Thryv Holdings Inc (THRY) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to R.H. Donnelley's first quarter 2005 results investor teleconference. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. Please note that today’s teleconference is being recorded as well as web cast live over the company’s website at www.rhd.com.

I would now like to turn the call over to Jim Gruskin. Mr. Gruskin, you may begin.

Thank you and good morning everyone. Hi, I'm Jim Gruskin, AVP of Finance at R.H. Donnelley. On the call today are Dave Swanson, Chairman and Chief Executive Officer of R.H. Donnelley, Steve Blondy, Senior Vice President and Chief Financial Officer, and Peter McDonald, President and Chief Operating Officer.

Certain statements made today may be forward-looking within the meaning of the Private Securities Litigation Reform Act. We call your attention to our press release for the quarter ended March 31, 2005 and our Form 8-K furnished to the SEC yesterday, April 27, which both discuss our first quarter 2005 results. We also encourage you to review the Company's other periodic findings with the SEC which set forth important factors that could cause actual results to differ materially from those contained in or suggested by any forward-looking statements.

During this call today we will refer to certain non-GAAP financial measures in discussing the Company's performance. You can find additional information about these measures and reconciliation between these measures and the most comparable GAAP measures in the press release and related 8-K furnished on April 27, 2005. A separate 8-K filed on February 24, 2005 includes an explanation of the non-GAAP measures mentioned in connection with the recent SBC transaction.

Today we will be referring to adjusted pro forma results, which unless otherwise indicated, reflect the combined results of R.H. Donnelley and the directory business acquired from SBC, assuming the transaction took place at the beginning of the period presented. The press release is available on our website, and can be accessed by going to www.rhd.com under Investor Information. Now I would like to turn the call over to Dave Swanson.

Thank you, Jim. Good morning everyone. Welcome to R.H. Donnelley's first quarter 2005 investor call. I am going to take the next few minutes to provide you with a brief review of our first quarter highlights and then I will have Steve Blondy will take us through the Company's financial results in a little more detail. We will then be happy to take your questions.

As you likely saw from our press release last night, Q1 was a very good quarter for us. We delivered 4.8% publication sales growth in our Sprint markets. The best performance since we acquired that business in January of 2003. We successfully completed some of the very important integration projects in Illinois. We launched online search products in our remaining markets ahead of schedule. We used cash flow to repay approximately $113 million of debt.

These achievements and the underlying strength of our Sprint business enabled us to raise our guidance for full year 2005. Our solid Sprint results reflect the cumulative impact of the RHD business process implementation. From Las Vegas, our largest market, through virtually all the markets with directories that published, we showed solid growth in the quarter. Importantly, we’ve begun to see improved performance in some of our smaller markets as our process moves deeper into our business.

National sales for the quarter were also strong. Across the board in our Sprint markets our keen focus on promoting usage and awareness of our products, solid sales execution, and a great process in the areas of receivables collection and customer service, is driving increased advertiser renewals and recurring revenue. We’re also benefiting from a discipline that began 2 years ago of only accepting advertising from businesses that are likely to pay and continue to be good customers well into the future.

The aggressive rollout of our internet yellow page and search products also contributed to our Sprint results. And finally, we feel like the economy has been more friend than foe in many of our markets. The early strong performance that we have seen in a number of our markets is leading us to increase our guidance for Sprint pub sales by 100 basis points to 3.5% growth for the year.

Regarding the Illinois business, we had a very productive quarter of integration activity and the process remains right on track. I want to share just a few numbers with you today to give you an idea of the scope and the success of our integration efforts thus far. First, we completed the conversion of customers in the SBC markets to the R.H. Donnelley billing, credit, and collection system and process. We’ve added approximately 60 new staff to our receivables unit in Kansas City and are now issuing over 96,000 bills to Illinois advertisers on a monthly basis. I’ve got to tell you I feel very good about the fact that we have our proven team executing a proven process, strongly focusing on cash flow, as they manage our receivables.

Next, we expanded our customer service group in Bristol, Tennessee and are now taking the 20,000 or so calls per month that come in from advertisers and users in Illinois, ensuring that they get the high quality and courteous service that they deserve. We successfully completed the printing and distribution management handoff in the quarter, resulting in our managing the printing of 18 of the SBC directory titles and the distribution of over 3 million directories in the first quarter. Getting these processes transitioned so quickly and effectively is a real testament to the quality of the teams involved, from both R.H. Donnelley as well as SBC directory operations and the SBC telecommunications group.

Meanwhile, we continue to invest in sales and marketing in Illinois. We have significantly increased our advertising and promotional efforts and we began leveraging the strong R.H. Donnelley brand in Illinois by launching co-branded directories with both the SBC and R.H. Donnelley names on the covers. As a reminder, Chicago is the birthplace of our company and the R.H. Donnelley brand was on the directories there for over 100 years until the 1990’s and between R.H. and R.R., the Donnelley name is well-known and highly respected in the Chicago area. The marketing team that we’ve deployed in Illinois continues to re-scope and reconfigure our product offerings to better meet the needs of users and advertisers. In a few cases these product resets are likely to cause us to take a small step backwards, as a result of consolidating two or more directory products into one. It is consistent with our plan and our philosophy to do the right thing and position the business for long-term sustainable growth. These product reset projects will likely continue for the next couple of years.

First quarter publication sales in our SBC markets were down 2.7%. I’ll remind you that we had limited impact on these results, given that they partly reflect sales campaigns that began before the acquisition closed. I would also reiterate what we said when we announced the SBC transaction last summer. Building a foundation for growth will be disruptive at the outset and our investments in the market will not generate results overnight. I would advise you to expect more of the same in the second quarter as we continue to move through the rebuilding process in Illinois.

And while the success of our integration efforts thus far is encouraging, it is too early to be declaring victory. It’s going to take time for the RHD business process to fully take lift in Illinois. Net net, things are going much as expected and we’re holding our pub sales guidance for the SBC business at a -1% for the year.

Switching gears to out online efforts, things really accelerated during the first quarter with the launch of 221 additional online directories and online local search capabilities in all remaining markets. Our entire Sprint and SBC footprint, consisting of 347 markets was up and running by the end of March, a significant accomplishment when you consider that at the end of the first quarter 2004 we had only 2 markets online. While it’s still very early, we’ve been encouraged to see advertiser renewal rates for our online products running as high as those for our print products.

It’s important to note that high renewal rates are what really drives recurring revenue and are the best indicators of the satisfaction that advertisers have in our products.

We have also continued to improve the functionality of the sites as well as the quality and relevancy of the search results. During the first quarter, we added a nationwide search capability to our on-line products that enables users to conduct the search into any community in the country from any RHD portal. We also have continued to explore and evaluate other strategic options and partnerships in the on-line space, and as I’ve said before, we are committed to getting some things done this year to help position us to achieve our goal of being number one in local commercial on-line search in our markets.

So, to sum things up, these are what I call very productive and exciting times here at R.H.Donnelley. In the first quarter, we have demonstrated considerable progress towards our key priorities for 2005, those being advancing the ball in our Sprint markets, rebuilding the Illinois business for the long term, and continuing to expand and improve our on-line search offerings in the markets that we serve. With that, I will turn the call over to Steve.

Thanks Dave. Well, this quarter was all about execution, and as we just heard, our business process continues to deliver in Sprint markets and the SBC integration is in full swing. Strong Sprint pub sales performance leads us to increase full year guidance. The Illinois billing conversion was completed on time, and without a glitch, and we repurchased half our preferred stock, which was convertible into 4.9 million shares. Here are the financial highlights:

Straight pub sales grew 4.8% in Q1 compared to 2.6% in Q1 ’04. We knew this would be strong as indicated in our original ’05 guidance. SBC Illinois pub sales declined 2.7% in the quarter versus a 4.5% decline in Q1 ’04. Again, as anticipated in our guidance, the sales campaigns for these publications were well under way when we closed the SBC acquisition last September.

Turning to the rest of the details, these P&L figures are all reported on a pro forma adjusted basis assuming the SBC deal closed January 1st last year, and all purchase accounting entries are reversed. Adjusted net revenue of $259 million in Q1 ’05 is up 0.9% versus $257 million in Q1 ’04. These figures reflect the impact of our deferral revenue method as current pub sales get recognized over the succeeding 12 months.

Operating expense excluding D&A in the quarter was $107.4 million dollars versus $100 million in Q1 ’04. Sales commissions, IYP rollout and advertising expense, all exceeded last year’s Q1 figures reflecting our deliberate investment in these key areas. Also recall that last year’s expense reflect SBC carve-out statements for Illinois, which exclude certain costs not allocated to the acquired entities. Reported Q1 ’05 expense excludes around $2 million of FAS 123 expenses as we expect to adopt a new standard retroactively in Q2 this year.

Resulting Q1 ’05 EBITDA was $151.8 million versus $157 million in Q1 last year. Reported EBITDA margin of around 58% in Q1 is tracking to our mid 50s target range. Last year’s pro forma Q1 margin of 61% did not reflect the full cost of the running the business in Illinois. Cash interest payments of $24.5 million during Q1 compared to total interest expense accrued of $57.5 million in the quarter. Cash flow from operations in Q1 ’05 was $112.8 million and free cash flow was $107 million, all of which was used to repay borrowings. Net debt of $3.29 billion was approximately 78% fixed rates, and represented under 5.7 times leverage.

As mentioned earlier, we repurchased half our convertible preferred stock in January for $277 million, financed with $300 million of 8 year, 6 7/8% senior Holdco notes. This reduced our number of diluted shares outstanding by 4.9 million while taking advantage of low-interest rates and eliminating half the preferred dividends to reduce our weighted average cost of capital.

Following Q1 results, we are increasing guidance for 2005 as follows: Sprint pub sales are now expected to grow 3.5% versus 2.5% previously, reflecting strong Q1 performance and better visibility on Q2 and Q3. SBC pub sales at -1% remain unchanged. We’re increasing guidance for 2005 revenue, EBITDA, and operating cash flow all by $5 million to $1.04 billion, $580 million, and $375 million, respectively.

Our 2005 effective tax rate of 39.0% is lower than last year’s and our original 39.5% guidance. On a first-share basis, guidance for free cash flow is $8.79, up another 1.5% from the 9% increase we announced in January upon the convertible preferred repurchase. We’re also increasing adjusted EPS guidance by $0.11 per share to $3.99, which is on top of the $0.13 increase in January.

That concludes our prepared remarks. Thank you for your attention. Now let’s turn the call back to the operator for your questions.

Thank you, sir. At this time, we are ready to begin the question and answer session. [OPERATOR INSTRUCTIONS]

Our first question comes from Karl Choi with Merrill Lynch. Sir, your line is open.

A couple of questions here. One, I know you usually don’t comment on a specific market’s performance, but didn’t the new competitor going in to Vegas - - I wonder how, if you could comment, on how the sales campaign is going for the July book, and second, given your comments about the SBC pub sales in the second quarter, should we expect pub sales to actually turn positive in the second half in order for you to get to the -1 for the year?

Hi Karl, it’s Peter. Vegas - - We feel very good about Vegas. Obviously, you can see from our first quarter results things have gone well. We continue to execute and perform the way we had planned, and I think as we look forward, part of the reason why we’ve raised our guidance, we feel pretty good about the way we continue to execute in our markets where we have competition as well as across the board. Your next question was?

Regarding SBC pub sales in the second half, shouldn’t they turn positive in order for you to get to -1 since it sounds like it’s going to be down quite a bit in the first half.

I think - - We look at the rest of the year and we’re still under construction. I think that’s the way to look at Illinois. First quarter, we really didn’t have much of an impact then. The second quarter, think about us as being under construction and like our strength business, there’s a process to improve over time. So, we’re going to maintain our guidance of the -1.

One thing I should point out, Karl, is that last year in the first quarter in Illinois was a -4.5, then we finished the year at a -2.1.

Paul Ginocchio with Deutsche Bank.

Just a few questions. It sounds like you’re going to co-brand in Chicago, is that right? With the R.H.Donnelley brand?

That’s correct.

The second - - Possibly anything I guess you feel pretty good about the brand awareness?

Yes, particularly in Illinois. As you know, it’s like Donnelley is - - Over the years, it’s like Donnelley hasn’t been a forefront grand, it’s like in many of the other markets, but in Illinois, Donnelley is a brand, it’s like the people recognize and our research indicates that it’s got strong awareness. It’s got a very good reputation behind it. So we think that it’s an advantage for us there.

Is there any reason you wanted to sort of get away from the SBC brand?

No - - We’re not getting away from the SBC brand. In fact, SBC will continue to be at the forefront on the books. There’s just some advantages to - - I think, also including the RHD brand as well in those markets.

Great. Just a couple of quick follow ups. What’s your - - You talk about getting to #1 in local search on-line. What do you think your share is today, and then second, are you going to need feedback from any of your regional sales managers, that it doesn’t seem like it by your revenue growth, but is anybody complaining that the incremental dollars are going on-line? That’s clearly what the market continues to worry about?

Our share today is still relatively small. It’s not an area that we have - - as we have reported back, have focused on. The last four quarters or so, we’ve been focused on kind of building out the infrastructure beginning to get the sales force used to engaging with the customer, got on-line and things of that nature. Our pricing associated with that has been penetration related and not ROI related. So, that’s an area – - it’s like those I’ve mentioned, we have just begun and will accelerate. It’s like our initiatives - - It’s like to begin to gain share in our markets in terms of traffic. As it relates to - - the one thing that I continue to reiterate as it relates to kind of the marketplace, and I’ll let Peter chime in here as well, is - - we don’t feel pressure to be doing this. It’s like, quite honestly in the marketplace, it’s still - - most of the pressure that we get comes more from you guys than it does our actual users or advertisers, but that said, we believe it is the right place to go. It is - - I don’t think that we are seeing a - - people are moving the money - - It’s like from print to on-line. Most of that is incremental or potentially - - it’s like it would have been deployed on another heading or maybe another directory, but it’s a small enough number that it just doesn’t matter.

I look at it this way. I think the customers are probably evolving, are more sophisticated. Very local customers are evolving into how do they market their business or services over the Internet, and they’re very pleased to have a relationship, I think, with our sales force, that we can help them service their marketing needs, both print and on-line. I think that’s - - when you see the customers, they’re very pleased with what we’re doing here.

Sir, if I could - - Two quick calls with Steve. What was the – What’s the current all-end cost of debt and then shares at the end of the quarter?

I’m just writing that down, Paul. It’s about the - - [inaudible] cost about 6.5%, which is pretty much the same as it was at the end of the year. Hang on a second, I have a chart here. Yes, 6.58% to be precise at the end of March. Share counts at the end of the quarter, is that what you said?

Correct.

You haven’t released that number yet, Paul. It’s basically in the 36 range, I think, something like that but I don’t have that number handy.

Mark Bacurin, Robert W. Baird, you may ask your question.

A couple of nit picky questions Steve. I was hoping you could quantify what exactly the expenditures were in Q1 in related to the accelerated advertising in the Illinois markets?

We are not breaking that out in detail. What we have said it, overall investments in Illinois will be about $20 million over 18 months, and we are pretty much on track in that regard. Advertising and promotion is one of the areas. I mentioned IYP is another area we are investing in selling commission trying to get the sales force up to a more incentivized based compensation program is a 3rd area. We are not providing the level of granularity that you are looking for.

When you say on track, you mean on budget? Or is that $20 million pretty equally over, say, 6 quarters?

I think it is pretty equally over 6 quarters. -- front-loading to it at all.

Fair enough. Then, Dave, I was just wanting to get more color on -- you had mentioned that as you do some of this [rescoping] in Illinois that you expect to see some backward steps. I assume by that, you have incorporated all that into your existing guidance of -1% post sales for ’05. Is that fair? Or are you talking about traditional cost items as well?

I think that is fair Mark. At this point, some of them are a little bit difficult to quantify, but we knew we were going to be doing some of this and the best visibility that we’ve got right now on the ones that were kind of actively involved, we think it all holds together with our -1%.

Okay. Great, and then could you just talk about -- I know you just took on the [Dontech] acquisition, but are there other properties that [inaudible] seen and heard that there may be some other properties coming on the market and just wondered what your balance sheet may allow, and what your appetite is for additional acquisitions?

Well, last quarter we had a specific question about one target in particular. I think we answered that the same way, which is we are not going to comment on specific situations until, or unless; there were something specific to announce.

Let me reiterate, we adopt a very disciplined approach to investment analysis, and I think that the two acquisitions that we have made would bear that out. Dave, the focus is [concreting] shareholder value.

As far as the sort of debt capacity, if you will, that we have available to us, I think we are focused right now on execution this year. We could finance something if we wanted to. Rumors are that there are banks out there willing to lend probably quite a bit more than we would be willing to borrow. So, financing something is probably not going to be a restraint

When you say more, is that in terms of leverage ratios, is there a number 7, 8, 9 times? Can you ---?

My first financing in a couple of situations where they are looking to --- some banks are willing to lend 8 times, but we are not going there.

Okay. Great. Then I was just hoping that maybe, Peter, that you could shed some light on as you formalize the internet strategy and look for ways to sort of drag more traffic to these sites. What sort of partnership opportunities are there? What sort of structure would that take? Would it be click throughs of users to your websites, or would it be more where you would help your existing advertisers get prominent placement on maybe some additional other non-RHD [branch] websites?

Mark, its Dave, let me grab that one. I’m just not prepared to go there. We are looking at all of the above and evaluating all of these kinds of relationships and going through a pretty rigorous process to get comfortable with what we think are going to be the right things for us, our advertisers, and our shareholders over time. So, just again, suffice it to say, we are evaluating all and everything that is out there, all of the things that you mentioned. We will be ready to start placing our bets a little bit later.

Bill Myers with Lehman Brothers, you may ask your question.

Thanks. Just very quickly. You commented about how you are pretty much up to speed in terms of rolling your websites across all the markets, your market, as well as the SBC market. Can you give us some sense into the revenue [inaudible] for ’05? I think in ’04 you were somewhere between 4 and 6 [minor] revenues. Where you [thought] that could generate in the current year?

Phil, we spent a lot of time thinking about that. We are just not going to go there because we don’t focus on one versus the other. We really view our job, and Peter and I talk about this all the time, the job is to grow the entire business. I’m not interested in how we want to lay it off one versus the other.

Can you tell us what percent of your customers are using the online service?

Yes. It’s about -- I think we have over a 1/3 of our customers are currently paying participants for our online products.

What do you think the potential is realistically?

From a penetration standpoint?

Yes.

Phil, it completely depends on how you want to price it. If you want to give it away, it is 100%. The more you charge, the less you are going to have in terms of take rate. So, we are comfortable -- our strategy from the beginning is then to really move what we think is the relevant content that is embedded in out directories online, and with the strategy we have been deploying, we have been very successful in doing that.

Mike Meltz of Bear Stearns, you may ask your question.

It sounds like you have broad base improvement in Q1. Can you speak specifically, have you seen improvement at the military markets, as well as in Minnesota, the areas that have been sluggish in the recent past?

And then secondly, what are there, or are there, implications for RHD from TMP potential sale there, of their business? And then, for Steve, you gave the cash cost of interest expense, what was the all in cost of interest -- rate of interest expense for the quarter? What are you expecting for cash interest cost full year ’05. Thank you.

Mike, just let me answer your question relative to the midsize markets, or the military market. We are pretty pleased because across the board and in the military markets, we have seen improvement and we continue to see improvements there. So, we feel pretty good about that.

Relative to the TMT sale, it is not going to change -- really not have much of an impact on us. If this is something that they have decided to do, we have a great relationship in the [CMR] community. We expect that going forward.

Thanks Peter.

Mike I actually mentioned $24.5 million of cash interest payments in the quarter Q1, but total interest accrued of $57.5, so the expense on the P&L $57.5.

It’s the 6.5 is what I was referring. What is your all in cost right now?

That’s the all in cost, including the swaps.

Including the deferred fees?

I think including the deferred financing costs like 6.94, something like that. As far as cash interest for the year, our guidance for that has not changed. 237 of total interest expense, of which 221 is expected in cash and 16 is expected to be deferred financing cost amortization.

Arnold Ursaner with CJS Securities, you may ask your question.

Question first on options expense. You have told us that we should expect about $11 million expense from options for the year. Did you take any in Q1? Do you still expect the $11 million for the year?

As I mentioned, we have not adopted FAS 123 in Q1. We expect to do that in Q2. The rules came out -- the specific rules came out in the middle of Q1, and the sort of migration is going to require a little more study. So, we expect to do that in Q2.

With that said, we did expense, I think it was about $1 million, in Q1 based on the stock appreciation rights, as well as the original Founder’s Grant that we have been booking since we completed the Sprint acquisition. So, we did look at about $1 million. As far as the forecast for the full year. It is really going to depend on, if we don’t adopt, it will depend on what happens with the stock price. Like in the 1st quarter, the number was a little lower than we had planned to get stock price didn’t respond to our out performance and our having reduced our share count. If we do FAS 123 than I think we are right back in the $11 million mark.

But what is embedded in your guidance?

$11 million.

Okay. 2nd question. Your interest expense in Q1 was $57.5, but if I look at your full year interest rate guidance, it implies an increase even though your debt cost has come down. Can you help walk us through that a little bit please?

I’m not sure why you concluded our debt cost has come down. What I can tell you is that the -- I’ve kind of rattled off already -- the total cost for borrowing, but we are expecting a slow, but steady increase in LIBOR throughout the rest of the year. That is what may be the difference if you got a lower number than we do.

Frederick Ferraro with JP Morgan, you may ask your question.

Thank you. A couple questions to sort of follow on. The Vegas role of the yellow book, when would we see an impact? I assume that is happening right now, just beginning so it is actually 3rd quarter [inaudible] if it has an impact, it sounds like, with your raised guidance, you are not expecting the impact, which is the question.

Secondly, I wondered if you had any thoughts on the SBC, Bell South/Google deal. If you really see any sort of threat there?

Finally, if you could just give us an update on your thoughts on companion books and your strategy, particularly in the Dontech properties? Thank you.

Frederick, let me just start with Vegas. We’ve -- Yellow Book has been there, I think they came in last May, so they have been in the field for the better part of the year. Our results in January directory were fairly good. We are still in the campaign for the July directory. We won’t know those results, but we still feel favorable about how we are doing in Vegas with the competitor. So, we’ll talk more about that on the 2nd quarter call.

Frederick, it’s Dave. On the Google deal you mentioned, I know Bell South has a deal with Google to sell [ad words] that we have looked at, but I don’t know that SBC has -- if you know something about an SBC deal with Google-- that one would be news for me.

What are your thoughts on the Bell South deal? I mean they are obviously chasing certain properties [inaudible].

It’s one of those things we are evaluating right now. In trying to determine whether we think over the long haul it will be in the best interest of the company, our advertisers, and our shareholders, so, it is a little premature that I don’t want to talk about it. It is interesting, that I will say, but I’m not ready to weigh-in one way or the other yet.

I take it you are talking and thinking about it and evaluating it still?

We are talking to everybody and evaluating a lot of different things.

If you could just follow up on the companion books, what your thoughts are and the strategy in the SPC that was formerly Dontech properties..

I think there is a number of companies around the country that doing the container (ph) directories. We looked at we have some versions of this and many of our market around. We looked at it on a market-by-market basis to see where it made sense and some places it does and places it doesn’t. We generally -- our business process says that what we need to do is to continually look at the marketplace and see what the users are looking for and we try to accommodate them. We tried that kind of thing in different places and like everybody else, we’ll continue to look at with a disciplined approach.

Thanks and just on, the yellow my understanding was they were there but they were just launching recently their books. Have they launched a book? How long have they had actually a book a published book in your market?

They don’t have a directory that I know of that’s published.

All right, you say they have been there for years -- you mean they have been trying to sell -- to start up right. So they are launching -- the launch was expected any time now -- right of a book? Right?

They’ve been selling in the marketplace against us for the last year.

Maurice McKenzie with FBR you may ask your question.

Can you just discuss trends that you’re seeing in pricing and ad counts particularly in the Sprint markets and any category strength you’re seeing in those markets as well.

Maurice I think when you think about the Sprint markets you know from a pricing standpoint. We continually look at different options out there. We studied pricing fairly consistently over each of the quarters in each of our markets. We’ve got some pricing that accommodates more local businesses than others. But we continue to look at delivering a strong value and we can see in the recurring revenues that we’re doing pretty well there, which is also impacting the ad counts in each of our markets. I think when you look at our first quarter one of the things that you should take away is there’s consistent growth across our footprint. Which is kind of due to the RHD business process I’ll call it -- which includes pricing and scoping and many of the things that you do in marketing.

Paul Ginocchio with Deutsche Bank you may ask your question.

I’m surprised you said National was strong. Could you go into that a little bit that would be the first category impacted by the internet. And then second, seeing that CMR’s are getting a little frustrated with book extensions not that you’re not doing a lot of that but maybe you can talk a little bit about that? Thanks.

Paul we’ve given a little extra attention focus on National. I think we’ve continued to grow a team their that’s very capable. People who have come from the CMR, the National community, which I think is a big positive for us. I think when you look at our National the results are significantly improved over prior year. We continue to see that if we work with the CMR community the right way we expect this trend to continue.

Great. Can you comment on book extensions? It seems like there is a lot of book extensions going around in the industry and CMR is somewhat getting frustrated with that?

I think maybe we had a white page alpha someplace but no extensions of any significance at all. We are very sensitive to the CMR community and staying away from that. If we change, a directory from one month to another it’s usually around what makes sense in that marketplace. That’s the only reason we would do it.

All right well I’d like to thank you all for your interest in RH Donnelley today and certainly if you have any follow up questions please feel free to contact Jim Gruskin. Thanks and have a great day.