MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating revenue consists of the following: Operating results are summarized below: 10 LEE ENTERPRISES / 2000 Annual Report In 2000 circulation revenue decreased (2.4%) primarily as a result of a decrease in units. In 1999 circulation revenue decreased by (.3%) as a result of a decrease in volume offset by higher rates. In 1998 circulation revenue decreased (.8%) as a result of a decrease in volume. In total, advertising revenue increased 3.1%, 3.2%, and 3.6%. Classified advertising revenue increased approximately 4.9% in 2000, 5.3% in 1999, and 8.1% in 1998. In 2000 growth in advertising revenue was in the employment and automotive cate- gories. In 1999 growth in advertising revenue was in the automo- tive and to a lesser extent in the employment categories. This growth offset a decrease in real estate. In 1998 continued signifi- cant growth in employment and real estate advertising offset a small reduction in automotive. * EBITDA is not a financial performance measurement under generally accepted accounting principles (GAAP), and should not be considered in isolation or a substitute for GAAP performance measurements. EBITDA is also not reflected in the Company’s consolidated statement of cash flows, but it is a common and meaningful alternative performance measurement for comparison to other companies in the newspaper industry. The computation excludes other non-operating items which are primarily the gain on sale of businesses. Total revenue realized from retail and national merchants includes preprints, which have lower-priced, higher-volume distri- bution rates. Preprint revenue increased 2.9% in 2000, 4.2% in 1999, and 4.4% in 1998. Retail “run-of-press” advertising is advertising by merchants in the local community that is printed in the newspaper, rather than “preprints,” which are printed separately by the Company or others and inserted into the newspaper. Retail revenue increased .5% in 2000, .4% in 1999, and decreased (.3%) in 1998. Retail revenue increases were caused primarily by an increase in volume as a result of the continuing emphasis on price incentives in return for larger or more frequent ads. The following advertising and circulation revenue results are presented exclusive of acquisitions and dispositions. This report contains certain forward-looking statements that are based largely on the Company’s current expectations and are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends, and uncertainties are changes in advertising demand, newsprint prices, interest rates, and other economic conditions and the effect of acquisitions, investments, and disposi- tions on the Company’s results of operations or financial condi- tion. The words “believe,” “expect,” “anticipate,” “intends,” “plans,” “projects,” “considers,” and similar expressions gener - ally identify forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are as of the date of this report. 2000 1999 1998 (Dollars in Thousands) Advertising revenue: Retail advertising: Retail– “run-of-press” . . . .  $110,996 $ 108,203 $ 106,889 Retail– preprint and other. .  48,944 46,344 44,477 Total retail advertising. . . . .  159,940 154,547 151,366 Percent change . . . . . . . . .  3.5% 2.1% 21.9% National . . . . . . . . . . . . . . .  9,318 8,737 7,613 Percent change . . . . . . . . .  6.6% 14.8% 8.2% Classified . . . . . . . . . . . . . .  101,061 95,854 87,622 Percent change . . . . . . . . .  5.4% 9.4% 34.5% Other. . . . . . . . . . . . . . . . . .  5,894 5,254 4,783 Percent change . . . . . . . . .  12.2% 9.8% 26.4% Total advertising . . . . . . . . . .  276,213 264,392 251,384 Percent change . . . . . . . . . .  4.5% 5.2% 25.6% Circulation revenue. . . . . . . .  80,468 83,102 83,091 Percent change . . . . . . . . . .  (3.2%) – % 2.8% Other revenue . . . . . . . . . . . .  65,455 57,114 48,419 Percent change . . . . . . . . . .  14.6% 18.0% 29.2% 2000 1999 1998 (Dollars in Thousands, Except Per Share Data) Operating revenue. . . . . . . . .  $431,513 $ 413,846 $ 391,261 Percent change . . . . . . . .  4.3% 5.8% 19.9% Income before depreciation, amortization, interest and taxes (EBITDA)* . . . . . . . . .  131,793 124,955 113,990 Percent change . . . . . . . . . . .  5.5% 9.6% 15.7% Operating income. . . . . . . . .  102,467 97,369 87,899 Percent change . . . . . . . .  5.2% 10.8% 7.3% Non-operating (income) expense, net . . . . . . . . . . . . .  (7,748) 10,205 12,715 Income from continuing operations . . . . . . . . . . . . . .  69,875 56,821 47,674 Percent change . . . . . . . .  23.0% 19.2% (4.4%) Earnings per share,  continuing operations Basic . . . . . . . . . . . . . . . .  1.59 1.29 1.07 Percent change. . . . . .  23.3% 20.6% 0.0% Diluted . . . . . . . . . . . . . .  1.58 1.27 1.05 Percent change. . . . . .  24.4% 21.0% (0.9%)