Deluxe Corporation
New York Investor Conference

(Transcript of opening statements and edited question-and-answer session.)
Thursday, February 22, 2001, 10:00 am (CST)

Okay, so we sell most of the checks we print through banks and credit unions. We also sell checks and accessories directly to consumers via two distinct brandsóChecks Unlimited and Designer Checks.

Another service being offered to our financial institution clients is the Business Referral Program. BRP was designed to increase business check sales originating in the financial institution. Business Referral makes it convenient for small businesses to purchase check and check products that best meet their business needs directly from their financial institution, rather than going somewhere else.

One of the challenges in a mature business is keeping employees stimulated and engaged. But rather than presume to know the needs of our employees, we conducted a survey last spring to find out their level of engagement, and how fulfilled they were in their positions. A frequent comment had to do with communication and the availability of senior leaders. In response to this request, we initiated leadership site visits. By the end of December, every Deluxe officer had visited at least one site. I was able to get to every facility. I shook hands with thousands of employees and listened to their comments and concerns. While no work environment is ever perfect, what I discoveredóoverwhelmingly soóis that our people truly care about Deluxe. They care about our customers, our business, and our future.

Doug Treff
Thanks, Larry. The financial strength of Deluxe is a key corporate asset and effective cost management is an objective that is intended to keep things that way.

Our pro forma data shows the consistency of our business:

Operating margin was 22.0% in 2000, compared to 23.9% in 1999 and 21.1% in 1998. The 2000 decrease was primarily due to the investments in PlaidMoon, an e-commerce start-up, and other e-commerce initiatives.

LMóLarry Mosner, DTóDoug Treff, CFóChuck Feltz

Could the use of the Internet for ordering make it easier for consumers to price shop?
LM ñ Certainly. Let me break that down. In our Financial Institution channel, if the customer is an individual customer of a bank, they can reorder their checks by going to Deluxe.com and enter it and they will get the pricing for their product from their bank. The bank may also have a website which would either link them to us so they can get directly to us or they can go through their bank ñ however the bank wants to set that up.

On the direct channel, in the consumer segment, they have that same ability today. First of all, there are a really limited number of brands out there which they can shop, but they can do that comparison by looking at the free standing ads in the newspaper or by looking at the web. I donít see that there is going to be a major differentiator between being able to competitively shop on the web versus what exists today in the market.

Can you talk about why youíre not being more aggressive in terms of the timing of the share buyback and why you are not doing a tender offer for example?
DT ñ Associated with the spin-off of eFunds, we went to the IRS to get the tax-free ruling for that distribution to shareholders so it would be tax free to shareholders and to Deluxe. One of the limitations as a result of that tax-free ruling is that we can only engage in open-market purchases up to 20 percent, or actually less than 20 percent, of shares outstanding. But we are proceeding as rapidly and quickly as we can, given those limitations.

If you were to break down the check volume, specifically the market as it stands today between the FI and private label, could you give your respective shares of each and how the entire market is leaning? What percentage of the market is private label versus FI and what your share in each of them is?
LM ñ We had commented in the prepared remarks that in the financial institution segment, we have about half of that market and it accounts for about two-thirds of our total revenues. In the direct-to-the-consumer channel, we have a little in excess of 60 percent share in that market. Really, the second player in that market would be Custom Direct out of Canada and third would be Checks In The Mail, which is owned by Clarke American. In the FI side, there is our space and then the second largest player would be John Harland Company and the third would be Clarke American, so there are really three key players in each segment.

How big is the direct channel?
LM ñ It is about 21 percent of the total check industry. We think it is growing at about a percentage point a year. So, in other words, it is 21 percent now, next year it will be 22 percent, and the next year 23 percent. We think it is going to continue to grow. It could be a percentage point or a little less but that growth is coming out of the financial institution side of the market, because the total market we view as probably flat and over the next several years probably will tend to trim down slightly. We do not see any sharp decline out there in check writing. We could be wrong, but we monitor that fairly closely based upon looking back as well as take a look at what the trends are and what forces might cause that to change in the future.

I presume that the customer can go from your FI web site over to your direct channel website. Can you talk a little about your net realized price in each of the two channels?
LM ñ The price in the direct channel ñ the 21 percent share ñ that customer is a very price conscious customer and he is also driven more by design for preference, because they are more readily available in that channel even though they are available in the financial institution channel, but itís easier to get to them. But the price, if you take a look at what the customer would pay in the direct channel, it might be a promotional offer for $8.00 and they are paying at their bank $14 to $20. Itís the same product basically, because what we do is sell products to the bank and the bank then marks that up and sells them in return to their customers ñ depending on the program, they might be free if you are a member of the bank. There is a mark-up that the bank puts on them.

I understand that you are paying more at the bank, but what I asked is your net realized price. Is it conceivable that you are making more money on selling direct than you do through the banks?
LM ñ I would say that both of them are very comparable.

Ok, so no difference.
LM ñ That might change over time, but if you take a look at both of them, both are very profitable businesses.

In light of the separation of eFunds and the thought that they were going to be the electronic operator, could you tell us how long that site has been up, what your strategy is in Internet banking, and what youíre currently doing now?
LM ñ We really do not have an Internet banking strategy in the sense of banking. What we do have is a relationship with financial institutions to provide the checks to their customers for them on their behalf. We can do that with a traditional financial institution as I commented earlier, or there are roughly 40 Internet banks out there and we are providing checks to them, I think about 35 or 36 of the 40. Most of that is based on our view of the technology advantage and thatís one of the reasons that Boeing switched to us.

First, when did you put the site up? And second, if youíre in Internet banking at deluxe.com, are there other kinds of advance services that you are going to be offering to your customer base that you can provide more cheaply for them then they could do it alone ñ I was specifically thinking of banks that are upside 50. I think the technology budget for community banks of which there are about 6600 might be about $75,000 a year.
LM ñ I cannot quote you a date on when that site went up. It was probably within the last 12 to 15 months. One of our key strategies is to have a very strong Internet presence in each of the businesses, the FI channel, the direct-to-consumer, and the small business owners. One reason is defensive ñ the customers want that. They want to be able to connect with business at any bank. If you donít have an Internet site, then they might not even shop with you ñ whether a financial institution or a credit union ñ the Boeing example. From our prospective, we think we can leverage that channel of distribution to be a competitive advantage for us in this way. Let me use the financial institution segment very specifically in Chuckís area. One of the things that I commented on here is we know from having done pilots with live customers of financial institutions, that when we can engage the consumer in a dialog in either a person-to-person via phone or Internet, that when that happens, we can raise the average order value of that check order because we can either talk to them about the designs, or when they are on the Internet, they self select in the designs, the leather checkbook cover, type font, saying, monogram on the check. So we view it as an opportunity with the financial institution. If we can engage the end consumer on behalf of the financial institution, because we donít want to disenfranchise them, and raise that average order, the bank wins because they are getting a percentage of a higher average order, the customer is winning because they get more satisfaction in getting the product they want, and weíre winning because we get a more accurate order and weíre getting a higher average order and so we think that if we have that ability to have that interaction with the end consumer, the economics of that are positive with us.

Thatís interesting. You also talked about the small office, the home office and the forms element of it. Thatís one of the industries that seems undervalued at the moment. Maybe you can talk about what your ambitions are in the forms area, if any, does it really relate to banking type forms or are there other forms you can efficiently sell and use your technology position to print these things economically?
LM ñ We have the business called Deluxe Business Forms, which is primarily a business check business and related forms. We were much more heavily into the forms business four or five years ago and we divested ourselves of that because it wasnít nearly as profitable for us as the check part of it and directly related businesses. We certainly look at the forms industry on a continuing basis but you are correct in the analysis of the forms industry, it isnít robust in the sense of value from the shareholder return, relative especially to our return when we look at the check side of it. So we feel confident in our ability to really center off the check relationship and leverage that with alliances with business partners that also service the small office, home office, where they might have forms we can partner with them on our private label program or on an alliance basis. So we are looking at how we can better service that without us necessarily having to get into the printing of the forms themselves.

The question is, do we have any such alliances at this point in time?
LM ñ I say no, we are actively looking at that and creating those kinds of alliances. It is a potential for us without having to create brick and mortar for the printing side of it.

If we could go back to the share buyback question, with regard to the 20 percent of market purchase, could you expound a little bit about if a self tender would be included in that 20 percent umbrella or privately negotiated purchases? Could you talk about that a little bit?
DT ñ The limitations are up to 20 percent. We can purchase on the open market and in addition we are able to make block purchases. I anticipate the majority of our repurchases will be related to block purchases.

Are you precluded from doing a significant self-tender?
DT ñ Yes we are precluded from doing that.

Is that a two-year limitation?
DT ñ Yes.

Can you talk about what typical contract terms would be? Is the pricing all under contract? And also, the growing importance of the directions used ñ does that ever become an issue when you talk to financial institutions about serving them?
LM ñ Iíd like to let Chuck Feltz answer that as Chuck heads up our financial institution market and I would like to give you a chance to meet him too.

CF ñ The structure of our contracts, the pricing term, hasnít changed much over the past few years. The typical contracts are going to run a 3 to 5 year period and in that we obviously address volume thresholds, price thresholds, but what has changed over the last few years though is the focus on not only the price of the check, but the involvement of the supply chain of lowering the costs which require more involvement as we bring different programs to bear in the contract negotiations, so for the last three years that has been more prevalent part of the RFP process and we work with both the retailing and procurement areas in the major banks. And itís a growing of the RFPs in some of the smaller banks as well. Technology investments help lower the overall cost of doing business relative to that contract period. Your second question had to do with the direct channel and cause concern for the FIs. Yes it does cause concern for the FIs to the extent that they can be losing customer check orders and therefore margins ñ different banks make in aggregate about $1.7 billion in revenues just from the sale of checks, so there is a concern there. In my area, we are heavily focused on retention programs during that contract period working with the banks so that they as well participate in those retention programs to keep that customer buying through that particular channel. Iím of the opinion and I think our business is that as we get more connected to the end user, the customer, in partnership with our bank, whether that be through our VRU or live agent or Internet, that we have a much greater propensity to keep that person within the bank channel.

Has anyone ever dropped Deluxe as a supplier because of the Companyís involvement with the direct channel?
CF ó Not to my knowledge in the last several years. If you want to go back to when it first started occurring in the mid-nineteen eighties when that channel started to emerge, I think there might have been a small bank at that time, as I remember being a sales rep, when we aggravated enough and we werenít under contact in those times, who would have said this was causing them a little bit of heartburn. As it emerged, it has just become a very strong and prevalent channel, we have strategies based on our merchandising background, to have banks that want to work with us to keep them in that channel, and most of them do frankly want to work with us on that. The more that we can take the cost out of that working definition from them, the better it is. Our competitors have also been historically in the direct channel as well. In other words, Clarke American has a brand, Checks In The Mail, so they have the same issue. Harland used to have a direct channel piece so they used to have the same issues. Harland came out of the direct channel but on the marketing side still produces some checks for the Artistic brand which is now owned by Davis Henderson out of Canada. The banks found that the three major players were involved in that direct channel as well.

What percentage of your business now is people going to your site and not going through the bank to your site but just directly to your site, and then how are you going to market to the consumer that you have this site that you want them to come there directly and not go through the bank?
LM ó Starting with the direct-to-consumer channel, right now we ended 2000 with about 10 percent of our total volume conducted via the Internet ñ over a million orders. Eighteen months ago it was for all practical purposes ñ zero. We will see this year that number increasing to 15 to 16 percent. So, it has taken off rather dramatically in our direct-to-consumer. In our ads, if we go back to those free standing inserts, the website is right in those boxes when they reorder. The website is advertised as well as our 800 number. In the small office, home office segment ñ about 3 to 4 percent of our total volume is conducted via the Internet. We will see that growing by two percentage points in the year 2001. In Chuck's area, less than 1 percent of our volume is via the Internet. In most of the advertising that is done in the Financial Institution is on the box of the reorder so that the website ñ deluxe.com ñ is there. We do not advertise independently to the bankís customer. We would do so in the check package itself or the bank could have on their website ñ Order checks ñ and it could be branded by the bank and then hot linked to us ñ or they could provide information to their customers on their website saying ñ Go to Deluxe.com. We are firmly committed to the FI channel right now. We will hot link their site if they so choose and allow you as a consumer to come to us under all brands to order your checks and conduct your business there and then we will link you back to your bankís site. We are available on certain search engines, and you can find Deluxe.com out there, but we have not chosen to be aggressive with this at this point. The last time I had a chance to speak with several of you was in August and I told you we were into double digit returns in terms of those kind of linkages ñ now we are in four digits, just to give you some kind of an idea what we have done in the last year with partnering with our FIs on that. That is our primary way that we want to go to market with that which is clearly to work with our financial institution partners. In no way do we want to create a separation there.

If we want to get new checks, I just tell my wife to go onto your Internet site and I pay $8 and I get the same check that I can get through the bank where I would pay $20? But I would hot link into a different site at Deluxe?
LM ó Just to be clear, if you hot linked into the Deluxe site, you would pay the same amount you would pay at your bank. If you hot link into our direct site, you are going to pay whatever the direct price is at that point.

You mentioned about dropping lower margin business and some business that was at a loss. What causes the contract to be low margin and at a loss? It seems to me the economies of scale are such that you basically shouldnít be losing money on any of your contracts. Do you have a lot more of those kind of contracts to roll off?
LM ñ We have within the financial institution segment ñ one of the dynamics of the industry is that if one of the banks consolidate or merge, a couple of things happen. Even if we are the provider to both parties, they are probably not at the same price. So what happens when they do go together they donít come in and say theyíll pay the higher price of the two. Then they have greater volume, so they are looking to leverage their buying power. So what we have had a couple of years ago, some major acquisitions were taking place in the industry, is the bankís leveraging their buying power and what we elected to do when we had the contract of 3 to 5 years, we said we were not going to make any money over a 5 year contract on this even on the margin, then weíre not going to go down to the price that maybe some of our competition was going to do, so we took the approach of not wanting to give up the business, but it didnít make good economic sense for us to do that. We have retained our major contracts for this year but that was a couple of years ago.

What would cause an acquisition to look good now and to not look good three years later? What changes to the contract?
LM ó The contract holds obligations from our standpoint and the clients ñ the banks ñ and those are volume levels that have to be hit. There are also participation levels and cost reduction activities that move from paper to electronic, the reduction of error ratios by their people, depending on how well they are trained, how well they facilitate the sale of our product and other things that greatly effect the status of that contract. Over a period of time, if the original assumptions do not bear out over that contract period, the contract can go from a certain level of profitability to that level of profitability over time. More than likely though, what we have seen over the past couple of years, we have actually taken that profitability level up because of the willingness of these banks to partner and to participate in our value item program. We are typically more pleased at the end of the relationship, which is why retention numbers are high, then we are displeased and find that we need to consider parting of ways.

My impression was that pricing had stabilized.
LM ó I think that pricing is more stable now than it has been in the last several years.

There isnít anyone out there wanting to underbid you to get the business?
LM ó The opportunity to create instability is in direct relation to your ability to deliver value. My personal standpoint, which is biased, is that we have delivered value over the last few years that is allowing us to reach a level of stability that wasnít there before that.

Some years ago, Deluxe management undertook the concept of acquisitions as the mature check business let the cash flow and went into a series of acquisitions, too numerous to remember, and cut them all back to end up with eFunds. What can you tell us today that will give us confidence that you are not embarking on the same plan that they did 8 to 10 years ago?
LM ó I will repeat those comments. We are looking at businesses that we are in now ñ like Designer. If a Designer came along, we would certainly look at it but benchmark it against the value of the share repurchase. So either we would have to leverage our core competencies and provide a greater return for us to seriously consider that. I think I can safely say that you wonít see us going down any tangents here.

What is in you r average cost of customer acquisition over the last couple of years and how is that trend going forward?
LM óThe average cost of customer acquisition in the direct channel ñ I donít want to give you an exact number ñ but let me put it this way. I can tell you that in the direct channel in the first order we lose money. We make money on the reorder. The economics on the direct channel are much different than the economics of the FI channel. With the FI, we donít have any cost with the customer acquisition ñ the bank has that. In the direct channel, we have to go out and acquire that customer. Those are the metrics of that channel.

Do you make money on that first reorder or do you have to have them for a year?
LM ó We make money on the first reorder, more than enough to offset the loss on the initial order. It is probably a ratio in the 3 to 1 range. So it is significant.

What is your average revenue per customer?
LM ó Average revenue per customer per year ñ probably, a ballpark number, in the $30 to $35 range.

What are the marketing costs in the direct channel?
LM ó I canít recall that number. I donít have it right here.

Talk a little bit more about the order entry center in terms of number of call centers you have and people there and the opportunities.
LM ó We have today in our FI channel, 3 call centers ñ Greensboro, Syracuse, and Phoenix. Going back several years ago when we had 65 check printing plants, we almost had a call center in almost all of them. So we consolidated those dramatically in the last several years into the 3. In the direct channel, direct-to-consumer, we have 2 ñ one in Colorado Springs and one in Anniston, Alabama. In the SOHO (small office, home office) market, we have 1 in Shoreview, Minnesota and 1 in Colorado Springs. Those are the call centers we have today ñ dramatically fewer than we had 5 or 10 years ago. As the business grows and relationships change, one is if the Internet grows, then you might not need as many agents or press room service people or order people to transact that order, but what you do is you ship out because even in an Internet order there is a customer service element. So if a person conducts some piece of business via the Internet, it means that if there are any questions that they have, they either place a call, so you still have a call to follow-up, or you have an email message coming in to which we need to respond. So it might not be an order taker but it might be shifted over to an email response to an inquiry coming via the Internet. We look at our ability to be cost efficient both in technology as well as the process of order capture all the time. I think there is an opportunity there but it probably isnít as great if Internet orders shot up to 50 percent. Certainly an Internet order is a more cost-effective way to capture an order than it is for example on the phone. The question is what is the profitability of one via the Internet or one via the phone? One is more cost effective ñ the profitability may or may not be depending upon the average order size.

Do you have the feeling for how much of the volume there is going to be coming in on one order and then not coming back to you versus what is converted to a profitable relationship through a second order?
LM ó In the direct channel, there is a fair amount of churn in the direct channel that is generated by promotional mutual offers. So anytime you pick up that free standing insert, you usually see buy one, get one free and save X percent, and so what you have are individuals who are direct channel customers. They might get a reorder from another source if they arenít loyal to one company or another. We look at our retention rate on the bottom line. The reorder and even the third order are what make that business very profitable. What we work on is retention rates at all times. In other words, not only getting them in the door the first time, where we know we are going to lose money, but if we donít get them to reorder, then it affects our ability to generate the business models, but right now that business continues to be very very profitable. If we raise prices, that might reverse the retention rate because they say they are going to look at some other option first.

In the aggregate, is the direct channel more or less profitable than the FI channel?
LM ó Iíll answer the same way I did the first time, and that is that it is about the same. One might be a little bit more and one a little bit less, but they are both very very profitable.

When you sell direct to somebody, thatís your customer ñ correct? So you can market to that customer. When the customer is coming through the bank, you are not permitted to go market to that customer directly?
LM ó That is a correct statement.

You have a million orders over the Internet. I was thinking that was in total including the FI, but is that just the direct channel?
LM ó Thatís just the Internet and direct channel.

What are your marketing plans to go market to these people to retain them to sell them additional merchandise? How soon does that kick in and what percentage of your business is this in 3 years?
LM ó Let me be sure that we are really clear here in that of the customers that come to us with the financial institutions, we cannot market to that customer base. Those are the financial institution customers and we want to be very clear that no one has a misunderstanding on that. Of the customers that do come to us via the direct channel and order, we have those customers. We have about 40 million customers in our database that have ordered from us over time including PlaidMoon. What we have said is that that capability is still there but we are going to do it at a much lower level of investment and much more directly related to the check.

Just a few quick questions under revenue growth. You talked about services. Can you put some numbers on that? What kind of revenues do you get from various services and at what rate do you expect it to grow?
LM ó I would answer it this way. With the pressures in the financial institution to force that revenue down because of the bank consolidations and just the price competitiveness of that, I would say that if you look at our past history, it is pretty flat in terms of revenue. I think that all of the efforts that we see on the plus side will keep that revenue line at a flat level from all of our businesses. As the customers move themselves from the FI into the direct channel, we are adding services or marketing upside, so by doing all of those things it should enable us to keep that flat revenue over the next several years. And we are trying to do all we can very aggressively on new products and new services and the ability to upsell and cross sell, so I donít have a specific number for you other than to say that it will probably net out as a flat number.

The part about acquiring new customers ñ the business consultants will tell you that most companyís biggest mistake is underestimating your competition. In that light, obviously you are in a no growth market, competition ñ can you talk about what they have been doing? They are obviously trying to acquire new customers also. What have you been doing to offset their efforts?
LM ó I really donít know. We watch their ads. The most frequent way to acquire new customers in the direct channel is through the free standing inserts and there are really only two people in that business and we have sold the space that is available ñ itís pretty much on how they use that space. In a promotional offer to get someone to switch from their brand to our brand, so what we do and every direct marketer does, is also have tests going on in a variety of ways to attract that customer. So we measure the response rate ñ free, free, free or pay an extra cent or get a free checkbook cover if you order such and such ñ to see what works best for us. We track trends. Through market studies we have seen that weíve gained market share not just through the acquisition but through our ability to market to the end consumer.

Last year if we strip out divestitures and acquisitions, your revenue was actually down close to 3 percent. Going forward, whatís going to be different? In other words, all the things youíve talked about were in place last year and yet revenues declined. Why will the next 3 to 5 years show a flat number or conversely why was last year worse than normal?
DT ñ Our revenue actually increased 2 percent last year in 2000 compared to 1999, if you back out the effect of the divestiture of NRC, which contributed $124 million to revenue from 1999.

Right, but if you also back out the acquisition of Designer, you have a little decline of 3 percent.
DT ñ There were two primary factors. One was we reduced the customer acquisition last year in conjunction with our acquisition of Designer Checks in February. We wanted to see if we could become more effective, more productive, with fewer marketing dollars to acquire new customers. We werenít able to do that. So our units dropped as a result of that. Secondly, as we talked about earlier, we walked away from some lower margin large contracts in the financial institution portion of our business. So those two factors would not be go forward factors in the future to a significant extent.

And yet you gained share last year?
LM ñ We donít have share information yet for the year 2000 but I would suspect that in the direct channel ñ letís make sure that I was very clear in talking about the direct channel we picked it up. We probably would have lost a little share in the FI channel ñ at least thatís how I see it. Looking forward, I think is the real issue of your question. We think that certainly with the work Chuck and his team are doing that we can retain customers in the FI channel at higher rates than we have in the past. There is no question that we certainly cause our financial institutions some discomfort when we close all the facilities that we did and we put in a new order system. Those are almost all behind us at this point in time. So with our technology, investments, and partnering with the financial institutions, we think our retention rate is higher ñ we know it is ñ and we think we have a very good opportunity to compete very effectively for new business whether it be a contract bid of theirs coming up or maybe someone who has never been with us. Thatís our approach coupled with marketing initiatives that we talked about gives me a very high level of confidence of being able to make decisions. Certainly weíre working very aggressively on all of businesses to generate the levels of cash flow that we are experiencing today.

If you back off the customer acquisition spending, will there be a lag in actually acquiring those customers and the revenue attached to them and therefore there would be some period where the spending ramps up and the revenue hasnít kicked in yet?
LM ñ Yes, there is a lag in two levels. One, less so on the revenue because you acquire them. Where the lag is ñ is on the profitability. Let me make sure that I am very clear that we are talking about the direct channel where we are going out and trying to acquire a significant number of new customers. Because of the metrics, for every one of those new customers we lose money on, certainly there will be a negative hit on the profitability side. The payback will be in years two and three because we make money on the reorder part of that business, so when we look at investments in that direct channel, we look over a three year time, not just one year. We can stop spending and put it all in the bottom line, but the problem is that the business is going to go to heck in the second and third year, so for us, we have to continue to manage that level investment for the lifetime value of the customer so there is a return on that level of investment. Thatís where the lag is.

In terms of customer acquisition costs, can you give us some idea of what you think the lifetime value of your average check order customer is and can you also show us in terms of the direct channel ñ can you share with us what the value is if you have one million hard customers, but you have 40 million names?
LM ñ The million orders last year were just on the Internet. That is not the total number of orders in our file ñ that was roughly 10 percent. So last year we had about 10 million orders coming in for the year 2000 on the direct channel. The 40 million names are the people who are in our file that have at any time purchased from us. So that is a mix of people who bought and might never have bought in two or three or four years. The purpose of the 40 million figure is to give magnitude of names that we have to whom we could market because they are in our file and we have the capability of doing so. Your first question is what is the lifetime value of a customer. It is in excess of $125.

How long do you think that lifetime is? Three years?
LM ñ Three years. We watch those over time ñ response rates and retention rates.

What do you think your customer acquisition cost is in your direct channel ñ Internet versus free standing inserts or other?
LM ñ It depends on the advertising and the way people get them. Certainly we advertise in all of the materials we send our customers ñ we put our 800 number on them and our Internet address. If they phone into us because of the Internet, then there really was no cost. There is some conversion of people who would have called over the phone and now are moving over to the Internet. Not necessarily a new customer, but a different way for them to come to us. The Internet way is certainly more cost effective than advertising for a new customer.

You are stepping up your direct-to-consumer spending this year. Do you think the margins might rise a bit in 02 and beyond?
LM ñ Iíll go back and say what I said earlier. When you take it all and net it out, we think we can keep it flat because we have many things going on in terms of the FI side in terms of price competition, and we feel that all of the things that I just summarized in the discussions that weíve had in the prepared comments as well as in the Q&A, just keeping that level of operating dollars of profit or EBITDA flat over the next several years. There might be some upside to that but at this point in time I would not forecast that.