so that's the primary focus there.

The election and Olympic impact, now, we've told everybody we don't directly take ads for politicians and we will continue to not take them. However, we're hopeful that the combination of just the number of units that are being sucked up by those elections and the declining rating points of the networks that will contribute to some overflow business for us. I think that was- - also will be impacted a little bit by the writers' strike. Now that's been settled obviously, but there will be a delayed reaction in the marketplace as they get cranked back up and try to get some new shows back into the marketplace.

So, we haven't really seen second quarter break yet. It's still a little early for the scatter on second quarter. And obviously everybody will start positioning for the up front. So, it will be interesting to see how that all plays out.

The Olympics, you know, will probably help us from a content standpoint, because we've, you know, got our partnership with NBC, so we'll probably have some great Olympic material. You know, maybe there's a little bit of overflow benefit, you know, on the Olympics, but, you know, not a whole lot.

Okay. Great. Thanks very much.

And just to follow up on Eric Handler's question earlier, while we're on the line here, the consensus (Inaudible) we saw it was about $379 million for revenue and $206 million to $207 million on EBITDA.

Thank you. We'll take our next question from Barton Crockett with J. P. Morgan.

Okay, great. Thanks a lot. I know you don't want to get into the game of guiding too specifically for the first quarter, but given that we're so far into it now and given that there's such unusual comps with a year ago kind of Microsoft presence and we're in such a skittish market environment and, you know, local advertising and outdoor, out of home advertising environment, I was hoping you could give us a little bit more color. So, in particular, can you give us some sense of how utilization has been trending in January and February? And I would imagine you have a pretty good view into the March pre-shows for national. That would be one question.

Well, clearly, as we've sort of indicated, we're anticipating that the utilization will be down a little bit from last year. Last year, as you recall, it went up by 20% year-over-year from '06 to '07. So, you know, that one client that you just mentioned sucked up a lot of inventory. We did benefit a little bit from the fact that we had the $4 million of make good carrying over and we obviously had plenty of theater attendance to take care of those make goods in the first quarter. 100% of them will get taken care of in the first quarter, because some of the clients wanted to defer into some other periods. But, so we've benefited from that a little bit.

So, you know, I don't think there's any other color we can really give you, other than, you know, kind of what we have.

Okay. Did that one- -?

Back end weighted. One of the things I'd done on some of our conferences was put up a chart and I believe it's on our website of, you know, historical trends, revenue and EBITDA throughout the quarters. And, I mean, last year, as Kurt had mentioned, was abnormally high in Q1, than it normally had been if say you looked at 2006. You know, we'll probably return something back more to normal.

Okay. Something back to normal. Is it that (inaudible) you think still growth in EBITDA in the first quarter?

We're not going to comment on that. We didn't give guidance.

It's too early for us to tell.

Okay. Alrighty. And then, you know, to this restatement issue, could you just give us what, you know, now the restated utilization number would be for the first quarter of '07 and the second quarter? And is there any chance of the attendance as part of the restatement, or not?

No, it's not attendance-based. It's purely just the allocation of revenue between various components.

Okay.

Because in any contract you have revenue that affects the CPM and the utilization that's the on screen revenue. And then you have land and lobby and some other things that aren't in, obviously don't have any impact on the utilization and the CPM. So, when you allocate, you know, on a consistent basis year-over-year that, those numbers, that's what caused the number in '06 to be recalculated effectively.

Okay, but can you give us what the recalculated utilization is for the first and second quarter of '07?

Yes. Last year I believe it was 66.2% is what we had reported and it was actually higher. It was approximately 70.1%.

Okay. Alrighty. And then the final question, I'll get out. I mean, you said that you think the consensus for the first quarter may be a tad high. Can you just clarify what you're using as your consensus view there?

Well, I think- - I don't know if there is, if we've seen a First Call consensus yet. We just- - what we saw on the research reports. I think everybody is not shifting toward the back end of the year as Kurt had mentioned is more normal for us.

Okay. But I guess- - all right. I'll leave it there. Thanks.

Thank you. We'll take our next question from Eileen Furukawa with Citigroup.

Hi. Thanks for taking the question. I have a couple. First, you know, regarding the box office, what you saw in the fourth quarter. Can you tell us, was there any pattern in what was going on here? Was there any sort of regional pattern, smaller, larger markets, certain partners? And then also, within your '08 guidance to consensus numbers, what kind of attendance growth or decline were you considering? And then on utilization, you know, you're 104% utilization. Was there any particularly large ad buy from one or a handful of particular advertisers that really pushed this up? Or was it more widespread? And similarly, what kind of national utilization did you consider in coming up with your '08 guidance? Thanks.

Let me answer the last question first. The fourth quarter there was one big client, the Army National Guard. There was a three, three and a half minute piece, depending on whether we're talking about November, or December, that ran. We actually bought back I think almost 100% of the Coke inventory in December to make that work. And we also had a content piece in November that made that work. So, they were a very large client. But having said that, they didn't actually suck up a lot of the inventory that is included in the utilization, because some of that was sucked up by our content piece and some of that was sucked up by Coca Cola. The buy back of the Coke inventory which we made a little bit of a spread on. So, that's the answer to that.

The attendance, you know, the box office attendance in the first quarter has just been very strong. And fourth quarter, as you know, was very back ended. The last two weeks were very, very strong. And then that rolled over into the first quarter and there's been a number of films that I think have been upside surprises in the first quarter as well. So, and I don't know what else to say. There isn't, doesn't seem to be any local or regional patterns. It just seems to be, you know, movies that people want to see. And, you know, after the box office sort of exploded right at the Christmas period, that momentum has just carried right on into the first quarter.

The attendance growth that we've got in the 2008, I think most people's view is that it's flat year-over-year. And I think that's what we have in our budgets effectively.

And what's your national utilization you're considering for '08 guidance?

We don't give that out. Sorry.

Okay. Thanks anyway.

Good try.

Thank you. We'll take our next question from Lloyd Walmsley with Thomas Weisel Partners.

Good afternoon. I was wondering if you could just comment a little bit on the terms of some of these new content partnership agreements, is sort of the first question. And then taking a broader view, if you were to lump the content segments in with the required ad buys and look at it as a blended overall CPM, if you could talk about how those compare to your overall CPMs with the question in mind, over time, if you were to take back inventory from the content partners, what sort of opportunity could there be there?

Well, Lloyd, there's a lot of speculation going on in there. Obviously we don't have any plans to take back any inventory at this point. We have our content partner slots that we sell directly that aren't, you know, that we have the rights to do today and we've been, you know, reasonably successful doing that.

As far as the content partner terms, I'm obviously not going to talk about them. All of them are two years. Whenever we do a content partner deal or renew it, it's always a two-year deal. That's about as much detail as I want to get into it. And, you know, as far as trying to figure out what the actual CPM is, it's not really, you know, it's not sold that way. We basically sell a package that comprises time that people give us content in and they sell- - and they buy national units on an individual basis.

For us it's a great deal, because, you know, we've pre-sold a bunch of our inventory and we get our programming for free. And I'm sure on their side, they do exactly what you were alluding to, which is take all the time and, you know, take the money that they pay us and do the division and it looks like an attractive CPM. But for us, you can't really look at it that way, because we're getting content and programming if you will at no cost.

So, I think that's, yes, that covers all the questions that you had I think.

Yes. And there's no, you know, if you look at the UK for example where the quality of the advertising is often viewed by the consumers as content, if the ad quality, you know, over a long term period were to get to that point, would it make sense or is the economics of the content partnerships now not- - does that not leave a lot of room on the table for- -

Well, clearly, if we took the whole two and a half minutes and took it out of the show as just sold it as inventory, there could be revenue upside there. But I think we have to very carefully balance the effect that that has on the show, both from a consumer standpoint, which is very important obviously, and from a clutter standpoint. Because the one thing that a lot of advertisers like the cinema for is the fact that there's not a lot of clutter.

Now, one thing that we have been doing is promoting the creation if you will of longer form advertisements, sixties and nineties. And in fact, one of the criteria that we use to add an additional unit, as we've said, we'll go up as much as 13 30-second units. One of the criteria we use is do we have other long form advertising involved in the preshow so that it doesn't feel choppy. Thirty-second ads back to back to back feel very choppy. What we were able to do in both November and December, because of the long Army National Guard ad, the show had this long form advertising in it and we were able to obviously add a unit without making the show feel choppy.

So, there are a lot of factors that come into this. Clearly, it will all come down to how creative and how entertaining do the advertisements themselves get, how long do they become and so on. Because, you know, you are correct that, if that all happens, there may be inventory available for us to, you know, free up over time.

Great. That's helpful. Thank you.

Thank you. (OPERATOR INSTRUCTIONS) We'll go next to Rich Greenfield with Pali Capital.

Hi, just a couple of questions. One, when you look at, sorry, when you look at the 10-K, you have historically said I think 16% of your revenues fall in the first quarter. I just want to confirm, Gary, what you were saying before that, when you look at the full year number that, assuming the 10-K comment is accurate, that we should think about 16% of revenues in 2008 falling in Q1, relative to the disproportionate amount that fell in Q1 '07.

And then the second question for Kurt, when you look at new advertisers to the platform in the fourth quarter what you may already have seen in Q1 and anything that may be on the docket looking out over the next, you know, several months, could you just talk to some of the big brands or names that you've seen come in for the first time ever into cinema advertising? Thanks.

Rich, on the question on sort of weighting in each quarter, the best thing I can tell you to do is we have a slide show on our website that lays out '06 and '07 using the consensus estimates- - not our final numbers, but pretty close- - that lays out revenue and adjusted EBITDA quarter-to-quarter for both '06 and '07. And I think the number for '06 was in the 9% range for EBITDA and- - in '06 - - and then 14%. But I'd have to go back and clarify that for '07. I guess my point, we just had to be more in line with '06, what was more back weighted in the end of the year.

I was talking revenue, though, the seasonality of revenues.

Oh, well, it's similar. Just the fact that there's some leverage in the business and why the EBITDA ones are lower. But the ones on the revenue basis, if you looked at that, it would probably be a similar situation.

And the new advertisers, Rich, I mean, we've talked about a lot of these, but, you know, J. C. Penney was a big breakthrough in '07. Wendy's was a big breakthrough in '07. We've had a bunch of electronic companies come in, like LG, a lot of video gamers come in, toy manufacturers come in. So, I think we've had a pretty good run of new people that are coming in and that's really what's driving our growth. You know, hopefully we'll continue to see that. And as I had said before, we've had some of these clients already come back to us that advertised in '07 and look at trying to secure units not only in '08, but also in '09 rather. So, we've had some little, what I'll call, mini up front deals with some of those clients. So, I think that's a very positive thing.

And key categories you think you can target in '08, '09, especially as you add Lowes?

Procter & Gamble to me is, you know, the whole packaged goods industry is one that is a huge spender and we really haven't, other than personal care products, like Axe and a few other brands, you know, there's a couple- - that whole category, and Procter & Gamble is obviously a client that's a big target for the industry. But the whole packaged goods category I think is the big one. You know, other than Wendy's, we haven't done a lot on the quick serve restaurant either, so I think those two categories I'm hopeful that we can, you know, get into.

And there's some pretty key clients out there that have never spent in cinema, like Apple, and with great- - Target- - with great creative. They just have never, you know, gotten into cinema. And given their creative, they would be a perfect fit for cinema. And, you know, we're working hard on those kind of clients.

Thanks.

Thank you. Next we'll take a follow up from Barton Crockett with J. P. Morgan.

Okay. Great. Thanks for taking the question. I was wondering if you could give us some sense of, you know, at this point, what percent of your available, you know, normal ad slots have already been sold through kind of preset contracts with the content partners, you know, and any other type of long term or, you know, pseudo up front contracts that you have?

Yes, I think what we say and it's actually disclosed in our 10-K, which will be out in a few days, that between the content partners and the Coca Cola commitments it's 35%?

Yes, in '07 it was in the high 30s.

Yes, mid to high 30%, 33% or 34%.

Of total advertising?

Total advertising revenue, correct. So, you can probably assume it's a little bit higher, you know, maybe a little bit higher than that. The one thing that we did mention is in '08 we've got back a 30-second unit from Regal, so that will offset some of the beverage growth. And as you know, beverage was growing at 8% a year. So, that will offset a little bit of that growth.

Okay. So, you think it's if anything up a little bit from what it was in '07?

Yes.

Okay. Great. Thank you.

Thank you. Next we'll take a follow up from Hunter Dubose with Morgan Stanley.

Hi, guys. A couple of more questions for you. The first one is, can you give us any guidance about how we should be thinking about the treatment for Regal's acquisition of the Consolidated Theatre chain in terms of this being set up as a Lowes type structure where they get the incremental equity up front, then make payments to you versus simply holding off until the Screenvision contract expires?

And then the second question I have is that there was a recent Ad Age article commenting that the MediaVest agency was considering shifting up to $100 million of broadcast advertising contracts to cinema for this year. And I'm wondering if you've seen any indications of that and have you seen any indications that other agencies may be considering something similar in response to the Hollywood writers' strike, which even though I know it's ended, is likely to continue having an impact on the programming slate for broadcast for another few months.

Yes. Okay. On the Regal thing, Hunter, we have not heard anything from Regal and you stated it correctly. They have the option to sort of go the Lowes route and pay us a fee, if you will, in exchange for equity. We have not heard anything from them on that. We won't get access to Consolidated. We don't know what the actual dates are, but we think it's two to three years from now from an actual sale standpoint.

On the Ad Age article, there have been lots of conversations with the agency- - I think it was MediaVest that was mentioned in the story- -and other agencies about the idea of them doing sort of mini up fronts with us that they would then divide across their various clients. I don't have any deal to report, although as we talked about, we have been doing some deals directly with some clients with the agencies involved as well, where they've bought multiple flights in '08 and, you know, in '09 as well in one case.

So, yes, those conversations have been going on, ongoing for some time and, you know, we'll just have to keep pushing on it. It was obviously very, very good news.

Okay. Thanks.

Thank you. And at this time, there are no further questions. I would like to turn the program back over to Mr. Kurt Hall for any additional or closing comments.

Yes, I don't have any big thing to say, other than, you know, thank you to everyone and, you know, we'll be talking to you soon. As Gary mentioned, you know, sometime this spring we'll be finalizing the calculations for the circuits that have been alluded to with respect to the new theaters net that they have brought into the Company over '07. And so we'll be getting back to you on that. And just stay tuned. A lot of really exciting things going on for the Company. So, thanks.

That concludes today's conference. You may disconnect your lines at this time.