Lee Enterprises Inc (LEE) 2002 Q3 法說會逐字稿

Good morning, ladies and gentlemen.

And welcome to the Pulitzer Incorporated third quarter earnings conference call.

Today's call is being recorded and will also be available via the Web by going to www.pulitzerinc.com.

A replay for today's conference will be available until Wednesday, October 30.

And the Webcast will be available on Pulitzer's Web site until Friday, November 22.

Before we begin, let me note that any comments made during the course of this conference call may include forward-looking statements.

These statements are subject to risks, uncertainties and other factors such as overall advertising expenditures, competition, newsprint pricing and economic conditions that could cause future results to differ materially from management's current expectations.

For a discussion of these and other factors, please see the notes in the company's press release issued earlier this morning and the company's reports filed with the SEC.

Thank you.

Mr. Woodworth, you may begin your call.

Thank you, Jessica (ph).

Good morning.

And thanks for joining us.

I'm Bob Woodworth, President and CEO of Pulitzer Inc.

Earlier this morning, we released our financial results for our 2002 third quarter.

With me today are Alan Silverglat, Senior Vice President, Finance, Terry Egger, Senior Vice President and Publisher of the "St.

Louis Post-Dispatch" and Mark Contreras, Senior Vice President of Pulitzer Newspapers, Inc.

I'll start by spending a few moments reviewing the highlights of the third quarter.

Alan will then provide a bit more detail on the numbers, after which we will open it up for your questions.

Before we start, I should note that when we discuss comparable revenues and expenses, we will be including our share of revenues and expenses in Tucson.

If you had a chance to look at our earnings release, you already know that we had a strong quarter.

I would like to point out three highlights.

First, we achieved strong revenue growth, with comparable total revenue up 3.1 percent and comparable ad revenue up 4.2 percent.

We built those increases on year-over-year gains in each month of the quarter.

Significantly, that revenue performance reflects broad strength across all our properties and in key ad categories.

Retail, including preprints, was up 9.5 percent and national, again including preprints, was up 18.9 percent.

We continue to see a moderating decline in classified, which was down 4.7 percent in the third quarter compared with a decline of 9.8 percent for the first half of the year.

Weakness in help wanted again offset strength in automotive and real estate.

Second, we combined excellent revenue growth with continued emphasis on cost control.

Comparable costs were down 3.8 percent for the quarter.

And even excluding the impact of lower newsprint and severance, expenses were up only one-half percent.

The result was our third consecutive quarter of growth and operating income, which was up nearly 60 percent on a goodwill adjusted basis in a strong 11.1 percent excluding the impact of lower newsprint and severance costs.

Third, we brought this strong performance down to the bottom line.

EPS from continuing operations from 40 cents per dollar compared with 22 cents last year , excluding amortization.

Base earnings excluding amortization and nonoperating investment charges was 45 cents, nearly double the 23 cents last year.

Our base earnings exceeded street estimates by more than 25 percent.

About half of this increment came in September, when we saw advertising revenue growth of 9.6 percent over the prior year.

About 1.5 million of the quarter's revenue gain came from two grand openings, a casino and shopping mall in St. Louis.

However, the majority of the gain came in the revenue categories that are the focus of the growth strategies we have been putting into place.

For me, that's the real story of this quarter, the fact that our strategies are continuing to deliver the results we said they would.

I'd like to spend the rest of my time focusing on our strategies by drilling down in each of our operating groups.

First, St. Louis.

Revenue was up 4.6 percent for the quarter, largely on the strength of an 11.2 percent increase in September .

Retail growth was strong in the quarter, up 14 percent, including preprints.

This gain was aided by the grand openings but excluding their impact, the revenue at St. Louis properties was still up nearly 8 percent, reflecting strength in territory majors and preprint advertising.

National advertising was also strong, up 16.7 percent.

Turning to classifieds , as has been the case all year, we saw strong gains in auto and stable results in real estate , more than offset by declines in help wanted.

To a large extent, our strong revenue performance clearly demonstrates the benefit of Pulitzer's unique position in the St. Louis market as the owner of both the major metropolitan paper and the nation's second largest group of weekly suburban newspapers.

One of those benefits is our ability to refocus "Post Dispatch" and suburban journal outside sales forces on expanding our advertiser base and growing our market share.

In the past, the two sales forces had been focused on the same prospects, and were in effect, competing for the same add dollars.

Beginning in June, we eliminated that duplication and assigned each salesperson exclusive active accounts and prospects and gave them the ability to sell any combination of the post suburban journals and STL today.

This change effectively doubles our sales force is enabling us to take better advantage of cross selling opportunities, expand our advertiser base and ultimately increase our advertising market share in St. Louis.

This is a big end and to our knowledge, unprecedented change.

As we have told you, it's taken some time to work out the kinks , completing system conversions, straightening out who was responsible for what and setting clear sales quotas.

We have more to do, but the major work is behind us.

One of the initial signs that the sales force convergence is working is the growth of local retail territory sales.

In our St. Louis properties , these local geographic territory sales have been up month over month since June, including an increase of 15 percent or more than $350,000 in September.

Another important change in St. Louis was the elimination of free delivery to nonsubscribers of the post zoned editions.

This change ended free delivery duplication with the suburban journals.

We have had excellent success, in my grading preprint advertisers from the Post nonsubscriber product to the suburban journals largely because we offer and unbeatable value proposition to our advertisers , by eliminating any duplication of preprint distribution , advertiser printing costs are reduced.

That gives us the ability to be paid more fairly, while still lowering the overall cost for advertisers.

The results are reflected in the St. Louis and St. Louis preprint revenue, which was up nearly 30 percent in the quarter.

Significantly , we achieved that revenue gain at the same time that the elimination of the post nonsubscriber product cut our cost in the quarter by more than $700,000.

During the quarter, we moved our St. Louis portal site , www.stltoday.com, back into the post and we have been pleased with the results.

The move has enabled us to reduced expenses and we like the revenue trends we are seeing, especially in the classified up sell.

SDL Today continues to be the leading portal site in St. Louis averaging nearly 15 million page views per month.

As you can see , we're very encouraged by the progress we're making in St. Louis.

Much of our work in the market has been behind-the-scenes , principally on six major projects.

I've already talked about the first three: refocusing our sales force, eliminating preprint distribution and restructuring STL Today. our primary additional project have included rationalizing and distributions within STL distribution , acquiring distribution route and setting up our subscriber database and completing our expanded and centralized production facility.

Now, with that infrastructure in place , we are beginning to see the results we expected.

In my view, that's the central core in St. Louis.

Turning to Pulitzer newspapers Inc. , P&I continued its strong performance, achieving its third consecutive quarter of growth in both revenue and operating profit.

Comparable third quarter add revenue was up 4.6 percent, with increasing year-over-year gains in each month of the quarter, culminating in a 6.8 percent increase in September.

Just as impressive as the revenue growth, P&I operating margins grew almost 6 percent percentage points for the quarter.

We are making consistencies process in improving the properties to top tier level.

For the quarter, retail, including preprints was up 4.3 percent , classified was up 3.9 percent and national was up 35.1 percent.

This performance was built upon some very strong increases at particular properties.

Comparable add revenue was up 9 percent or more in flagstaff, Provo and Koosbay and 7 percent in pork hills.

In Bloomington, the largest P&I market , both total and add revenue were up a solid 4.4 percent.

Impressive facts about these increases is that we achieved them the old fashioned way, growing active advertisers by focusing on August we were not previously reaching and leveraging the combination of our dailies and weeklies in our markets.

Overall, active advertisers were up 6.3 percent for the quarter at the P&I properties.

Reflecting a more focused sales effort and our willingness to add a sales rep when we see a clear return on our investment.

We also find a way tone courage advertisers to buy all our publications in the market, driving our revenue while giving our advertisers grade reach.

One example is our initiative to up sell classifieds from our dailies into a weekly classified section.

That approach is driving revenue in decal, and we're expanding it to other market.

P&I also continues to make substantial progress in its media operations with page views up 67 percent over the prior year.

During the past several years , P&I newspapers have had success with up selling classified advertising on-line.

We are moving quickly to apply that approach to retail display advertising as well.

The result is that P&I and media operations are showing strong growth in revenue and profits.

In Tucson, comparable add revenue for the quarter was up 1.1 percent.

That compares with a decline of 5.6 percent in the second quarter and a 9 percent drop in Q1.

September was a strong month.

With revenue up 6.2 percent, and active advertisers up 6 percent.

As in other markets, these gains reflect a more focused sales effort.

In Tucson, we have realigned our sales terrorist, now have 21 sales people dedicated to growing small to medium size accounts, and increase of eight positions from a year ago.

Retail revenue was up 1.5 percent , reflecting strength in furniture financial , grocery and telecommunications.

And we saw strength in automotive and real estate classifieds as well as in buyer's edge, a new direct mail product.

We also saw significant increases in cross selling with the air zone that republic in Phoenix through the Arizona one buy a one stop solution for advertisers seeking statewide coverage.

Finally Tucson's E media operations achieved profitability in the third quarter, one quarter ahead of our target.

To sum up our overall perspective on the company's third quarter.

We are very pleased with our performance and especially our success in driving revenue growth in the categories that are the primary focus of our growth strategies.

Let me close by revisiting our guidance for the year.

Based on our results, we are raising the full year outlook for fully diluted base earnings per share from continuing operations to a range of $1.73 to $1.80.

That represents an increase of more than 20 percent over 2001 base earnings.

Thank you, and now I'll turn the call over to Al.

Thank you, Bob and good morning , everyone.

As Bob indicated, I will review our second quarter results in a little more detail.

Starting with earnings per share we report a net income from continuing operations of 8.7 million or 40 cents per diluted share.

As detailed in the release, these results include a pre-tax charge of 1.8 million, to adjust the carrying value of nonoperating investments earnings from continuing operations absent this charge, our base earnings would have been 45 cents per diluted share in the quarter.

That is almost double the 23 cents in the third quarter of 2001 excluding amortization and investment charges.

Operating income from continuing operations from the third quarter increased to 19.8 million , from 6.8 million one year ago.

On a comparable basis, excluding properties acquired from both 2002 and 2001 , and goodwill amortization from 2001, operating income increased an impressive 59.2 percent.

If we eliminate the impact of lower newsprint costs and severance costs incurred in both years, for positions permanently eliminated , operating income was up a strong 11.1 percent.

Bob has described the revenue component of this increase.

On the expense side, operating expenses decreased 3.8 percent.

Excluding the impact of lower newsprint and severance costs , expenses were up only one-half percent for the quarter.

The major cost factors driving the increase and operating income were

1.

A 27.6 percent decrease in newsprint costs principally on the strength of a 24.4 percent price decrease. 2.

As Bob noted , a savings of more than $700,000 from the elimination of the post nonsubscriber product. 3.

The absence in 2002 of that one and a half million in unusual charges incurred in 2001. 4.

Intangible assets amortization decreased by 5.6 million , with a January adoption of SFAS 142.

Our financial performance also benefited from lower interest costs , down about 1.7 million.

That decline is primarily the result of the interest rate swaps , which converted nearly half of our long-term debt cost from fixed to variable rate.

I should note a few other items.

We now expect 2002 capital expenditures to come in at $29 million.

The increase from our normal annual capital spending level of 10 to 12 million, primarily reflects the St. Louis northwest plant expansion.

We expect capital spending to return to normal levels in 2003 and beyond .

Pulitzer entered the quarter in strong financial position, with cash and marketable securities of about 179 million.

The $15 million decrease from year-end reflects full year funding of certain employee benefits, capital expenditures, deferred acquisition obligations and circulation route purchases in St. Louis.

Also to reduce cash flow from operations.

Before turning back to Bob , let me emphasize the points we want to make about our performance this quarter.

Our ground up retail sales focused, revenue initiatives are taking hold in St. Louis.

It is by two grand openings, our performance here was strong.

Market share is growing and improving.

Costs above and below the line remain under tight control.

Now, I will turn it back to Bob.

Thanks , Alan.

Now, we'll be happy to open it up for your questions.

Operator : If you would like to ask a question , please press star and the number one on your telephone keypad.

If you would like to withdraw your question , press star and the number two.

We'll pause for just a moment to compile a key roster .

The first question comes from Peter Eppert (ph) from Goldman Sachs.

Peter Eppert (ph): Good morning, actually two questions.

First, can you give us a thought in terms of maybe a rough estimate in terms of what the ongoing revenue benefit might be from the new mall that's been opened and the casino.

Number two, what's happening in the newsprint press market currently.

Thanks.

Peter, this is Bob.

Good morning , I'll cover the newsprint quickly and then let Terry comment on the openings here in St. Louis .

Our view is that we're going to have some effect of the news -- the August price increase flow through our financial statement through the fourth quarter of this year.

Beyond that, I think it is -- it is pretty difficult to predict, given the uncertainty in the revenue environment and particularly with help wanted, as you well know, it's a commodity and reacts to supply and demand.

So it's a little hazy looking out in 03', but there's virtually no doubt that a price increase in the fourth quarter, taking hold in the fourth quarter of this year will begin to show up in our income statement.

Peter Eppert (ph): You think the full $50 in the fourth quarter?

Yeah.

Pretty much.

I mean, it really just.

We built up -- for us, we built up inventory so that will mitigate some of the effect of it, but , yes. $50 or pretty close it to.

Great.

Thanks.

Peter, on the casino and the mall openings.

Obviously we'll cycle against those events next year, but on a going basis, the casino opening has and will continue to stipulate we think some degree the overall activity in that category.

So in terms of exact dollars on a year-to-year basis in '03, going against the opening, it will be a few hundred thousand dollars anyway.

At the mall , it really is a re-opening with some new tenants and Nordstrom's (ph) and Galians (ph) being the two most specific new players in the market.

Those accounts themselves will spend, you know, anywhere from half a million to 700,000 dollars a year possibly with us, begin cycling against the openings.

But again our hope is that it will continue to stimulate the categories , particularly in the department store area.

Great.

Thank you.

Your next question comes from Jane Wright from CSFB.

This is Gene Shreepee (ph).

On the classified side , when do you think you could actually hit break-even in terms of the help wanted revenue trend as at the "Post-Dispatch," I guess just following up on that, there wasn't enough strength in Auto &urn Real Estate to offset that decline what's your outlook for Auto & Real Estate Classified for the fourth quarter and maybe even beyond in 2003.

Thank you.

Help wanted , I wish we all wish we knew the answer to when it would -- when it would go flat.

We've actually seen some weeks where it's been flat but for the quarter the trend was still down about 19, 20 percent in help wanted.

Obviously the comps will get easier but none of us want to live there long.

We just don't know.

We just don't know when it will flatten out.

On the auto side, we saw six and a half percent growth in the quarter in St. Louis.

You know , the dealers have been very supportive of the programs we put out there, so we hope to see that continue.

I think there is some question as to how long overall automotive will stay strong, you know , nationally, but right now, we're looking at about six and a half percent.

Interestingly, our flat performance basically in real estate, we thought given the merger of the two largest players last year was a pretty good performance so we'll cycle against that .

We're slightly more optimistic than flat on real estate next year.

One quick follow up, could you remind us what those unusual operating expenses were , the 1.5 million in the third quarter of 2001?

Sure, James.

It's Alan.

They're principally related to the suburban journals and a by-product just addressing issues present when we bought the companies .

Your next question comes from Loren Klein (ph) of Merrill Lynch.

Stacy Fleck (ph): Hi , it's exactly Stacy Fleck (ph) for Lauren.

I was wondering if you could indicate how much non-newspaper print cash was up at Tucson?

I'm not sure.

Good morning , Stacy, this is Bob.

Stacy , if we can -- if you'll do us a favor of giving us a minute to do the math,.

We can get back to you.

We'll answer the question in just a second , if you don't mind if you have another or we can go on to others and jump back in.

Stacey Fleck (ph): I think all my other questions were answered thank you.

Thank you.

Your next question comes from Michael Krepinsky (ph) of A.T.

Edwards and Son.

Michael Krepinsky (ph): Thanks and congratulations on a great quarter.

I know that you monitor advertising market share.

I was wondering if you could talk a little bit about the trends in St. Louis.

Particularly, I know in St. Louis television and radio is extremely strong right now.

With inventories being sold out pretty much all ready all the way through the fourth quarter.

In that we're seeing rates significantly higher, even for radio.

Could you talk to me a little bit about, are you seeing national advertising category being up so strongly in September as a result of some displacement from television and radio?

What are you hearing from your retail advertisers in terms of that , and if you could just talk a little bit about your advertising market share in St. Louis.

I have another follow-up.

Hi, Michael.

Really, the issues , you know, I can't say there's any specific national account that said the TV's blocked out , we can't get any radios sold, we can't get in so we're going to go to a print buy.

But it is a factor, particularly with the elections, senatorial elections specifically here in Missouri.

So we know that airtime is really tight right now.

But we think the more important issue is, you know, looking at the local territory growth that we're seeing in some of the national things that are coming in, the territory growth is a direct effect of our selling efforts, and the national , we think is, you know, it's been a little mecurial (ph) this year but overall the pharmaceutical and auto have been pretty decent to us in the last four or five months.

We see that, you know, continuing.

In terms of market share , one of the important factors to remember is in our market share number, we're always going to have employment , is which is going to be a disproportionate share of all overall numbers.

If employment's down 21 , $22 million, that's three share points.

If you take that out of the equation, we think that -- our progress over the course of the last year, we've done pretty well against the market.

We also know that, you know, there's not going to be an election every quarter.

We think once that cycles we'll be in good shape.

We actually have some plans to be taken out to the market later this year to specifically try to move some of that broadcast money and work more closely with the agencies here in the local market.

Michael Krepinsky (ph) : I know St. Louis is a pretty strong political, but the newspapers traditionally don't get a lot of political, is it just displacement you're seeing or are you getting some political dollars in the newspaper.

Very little actually.

Michael Krepinsky (ph): In terms of the margin goals in St. Louis you stated you want to get margins comparable to newspaper margins, what is your sense about the margins in St. Louis now and where you might be able to take them.

Well, again, I think we're staying the course that we've been on.

Obviously , margins took a dip back in the last year and a half, but they're starting to move forward again.

Our goal is to be where we think a quality Metro paper should be, that's in the mid to upper 20s and next year it's going to be a little bit tougher with newsprint pricing some of the benefit costs overall, that's the course we're on.

We don't see a reason we can't get there.

Michael Krepinsky (ph): Great.

Thank you.

This is Bob.

Just circling back to the retail revenue question and market share.

If you go back and look at what's happened in retail advertising, in St. Louis, in the third quarter and even prior to that , I think you'd find that it stacks up fairly well to competitors in the market.

That was particularly true in the third quarter, where we had excellent growth, with majors and also in our retail territories.

So, we're pretty encouraged by that.

One final billed on that.

You always benefit from certain events.

In broadcasts, Olympics and elections you obviously benefit form.

That's why we're always careful to specifically identify the impact of those mall openings, the mall opening and the casino opening, so we can understand the difference between something that was episodic, in terms of our performance, and something that is truly a trend we're building on.

Michael Krepinsky (ph): Also, guys, you have a lot of cash and flexible balance sheet.

What are you doing?

Are you seeing anything out there these days you might be interested in, in terms of acquisitions?

What are you hearing out there.

I know Ganette indicated they're seeing some newspapers out there on the market.

Are you seeing anything at this point.

Mike, Bob again.

I think overall, I would say the activity is picking up a bit.

We're getting more phone calls.

Some of the phone calls we're making are a bit more interesting.

I mean, that's a relative statement , as you well know, but I think the overall appetite for possible transactions is picking up a bit.

Thank you.

Can we answer Stacy's question real fast?

The costs the non-newsprint costs in Tucson went up about 6.3 percent for the quarter.

Did cause margins to go down marginally as a result but they're largely related to the sales activities or sales force expansion , and we would expect revenue and margins to pick up and return to, you know, their normal levels in short order.

Stacey, Bob.

I just add there, it is principally related to sales activity.

Not only staffing, but some changes we've made in the compensation systems.

We're trying to implement some of the -- some of the other programs , the same kinds of programs that we talked about in the P&I group and in St. Louis.

They had a good month in September , but one month does not a year make.

We have pretty high expectations for what they'll be able to do the future .

At this time, I would like to remind everyone , in order to ask a question , please press star, then the number one on your telephone keypad.

We'll pause for just a moment to compile a Q and A roster .Your next question comes from Steven Barlowe of Pru Deposition Shall Securities (ph).

Steve Barlowe (ph): Good morning, a couple quick ones here.

Could you give us the capex number, Alan.

Around 29 million for 2002 and we would expect a more typical number to be in the $10 to $12 million range.

Steve Barlowe (ph): Okay.

Next , guidance that you gave to the quarters across with the fourth quarter the numbers consensus you get 176.

Any reason it would go as low as the 173 on your guidance?

The 173 is up a penny from our previous low point , and the $1.80 is up 4 cents from our previous high point.

So I think that's , and that reflects the fact that in quarter three , we were benefited by the mall and the casino.

And we don't anticipate, you know , similar, you know, one time grand openings in the fourth, fourth quarter .

I mean , the range reflects the uncertainty that are present in the marketplace and as always , we'll monitor our performance during the quarter.

If we see ourselves, if we're capable of tightening the range or giving better guidance, we'll certainly do so during the quarter.

Steve Barlowe (ph): Related to that, my understanding over time is that in order Strom's isn't a great newspaper advertiser, so since they did a nice bit of business with you now, I guess you expect that to drop off, let's say after Christmas, after the mall is closed it's reestablished with its reopening?

Yeah , Peter.

This is Bob.

In order Strom is a reasonably good newspaper advertiser, they're not a Dillards or a famous bar , as you suggest , there is a lot of activity associated with the opening .

But we believe they're going to add significantly to the retail base forward.

As Terry mentioned , as you know , anytime you have a major retailer open, it does stir additional activity in the market going forward.

I'd just like to circle back to your earlier point about the change in the guidance.

The one point we would make is that we are very encouraged by our growth in local retail territories .

And we're -- it looks reasonably good, through the first few weeks of October , and we're fairly comfort, you know, absent a major dislocation , we're going to do fairly well there.

There is continuing uncertainty on help wanted.

Auto could change course, so we're trying totem per our performance in areas that we can influence with the recognition there is some uncertainty out there.

Okay.

Your operating expenses non-newsprint were up 0.5.

Could you discuss what comps you have potentially in the fourth quarter and any thoughts in terms of next year, in terms of benefit increases that you're seeing right now, whether they're P and C or medical or pension adjustment , et cetera?

In the fourth quarter of '01 , we had some level of continuing unusual adjustments that won't be present in '02.

In terms of, you know , cost increases , I think we another just about built out if you will to the sales force in Tucson (ph).

There we might be two or so positions short.

There's not much new cost to come on, although I think some of those positions did come on during the course of the quarter.

They'll kind of roll in, if you will, to a more recurring level.

But locally so will their benefit on the revenue side.

In terms of benefit cost increases, we think that the major factors there will be pension and health insurance, like I'm sure our, you know, peers are also seeing.

On the health insurance side, we've taken some action to broaden , to a company wide perspective, the self-insurance plan we previously had in place at the "Post Dispatch", and that will clog the administrative component of those costs to go down dramatically , sharply decreasing or mitigating the cost increase, you know , would otherwise be present this year.

Our pension plans are well funded.

We don't see, you know, the need for any sizable contribution .

And our expense next year will go up more than, you know , it normally would , just because of , I think , overall investment performance and market rate changes and interest rates principally.

But not to levels that, you know should be unique or troublesome for us.

Steve Barlowe (ph): And would it be fair to say over -- about a 3 percent increase in non-newsprint in '03?

We're just not in a position yet to really comment meaningfully on our '03 outlook.

Its a more than a fair question, and we, you know , anticipate giving that kind of guidance when we meet with you in December.

Steve Barlowe (ph): Fair enough.

Thank you.

Steven, this is Terry:I just want to go back on one of the points.

We really want to be sure that we emphasize that while we certainly benefited to a degree from those openings, by no means is that the core story of what we think took place in St. Louis in the 30 quarter.

If you'd look at the amount of transitional activity between the adjustments with the sales force, the adjustments with the distribution, the establishing of new systems and the plant expansion opening, in light of all of that activity, to still have focused on the fundamentals of growing advertising revenue if the territory base is growing preprint revenue , major account revenue , those sands those openings, our employees just did and outstanding job.

At the same time , we're setting up a pretty strong foundation for the future.

Thanks . : Operator : You have a follow-up question from Michael Kapinski (ph) from A.G. Edwards.

Michael Kapinski (ph): Thanks.

I know you talked a little bit about the sales force additions in Tucson.

I was wondering what the FTest and the aggregate in St. Louis year-over-year is , has been and if it's down , by how much.

In addition , what , you mentioned you purchased some new carrier routes, I was wondering what is the percentage of the routes in St. Louis you currently own right now?

I'll deal with the routes first, Michael.

On the home delivery side, we're still at about 65 percent , just lately, there's been less deal activity in the course of the last two months, particularly.

And one of the things that we're trying to make sure we do is stay the course and be disciplined about not what we think is overpaying for any particular route.

While we're doing that it's also giving us the opportunity to stabilize the routes we have acquired, as you know.

We moved to direct billing over 90 percent of our routes in the second quarter.

It's giving us the chance to make sure that billing's accurate , do a better job on collections and making sure there's not bad debt out, there just stabilizing the overall delivery we do have.

If the opportunities presents itself , we would love to acquire routes as they become available but it has to be at a fair price.

On the single copy side , we're just at about 55 percent of the single copy routes now.

And that is probably the biggest bright spot in our circulation area, is the routes that we own in single copy continue to show year-over-year growth.

Mike, this is Bob again, just commenting on the FTEs.

We are down on a combined basis , we are down in St. Louis.

There's a number of ins and outs there.

I mentioned during my presentation, that we have moved STL today back into the "Post Dispatch".

We've achieved some economies there, in terms of staffing.

Part of -- partially and offset to that is the continued billed out of STLD, which on a-year basis is up in FTE count.

But I think the good news is that we're pretty much there.

Kind of back to Steven's question about looking at '03, a lot of the things we've had put in place in terms of infrastructure, the billed out of STLD and so on is pretty much behind us, so I think that's -- that is going to help our costs in '03.

But in direct answer to your question, if you look at Pulitzer St. Louis , we're down.

: From Q1 , '01, to the third quarter today , we're down all of St. Louis, down approximately 75 positions .

Michael Kapinsky (ph): Okay.

That's Q1 '01 to this quarter.

Michael Kapinsky (ph): Thank you .

At this time, there are no further questions.

Mr. Woodworth, are there any closing remarks?

Yes.

Thank you , Jessica.

I'll just close by reemphasizing what I really believe the message of the third quarter. hat's the success of our strategies in driving revenue gains in the add categories where we have the most control.

There remains a great deal of uncertainty in the market.

I don't want to suggest we've seen the end of the ad slump or that we are immune from the factors that are affecting the performance of our peers.

But we do believe we another beginning to see the payoff from a hard work creating an the conditions in which our revenue growth strategies can succeed.

As we go forward we continue to expect and in fact, have challenged ourselves achieve top tier revenue growth focus on those revenue categories we can most influence.

We appreciate your time and thanks for joining us

END