National Cinemedia Inc (NCMI) 2009 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the National CineMedia, Incorporated first quarter 2009 earnings conference call. Today's call is being recorded. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would now like to turn the conference over to Mr. David Oddo, Vice President of Finance. Please go ahead, sir.

Good afternoon. I would like to remind our listeners that this conference contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933 as amended; and Section 21-E of the Securities Exchange Act of 1934 as amended. All statements other than the 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, David. Good afternoon, everyone. Welcome, and thanks for joining us for our first quarter 2009 earnings call. Today I will provide an overview of our first quarter operating results and an update on the marketplace. Gary Ferrera, our CFO, will then provide a bit more detail on our financial performance for the quarter and provide specific financial guidance for Q2 2009 and our outlook for the full year; and then, as always, we will open the line for questions. We are pleased to report another solid quarter of growth and the approval of our $0.16 Q1 dividend. Q1 2009 revenue increased 17% versus Q1 2008; and with the operating leverage of our high-margin business model, our Q1 adjusted OIBDA increased 30% over 2008. These favorable results reflect solid national advertising and Fathom revenue growth that more an offset the effect of lower local advertising and beverage revenue.

Our adjusted OIBDA margins also benefited from tight cost controls, as we continue to manage the cost structure of our business very carefully in this tough business environment. We also continued to benefit from the improving quality and reach of our national network, as the effect of the 2008 AMC Loews, Kerasotes and Hollywood additions to our network are being favorably viewed by the media buying community. The improving reach of our network, especially in the larger DMAs, is continuing to aid our strategy to broaden our client base. Several new clients are buying our network for the first time in 2009, including clients in the retail, import auto, broadcast TV, cable TV and restaurant categories. I was most encouraged by the fact that several clients who had previously brought Screenvision exclusively began to buy our network. Strengthening our network remains a top priority for us as we aggressively compete with broadcast and cable TV and other national media networks. While we continue to add a few smaller independent circuits, our agreement with our founding members that requires that all of their theater additions be connected to our network continues to be a key part of our network growth. In addition to the Loews circuit acquired by AMC in 2006, during 2008, several newly constructed founding member screens were added to our network, and Regal acquired the 400-screen consolidated circuit that will be added to our network in early 2011. We expect the distribution added in 2008, combined with the expected future organic and other growth of our founding member and network affiliates will provide us with sufficient high quality inventory to meet near term market demand. With this growth in our network, we now have approximately 70% and 60% of attendance market share of the top 10 and 50 DMAs, respectively, and are beginning to complete more effectively with TV and other national networks.

More recently, four Muvico theaters acquired by Cinemark and one Muvico theater taken over by one of our network affiliates were added to our network. Three of these theaters ranked among the top 50 grossing theaters in the U.S., and all five of the theaters are in the top 50 DMAs. These additions are expected to offset some of the attendance decline associated with the loss of the Marcus theater circuit last month; and in fact, this shift is expected to have a positive impact on our 2009 OIBDA and free cash flow, as we will benefit from the lower theater access fee with our founding members versus the network affiliate model. In addition, we would not have to fund the Marcus capital associated with converting their theaters to digital, and the cost of placing ads on 35 millimeter film prior to conversion. We are hopeful that our network reach will continue to benefit from the theater development and M&A activities within the theater industry. In this regard, we are watching the process relating to the sale of the National Amusement circuit very carefully. With the expansion of that process to now include all of the theaters, we believe that it is now more likely that some, if not all, of the theaters will be sold. As expected, our Q1CPMs increased only slightly versus 2008, as the supply demand dynamics in the markets began to favor media buyers. While our pricing continues to be much higher than average TV CPMs, TV CPMs clearly create a floor on our CPMs and set the overall pricing environment in the marketplace for the broader sight, sound and motion advertising marketplace in which we compete.

We expect the softer CPM environment to continue throughout the remainder of 2009 and to result in near term quarter-over-quarter CPM declines, as our over 13% growth in 2008 CPMs set a challenging CPM benchmark for 2009. Fortunately, our ability to expand our client base and increase Q1 inventory utilization nearly 9 percentage points more than offset our slower CPM growth. Given the difficult market environment and the 10% increase in our salable advertising impression versus Q1, 2008, our national sales team did a great job. While our Q1 national advertising revenue exceeded Q1 2008 and our guidance, it is important to note that Q1 2008 was a relatively weak quarter, and a portion of our 2009 overperformance was related to a higher Q1 allocation of content partner annual spending commitments, and one large scatter advertising contract. While the number of national Q1 contracts year-over-year was about the same, one contract represented 14% of our national revenue, excluding beverage, for the quarter. In Q1, 2008, no one client represented more than 8% of our total national revenue, including beverage -- excluding beverage, sorry. While our national advertising business was strong, as expected, our Q1 local advertising revenue was pressured by the weak economy. Our local revenue decreased 19% versus Q1 '08, as increases in network screens were not enough to mitigate the negative effects of the weakening economy.

While our local advertising business is clearly being adversely impacted by the effects of the recession, the impact still does not appear to be as severe as many other local mediums. We continue to benefit from our high quality theaters, strong box office, attractive audience and solid value proposition relative to other mediums. Fortunately, our local advertising revenue only represented approximately 12% of our total revenue, and our growth in our higher margin national revenue more than offset the impact of the lower local revenue. While the local business is still very soft and expected to continue to track behind 2008, as the news of the strong box office and the marketing campaigns of the summer blockbusters begin filtering into the local markets, we are hopeful that our local business will begin to recover.

As we have mentioned, while a strong film schedule and overall box office provides a tail wind for our overall business, it has more of a direct impact on our local advertising business. Our combined meetings and events business continues to post strong growth, with revenue up 49% in the first quarter compared to Q1 '08. This was driven primarily by the growth of our Fathom Division, as it benefited from the expansion of our live broadcast capabilities and stronger metropolitan offer titles, including Madam Butterfly, which was our largest attended event ever. The expansion of our live broadcast network to nearly 500 locations now has allowed us to increase the revenue and cash flow potential per event and attract more high-quality digital programming.

Our EBITDA margins also continue to benefit from cost savings associated with the combination of the Fathom and CineMedia's marketing and operations functions. While the Fathom business is still a small part of our overall business, we expect this business to benefit from the continued expansion of our network and the transition to the digital cinema equipment. This expansion and quality improvement should help to transform the theater into a new kind of community entertainment center, which is with a much more diverse selection of content offerings. Turning briefly to some of our future growth initiatives, our new consumer website, ncm.com, was launched out of [Beta] over the last few weeks. This new website, which also includes the full integration of our Fathom.com site, has been designed as an online extension of our First Look preshow, providing our clients with a unique integrated entertainment focused media buy across both our cinema and internet platforms. By leveraging our existing digital media and operating personnel and infrastructure, and cross-selling with our existing salesforce, we were able to develop, operate, and sell this new consumer website with very little incremental investment of operating expense. In addition, unsold, on-screen inventory also provides a powerful off-channel marketing platform that other websites don't have.

While we have already landed some initial sales on the site, we are not expecting ncm.com to be a meaningful growth driver in the near term. However, as media buying silos continue to clash and clients increasingly look for integrated marketing solutions across multiple platforms, we believe that ncm.com will be an important part of our future as we build NCM into a new kind of national digital media network. During Q1, we also began the process of restructuring our investment in IdeaCast through an acquisition of 100% of its senior secured debt from its lender. We are currently in the process of foreclosing on key health club and programming contracts and other assets associated with the advertising network. Within the NCM family, the restructured IdeaCast will benefit from various sales and operating synergies. At the same time, we are in discussions with several potential partners and investors about combining the restructured IdeaCast operation with other similar businesses to create a larger, more effective digital media platform. This digital out-of-home media business continues to be a very fragmented, and absent of a platform that provides the scale desired by media buyers and a media buying currency that can be traded efficiently.

While NCM would have a smaller interest in this larger, separately managed entity, it will allow us to continue to place maximum operating focus on our core cinema and internet growth strategies. As this new out-of-home digital media business matures, our continuing ownership interest could provide a new growth engine for NCM in the future. As we discussed on our last call, we continue to monitor the potential sale of Screenvision. We have heard that a banker has been selected to sell the business for the 50/50 owners, Thomson and ITV, and that information will begin to be distributed to interested parties over the next several weeks. We look forward to participating in the sales process, as we believe that there are meaningful expense synergies that can be captured. There are also obvious strategic benefits associated with larger scale that will allow NCM to better complete for media dollars against TV and other national mediums and provide incremental value for all of the theater circuits that are part of that larger network. I am pleased with our strong first quarter performance, as we continue to outperform other media platforms in a difficult marketplace. However, as we continue to operate in a very challenging business environment with difficult second half comps, I want to put a few things in perspective.

While our sales personnel are continuing to be very strategic and aggressive, other than our contracted and pending revenue, like most other mediums, we have very little overall visible into the second half of the year, as media buyers and the brands they represent are delaying their final scatter buying decisions until the very last minute. We also had two clients exercise options to reduce previously booked commitments, and one client canceled their commitment, all for the second half of 2009. Given this lack of visibility in the second half of the year, we continue to manage our business conservatively, and are maintaining tight capital spending and operating cost controls. While we are likely to have some future quarter-over-quarter revenue and OIBDA volatility relative to prior year periods, the continued expansion of our client base should help lessen the volatility over time. We also will continue to benefit from our high free cash flow business model and the high quality and continuing growth of our digital network. As our network reach expands and -- we'll continue to improve our ability to compete more effectively with TV and other national media platforms, some of which are falling out of favor with media buyers. Now I would like to turn over the presentation to Gary to give you some more details concerning our Q1 financial performance and future guidance.

Thank you, Kurt. I will now spend some time reviewing our first quarter financial performance in a bit more detail. You should note that the effect of the AMC Loews and Regal consolidated integration payments are not included in our operating results. Those net payments are recorded directly to our balance sheet. The total AMC Loews and Regal consolidated integration amount was $400,000 for the first quarter of 2009. The amount specifically related to the AMC Loews Star Theaters was approximately $100,000 through February 2009, and was the final integration payment related to the AMC Loews circuit. For the first quarter, our total revenue increased 17.2% to $73.5 million, driven by an 11.9% increase in advertising revenue to $60.1 million, and a 48.9% increase in meetings and events revenue to $13.4 million. The advertising revenue mix shifted in favor of our national business for the first quarter, and was approximately 71% national, 15% local, and 14% beverage; versus 60%, 21%, and 19%, respectively, in Q1 2008.

Q1 national ad revenue, excluding beverage, grew 32.4%, driven by a utilization increase to 67.4%, compared to 58.7% in Q1 2008, across a 9.7% increase in our Q1 impression base. while CPMs increased only 0.2%, The strong Q1 2009 box office, the addition of the Hollywood and AMC Loews attendees, as well as full quarter of all Kerasotes Theaters connected to our network, contributed to the larger number of salable impressions over Q1 2008. Our national advertising lobby entertainment network and lobby promotional products increased 37.5%, primary due to an increased allocation of must-spend partner dollars to this product line. While these lobby media and promotional products account for only 7.3% of our first quarter total advertising revenue, they continue to be a unique part of our selling proposition.

As discussed on previous calls, a reduction in time required for beverage advertising by two of our founding members in 2009 was reduced from 90 to 60 seconds. This reduction was partially offset by the 8% contractual beverage CPM increase and resulted in a 17.8% decline in our Q1 2009 beverage revenue versus Q1 2008. As the economy continued to deteriorate into 2009, our Q1 2009 local revenues decreased 19.3% versus Q1 2008. The 13% increase in total average screens available for sale by our local sales force helped to slightly offset a decline in same-screen sales. Total Q1 advertising revenue, excluding beverage per attendee, increased 10% to $0.33 per attendee. This was driven by our national advertising revenue per attendee, excluding beverage, increasing 22.7% to $0.27 per attendee, and was partially offset by a decline in our local ad revenue per attendee of 27.1% to $0.06 per attendee.

We entered the first quarter with approximately $1.3 million of [make] goods; and as of the end of the quarter, we had approximately 2.5 million of make goods compared to $1.9 million at the end of Q1 2008. This higher make good balance relates primarily to lower than expected theater attendance near the end of March that resulted in a few March campaigns being under-delivered. Our meetings and events business had another solid quarter, as revenue increased 48.9% to $13.4 million from $9 million in Q1 2008. This was primarily driven by an approximate 60% increase in event site count and two strong Metropolitan Opera titles in Q1 2009. Total Q1 adjusted OIBDA increased 30% to $26.9 million from $20.7 million in the first quarter of 2008, while adjusted OIBDA margin was 36.6%, up from 33% during Q1 2008. The margin increase was primarily due to the increase in our high-margin national advertising revenue, and our efforts to contain costs, partially offset by lower beverage revenue and higher affiliate network -- higher network affiliate expenses. Adjusted OIBDA, including AMC Loews and Regal consolidated payments for the first quarter, was $27.3 million, compared to $21.5 million in 2008.

Depreciation and amortization increased $1.6 million from Q1 2008 due to increased depreciation related to investments in our digital network and the various network affiliate circuits, and our ncm.com website, as well as increased amortization related to the increase in intangible assets associated with the annual common unit adjustment. Net interest expense decreased $3 million from Q1 2008 to $13 million in Q1 2009. This decrease was primarily due to a pre-tax non-cash accounting gain of $1.9 million related to the interest rate swap with Lehman Brothers that is considered ineffective for accounting purposes, as well as lower average interest rates in 2009. Looking briefly at diluted earnings per share for the first quarter, we reported GAAP EPS of $0.03. Excluding the non-cash gain related to the Leehman swap net of tax and minority interest, EPS would have been $0.02 for Q1 2009 versus a loss of $0.01 in Q1 2008. As of April 2nd, 2009, we had 16,813 total screens in our network, including 2,299 network affiliate screens, representing a 9% increase in total screens at the end of the first quarter versus the end of Q1 2008. Approximately 14% of our network is composed of affiliate screens, and approximately 93% of our total screens are connected to our digital network, versus approximately 88% at the end of Q1 2008. These digital screens now generate approximately 95% of our attendance.

The increase in total screen count over Q1 2008 was primarily driven by addition of approximately 1,175 AMC Loews screens, 490 Hollywood screens, and 180 Cobb screens, partially offset by the reduction of approximately 600 non-digital market screens from our network. Approximately 400 consolidated theater screens acquired by Regal during Q2 2008 will not be included in our screen count and attendance until 2011 -- in early 2011. Our capital expenditures were $2.5 million for the first quarter compared to $5.3 million in Q1 2008. We continue to estimate that 2009 CapEx will be in the range of 8 to $10 million, assuming no additional network affiliate agreements are signed during 2009. Regarding our balance sheet, our total debt outstanding as of April 2nd, 2009 was $806 million, comprised of $725 million in term loan, a $74 million balance on our revolver versus a 49 million revolver balance at the end of Q1 2008, and a $7 million non-interest-bearing note payable to Credit Suisse in relation to the IdeaCast restructuring. The revolver increase is due to our decision to draw all of our availability in light of the Leehman bankruptcy and general credit market conditions. The revolver balance net of NCM LLC cash and cash equivalents was approximately $50 million at the end of Q1 2009, versus $45 million at the end of Q1 2008.

This net revolver balance excludes the effect of $47.8 million of cash in NCM, Inc., versus $28.5 million at the end of Q1 2008. The 47.8 million Q1 cash balance at NCM, Inc., is reserved for tax receivable agreement payments to the founding members, income tax payments and dividends. You should note that at our current dividend payment, we currently have approximately three quarters of dividend reserve built up at NCM, Inc. If this NCM, Inc., cash were included in our leverage calculation, our consolidated leverage would be 3.6 times trailing four quarter adjusted OIBDA, including the AMC Loews and consolidated payments. The average interest rate on our $725 million term loan was 6.1% for Q1 2009 versus 6.8% for Q1 2008. Approximately $550 million of our $725 million term loan due in February 2015 is fixed under interest rate swap agreements at 6.7%, and the remainder is floating-rate debt at 3.1% as of April 2nd. The average interest rate on our revolver borrowings was 2.3% in Q1 2009, versus 6.1% in Q1 2008. Our pro forma net senior secured leverage at NCM LLC as of April 2nd, 2009, is approximately 3.9 times trailing four quarter adjusted OIBDA, including the AMC Loews and consolidated payments, down from approximately 4.1 times as of Q1 2008.

We also announced our regular quarterly dividend of $0.16 per share. This dividend represents an annual yield of approximately 4.3% based on recent trading levels. The dividend will be paid on June 4th, 2009, to shareholders of record on May 21st, 2009. Now turning to our Q2 guidance and annual outlook. For the second quarter, we expect total revenue to be in the range of 84 to $87 million, and adjusted OIBDA to be in the range of 38 to 40 million. With respect to our annual outlook, we have recently experienced a slowdown in the rate of bookings as marketers and media buyers are taking longer to commit advertising dollars. As a result of this later-breaking scatter market, our total national advertising revenue, including our content partner, beverage, cell phone PSA, and booked and pending scatter contracts, is approximately 73% of our total 2009 national revenue advertising target, versus approximately 81% of the actual 2008 national advertising revenue at the same time last year.

As we have started to see a pickup in scatter activity for Q3, we are hopeful that some of this decline is simply due to timing. For instance, a major client from the second half of 2008 has been experiencing production delays with their Q4 2009 and Q1 2010 buy; and while we still do not have a firm commitment today, if that contract were included, our national contracted and pending revenue increases to 77% of our 2009 national advertising revenue target, and our booked and pending scatter contracts are just 1% below last year at the same time. We continue to see late-breaking scatter revenues each quarter. This is evidenced by late bookings we experienced in Q1 and the revenue we are still booking for Q2. As such, we continue to manage our business based on an expectation that a late scatter market will materialize in Q3 and Q4, resulting in our total revenue and adjusted OIBDA approximating the results achieved in 2008. However, given our slightly lower current bookings, there is some downside risk with respect to the second half of the year should the Q3 and Q4 scatter market fail to materialize. You should note that this outlook for the second quarter and full-year 2009 does not reflect any potential make goods being generated. That concludes our prepared remarks, and we'll now open up the lines for any questions you might have.

Thank you. (Operator instructions). We'll first go to Alexia Quadrani from JPMorgan.

Thank you. A couple of questions. First, if you could talk a bit about how the verticals worked throughout the quarter, what your major categories of advertisers, how they trended in the quarter? And specifically on that topic, of the two clients that have canceled in the second half of the year, what verticals were they in?

Yes, I'll answer the second one first. We aren't talking about the verticals, but they were sort of -- one was a third quarter, and one was a fourth quarter.

50% of comp.

Yes, and in two cases they actually only canceled 50% of their buy. So it wasn't a total cancellation, which I guess is a good sign. We're seeing a lot of -- in the television business -- called "option taking" at this point as well, so we were pretty sure that some of this would happen; and actually we have been pretty happy that more of it hasn't happened to be perfectly honest, given what is going on in the television business.

I'm sorry -- in terms of your verticals, you're not going to talk about what sort of -- what your major categories -- how they were trending in the quarter?

I'm sorry, yes. The major categories -- we still continue to be very strong in the import autos. We had some military money in the first quarter, very strong. I think those were our two biggest contracts in the first quarter, were from those two categories.

And obviously the content partners, because that shifted --

Yes, in the content partner money, we have a little bit more content partner money in Q1 of 2009 than we did in 2008.

So when you are seeing a bit more of a headwind in terms of pullback in advertising spend, would you say it is really across the board or really outside those major verticals you just mentioned?

I would say that it is somewhat across the board; although when you talk about headwinds, obviously, we didn't have a whole lot of headwinds in the first quarter. And our cautiousness, if you will, is really, I think, the right thing to do in this marketplace. And what we're experiencing is more of a delay in when we're seeing the money come to market; and as Gary mentioned, we had a lot of first quarter money that we actually did in mid-to late February, and we're still pretty active with some deals in the second quarter. So the headwind comment is more about we're not seeing the money as soon as we used to.

Okay, would you say, then, that April sort of materialized pretty close to your trend -- what you saw in Q1?

Yes. Look, our second quarter is coming in pretty much where we thought it was from a target standpoint.

Okay. Thank you very much.

Next we'll go to James Dix of Wedbush.

Good afternoon, guys. Just on the guidance, one thing, Gary, it seemed like in the second quarter, the margins looked like a little lower if you kind of just take the midpoint; so A., if I'm right, is there any particular reason for that, and is there any read through for the second half of the year? And then I guess in terms of top line trends, I mean, would you say that the trends you are seeing kind of mirror what you are seeing from you can tell the network TV guys going through, or is there any different trend -- at least in terms of when you are getting the bookings -- that seems to be more directed at cinema or is more pronounced at the moment than what you were seeing earlier in the year?

Well, I think the only see that we're seeing that is different than we have seen in the past is it is just happening a little bit later, and the money is just being held by the clients and their agencies until the last minute, and I'm sure they are looking at their businesses, and just trying to figure out exactly what their sales are going to look like, and what their revenue capabilities are looking like before they are releasing the marketing money. So I think the economy and the sluggishness of the economy and some of the uncertainty in the economy is sort of going through the whole process. It starts with the client companies, and then obviously gets delayed before we find out. We have continued to add quite a few clients. As I said in my comments, we had a lot of new clients come in Q1 and Q2, and we've got more in 3 and 4. So I don't think we're seeing anything different. I have heard that the options being exercised in the TV business are nearly double what they have experienced in the past on a percentage basis, so clearly we haven't be seeing that kind of cancellation or movement, if you will. Clearly, you can see our CPMs have closed down a little bit; the growth is only up slightly year-over-year, basically flat. And so obviously the marketplace is a little bit softer right now. Clearly, there is a supply/demand reality right now that is favoring media buyers. Your first question on margins, look, I don't think there's a whole lot to read into that. We have got less beverage money that we're recording; and last year, that almost entirely was the difference in our margins, and in '09 it is budgeted to be pretty much the difference as well, because that's pretty much 100% margin revenue. I don't know, Gary, do you have any other factors?

That's probably the --

Biggest thing, yes.

We're not expecting them to be drastically out of line.

Yes.

Okay. Just one thing following up, Kurt, I mean, I guess just the question is, I mean, do you have a sense that the cinema market is -- a lot of people have been talking about just about all of the markets, whether it's TV or local stuff -- are we bottoming, are we seeing kind of the worst of it, and are we stabilizing? So there's talk about is network TV stabilizing, or looking any better going into the second quarter? So I'm just trying to get a sense from you. I mean, do you think that -- do you think things are stabilizing in terms of the headwinds you're facing, or are they getting worse or better in the second quarter?

I wouldn't say they are getting worse. I think clearly there are some signs that the economy is starting to bottom or stabilize or whatever word you want to use. Clearly, we saw a bit of a pickup in the beginning of the second quarter in our local business -- hard to tell whether that's economy driven, or whether that's just the big films being announced, the excitement around the whole theater business. That usually has more of an impact on our local business than our national business. I think it creates an overall tailwind for our business in general; but clearly, when the local clients start to read about the cinema business being up 15, 16% or whatever, and all these new blockbusters starting to be released into the theater, that creates excitement in the local market and it tends to help our local business. We've had a few good weeks here in that business. So there are some signs that are obviously positive. I think our concern, if we have any concerns, is just with lack of visibility; and I think in an environment where you have a lack of visibility, it's prudent to be conservative.

Okay, understood. Thanks very much.

Next we're go to Barton Crockett of Lazard Capital Markets.

-- question. Couple of questions. One, you mentioned that you look forward to participating in the auction of Screenvision. Can you give us some sense of how you would kind of gauge your interest? In other words, what are the parameters that would make a deal interesting to you, and what are the kind of parameters that you really wouldn't be interested?

Well, I haven't seen any information yet. None of that is available to the marketplace, so it's a little hard for me to comment at all on what we might be looking for. As I said in my comments, we clearly believe there are some fairly significant synergies to be brought to be bear, and we think there are some benefits from the standpoint of having a larger network and being able to compete more effectively against TV and the internet; and what is going on in the marketplace right now with the silos breaking down, and money sort of moving -- from a planning standpoint, moving into a lot of different places that it didn't historically get allocated, I think it's incumbent on us to try to figure out a way to become more and more competitive with those other national platforms. So that's really the primary focus for us.

Okay. I mean, are you at all in a position where you could talk about multiples that would take sense and multiples that wouldn't make sense? Or is it just to early to even consider that?

No, again, we haven't seen any information, so it's kind of hard to comment on that.

Okay. And then in terms of how you would pay for it? Debt or shares, or still to early to even think about it?

Well, yes. I mean, Barton, if you could tell me what the capital markets are going to look like two months or three months or whatever time period in the future -- six months, whatever -- I could probably give you an intelligent answer. But the capital markets are changing all the time. The high yield markets have all of a sudden perked up; and while rates are still high, it's starting to at least be a marketplace again. And so I think that's sort of an -- almost week-to-week question, if you will.

Okay. No, that's all fair. Well, let me switch gears here. Could you talk a little bit about -- in terms of your second quarter guidance for a year to year decline in revenues, give us a sense of how that kind of breaks down between utilization and CPM? And it sounds like from your guidance for the back half of the year that you see comparable or maybe slightly better performance in the back half in terms of year-over-year revenue trend. Even though the second quarter comp is easier, you have much stronger growth in the back half, and elaborate on what you see kind of helping you out there in the back half relative to the second quarter.

Yes, clearly the second quarter, I think the CPMs are going to be pressured more than the utilization if you look at those two metrics in combination. So I think there's clearly more pressure in the marketplace on CPMs right now for us. And I think that's true across the board. As I said in my comments, television creates a bit of a floor on the pricing for all sight, sound and motion media, and we pretty much complete in that marketplace. So I think we're going to see lower CPMs across the board, would be my guess. The second half of the year, as we mentioned, there are very, very tough comps; and the combination of that and the lack of visibility right now, we have a lot of contracted money and bookings already on the books, as Gary mentioned. We still have got some work to do. And we'll know more the next time we talk to you. We'll be giving, at that point in time, third quarter guidance and probably be able to give you more specifics about the year end.

Okay. That's very good. Thanks a lot.

Yes.

Next we'll go to Ben Mogil of Thomas Weisel.

Hi, guys. Good afternoon.

Hi.

I just had a couple of questions. Gary -- and I think you said this, but I may have had trouble hearing it. What was the local CPM decline in the quarter year-over-year?

Basically, if you look at it -- and it's not CPM, we're just saying revenue per attendee. If you go on that basis, it was down about 27%. You can also try to do average screens, which is actually how we sell it on a per screen basis and try to get a screen rate -- but it should be pretty similar. But you can get all of that information from what I gave you, but it was 27%.

Okay, and the CPM nationally was up 0.2, is that correct?

Yes.

Okay. Switching to sort of -- like sort of bigger picture questions -- when you hear the conglomerates and -- Viacom and Disney and even News Corp said that the ad markets have stabilized in their mind over the last four to five weeks -- is that something you would agree with, or do you think that because your trajectory and because your issues have been different than theirs, you are working off of -- I mean, obviously the same overall ad cycle -- but you may have some timing differences than they do?

Well, clearly they have just gone through a spat of option issues that they have been dealing with, and I suspect they got through the fiscal third quarter options, and they are feeling better. They're also -- there's a lot of positioning going on right now between the media buyers and sellers, going into the upfronts; which as you know, the presentations, I guess, started last week, and the negotiations will be starting the next few weeks. So I always take what is being said this time of year with a little bit of grain of salt just because of the positioning that is going on relative to the upcoming upfronts. Having said, we have had three real strong quarters in a row where we have significantly outperformed what I'll call traditional media platforms, so I think we're in probably a little different mood than they are generally; and as I said before, I'm hoping that the economy is starting to stabilize. We had sort of budgeted based on the fact that we would have a recovery in the second half of the year. It looks like that might be a little later than originally thought, but there are some positive signs, clearly.

In terms of the ad categories, is there any category in particular that you thought by now you would be having better traction with and the tough economy is just making that impossible? Any in particular that you really would like to get some more exposure to that it's just really difficult to penetrate right now?

Yes, I would say the packaged goods category is probably the category -- and maybe quick serve restaurants, QSRs -- they are both very, very large spending categories, and they're the ones that we, on a relative basis, are very underrepresented among other media, and I would say that's my biggest disappointment. I don't actually think it is because of the economy, because actually, those two categories have actually done pretty well during the recent slowdown; and in the case of some brands, have done incredibly well -- McDonald's, in particular. So I wouldn't say it's the economy. I would say it's just them getting comfortable with the cinema medium, and getting comfortable with the pricing; because as you know, those two categories in particular buy at generally low, low CPMs, relative to other categories. And so we're continuing to work through getting them comfortable with our higher CPMs.

But we are starting to make traction in those areas.

Yes, we are, but we're still underrepresented. I mean, what I do is I look at our -- we have a fairly low percentage of the overall media buying world at 4, 5, $600 million, whatever the total theater is these days; and I look at that as a percentage of total media spending, and we're -- on the packaged goods, we're not even on the radar. I don't know how many decimals it will zero out to, but it's a very small percentage. So I think it's those two categories where we are most underrepresented. There are some categories where we are probably over-represented. We have been doing incredibly well in the car category, even given some of the problems in that industry. We have even started to do some deals again recently with some of the US manufacturers. So -- we do very well with the military. So there are several categories that we are over-represented, and our goal is to be over-represented in as many as we can and to be underrepresented in none.

Okay. Fair enough. Thanks, Kurt. Thanks, Gary.

Yes.

(Operator Instructions). Next we'll go to (Inaudible) from CJS Securities.

Hi, good evening. Just two quick ones. First, your attendees per founding member screens has been higher than your attendees per total screens every quarter since you've been public, but was actually less this quarter. Do you have any insight into that?

No, don't have any insight. The only thing I can think of is just the timing of adding screens. Because I know when you look at each one of the individual circuits, you would generally see a higher attendance per screen from our founding member circuits just because they have a higher concentration of theaters in the bigger DMAs, and those theaters generally have higher attendance per screen. So it must just be in the timing of when those other theater circuits were added, and when you added the screens into our attendance associated with those theaters.

Okay, and then the other one, the Justice Department recently came out and announced they were going to be a little bit more aggressive monitoring anti-trust issues; and I don't know all the details, but do you -- have you looked into this or considered how it might affect any kind of acquisition or merger with Screenvision?

I saw some of the stuff that you are referring to over the last few days, and it was obviously just excerpts from a speech that the Justice person was speaking at a luncheon or something, so it's always a little hard to read into that. Clearly we, I think, all expected under the new administration that there would be a new look. We have done a lot of work on the specific thing that we're talking about here, and we're pretty comfortable, given that we operate in a marketplace that's a very broad -- broadly defined marketplace, that it shouldn't be an issue. But you never know.

Okay, thank you.

Yes.

Next we'll go to Rich Greenfield of Pali Capital.

Hey, it's actually (Inaudible) for Rich. Thanks for taking the question. Given the lead time in the national side of your business, how much of the lower-implied revenue growth for the second quarter -- if any -- is related to what was going on back in October and November of last year? And I actually have a follow-on question after that.

Yes, it's a good observation, and you never really know; but it's entirely possible, because clearly every brand, every company, every person in the United States sort of went into "do nothing" mode in October, November and December -- sort of froze up almost and made no decisions. So it's entirely possible that we're seeing some of that. And clearly, a lot of the revenue that we're getting in the second quarter has come very, very late. So as the economy started to recover a little bit, the bank market started to -- start to function again, you may have seen people go through their normal process of allocating dollars to various mediums. So it's a really good observation. We've thought about it. There just isn't any real evidence. You can never really tell what the issue is, and I hate to speculate; but if you want to speculate, that's okay.

And (Inaudible), it's Gary, just to be clear, we're giving you a broad number for revenue. Embedded in those numbers when we look at national, our national will probably still be up quite a bit. But obviously, we're going to have (inaudible) revenue in that quarter, et cetera, so that's got to be taken in to account.

It's a really good point, because we haven't really talked -- we talked about at it little bit last year when we talked about the expectations for beverage revenue this year. But beverage revenue is going to be down 18% or something like that for 2009, which is, what, 7, $8 million? And all of that, obviously, was made up and more in the first quarter, and our guidance would say that most of that is being made up in the second quarter. So we are selling more what we'll call scatter money outside of our normal -- our beverage deals; but it is something that we have got to make up this year and is one of the factors that's contributing to the fact that we're going to be -- we're sort of managing our business to flat this year.

Got it. Thanks. And then secondly, have you seen any signs that Screenvision getting more aggressive in pursuing business as they look to perhaps dress themselves up, so to speak, for a potential sale?

Yes, we have seen them in a few situations. But I wouldn't say that it's -- we talked a lot about this last year at this time, and was right before Loews transferred. We saw a lot of deals that we were competing head on head. There is a few now that -- where that has been the case, but I wouldn't say that it's out of the ordinary right now.

Okay. Great, thanks.

We'll go to Barton Crockett from Lazard Capital Markets.

Great, yes, I just wanted one follow-up. You guys had mentioned something about IdeaCast and the restructuring there. I was wondering if you could just elaborate on what your ownership stake is there, and how that your ownership stake has been changed through these transactions?

Well, when we get the restructuring done, presumably our ownership stake will be 100%, because we own 100% of the senior secured debt. So that is the expectation. Obviously, that process isn't done yet. We also expect that over time, we will probably own considerably less of it as we put it together with other potential businesses. Where -- as I mentioned in my comments, we're having several conversation right now, and we believe that creating a broader platform that's separately managed is the right move for us.

Okay. So --

So that's what you can expect.

So I guess that's what confused me. So you're not consolidating a new business for a long period of time, it sounds like?

No, there's a short period of time here as we go through the restructuring; but for consolidated accounting purposes, we don't expect there to be a very long period of time.

Okay. Great. Thank you.

It appears there are no further questions at this time. I would like to turn the call back over to the speakers or any additional or closing remarks.

Great. Thanks, everyone, for joining us. Obviously, to the extent that anybody has any other questions, Gary and David and I will be available, so give us a call, and we'll talk to you again soon. Thanks again, bye-bye.

Ladies and gentlemen, that does conclude today's call. Thank you for your participation.