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Operator
Good morning, ladies and gentlemen and welcome to the Pulitzer, Inc.fourth 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 call will be available until Tuesday, January twenty seventh and the webcast will be available on Pulitzer's website until Friday, February 20th.
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, outcome of labor negotiations, 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 of the company's press release issued earlier this morning which is also available on Pulitzer's website and the company's reports filed with the SEC.
In addition, please see the company's press release for a reconciliation of the differences between non-GAAP financial measures presented during this conference call and the most directly comparable financial measures calculated and presented in accordance with GAAP.
Thank you.
Mr. Woodworth, you may begin your call.
Bob Woodworth - President and CEO
Thank you, and good morning and thank you for joining us.
I'm Bob Woodworth President and CEO of Pulitzer Inc.
With me today are Alan Silverglatt, SVP Finance, Terry Egger, SVP and publisher of the "St.
Louis Post-Dispatch" and Mark Contreras, SVP with responsibility for Pulitzer Newspapers, Inc. or PNI and/or operations in Tucson.
Earlier this morning we released our financial results for the fourth quarter and full year.
I'll spend a few moments discussing those results with particular emphasis on what we accomplished in 2003 and what you can expect in 2004.
Alan will provide more detail on the numbers, and then we'll open up the call for your questions.
As we discuss results, please keep in mind that comparable numbers include our interest in Tucson, in the Tucson joint operating agreement and exclude the impact of acquisitions we made in 2003.
I should also note that when we discuss the retail and national revenue categories, both include preprints.
As you can see from our earnings release, we achieved strong results for both the fourth quarter and full year.
Starting with the quarter, ad revenue was up 5.7% on gains in retail, classified and national, which were up 6.4%, 4.8% and 4.1% respectively.
Those gains reflect increases at each of our businesses with ad revenue up 7.6% in St. Louis, 3.2% at PNI, and 4/10 of a percent in Tucson.
On a consolidated basis comparable revenues strengthened each month of the quarter, from 4.9% in October to 5.2% in November and 7.1% in December.
This was a particularly impressive performance because it came on top of a strong fourth quarter in 2002 when comparable ad revenue was up 4.6% with a 9.7% increase in December.
We coupled that revenue growth with continued close control of expenses, including newsprint, comparable expenses were up 3% for the quarter.
As a result, base earnings, which are defined in our press release, increased 11.5% to 68 cents per fully diluted share, so a strong fourth quarter with momentum growing month over month.
We're pleased with that, of course, but as we have emphasized, we managed Pulitzer for the long-term, and so I'd like to spend some time giving you our perspective on what we accomplished in full year 2003.
Our approach is simple.
We execute proven strategies to drive revenue growth, keep a sharp eye on costs, and importantly, balance cost control with prudent investments in our future.
Investments that extend our reach and strengthen our market presence.
We had high expectations for all of our employees at all of our properties, and in 2003 the skill, experience and commitment of the people of Pulitzer allowed us to deliver excellent results despite the difficult environment.
With continued weakness in recruitment and major retail and tough comps for 2002.
For the year we achieved a 2% increase in comparable ad revenue while holding operating expense, excluding the impact of higher newsprint prices, essentially flat.
The result was a 4.9% increase in operating income and a nearly 7% increase in base earnings per fully diluted share.
We increased our consolidated EBITDA margin about 1 percentage point to 25.2%, reflecting similar margin increases both in St. Louis and at PNI.
2003 was the third year in a row we improved our consolidated EBITDA margin.
An accomplishment we believe compares favorably with our peers.
I'd like to emphasize we have not quilt our margin improvement simply on the cost side.
Cost control has been and will continue to be a constant focus but we also made substantial investments in creating or strengthening the infrastructure that supports our long-term strategies to expand audience reach and deliver results for advertisers.
And our employees did the hard work to bring these projects to life.
Some examples, in St. Louis we invested in new and revamped editorial sections at the Post-Dispatch and redesigned the "Suburban Journals" to strengthen their local community news orientation.
Response from readers and advertisers has been extremely positive as reflected in the nearly 20% increase in local territory revenues in St. Louis in the fourth quarter.
We also continued to purchase Post-Dispatch distribution routes, and we now own about 75% of both single copy and home delivery distribution.
FTL today.com continued its strong audience growth with weekly page views up 54% for the year and 67 percent in the fourth quarter.
We're turning that audience into revenue with initiatives like auction express, which combined an online auction with a 56-page auction catalog in the Post-Dispatch.
It generated more than half a million dollars in incremental revenue in the fourth quarter, a significant portion of which came from new advertisers.
At PNI we continued to acquire and quickly integrate paid week list and other publications to strengthen our reach in our markets.
In 2003 we acquired eight publications and started a Spanish language newspaper in Santa Maria, California.
PNI had a solid year, achieving ad revenue growth in eight of 12 periods in 2003, and that's on top of revenue growth in every period of 2002.
Both daily and Sunday circulation were up for the group, and comparable expenses were down 1.3%, primarily as a result of a 2.4% decline in FTEs.
As a result, comparable EBITDA per FTE was up 6.6%.
In Tucson we continued to see gains in circulation as the Arizona daily star achieved its sixth straight year of daily circulation gains.
Along with our partner Gannett we also hired Michael Jameson as president and CEO of TNI partners, the Tucson partnership agency.
Mark, who started earlier this month, brings extensive experience in business including a strong sales background and hands-on experience running a newspaper agency.
I've stressed our willingness to invest in our infrastructure even in difficult times because it is critical to giving our people the tools they need to build audience and revenue.
It also provides the framework to pursue new revenue initiatives.
And we are particularly excited about our new direct mail venture in St. Louis which will launch later this quarter with firm commitments from two of the largest grocery chains in the market.
We were able to take their business away from ad, though, because of the capabilities we have created in St. Louis.
First our enhanced award winning food section has made the newspaper a premium environment in which to connect with shoppers; second, the acquisition of our distribution routes means we believe we now have the most accurate household database in St. Louis.
Advertisers know that they can trust us to reach the audience they want without duplication and without gaps.
It's an unbeatable combination in this market.
Looking ahead, in 2004 you'll see more of what you saw in 2003.
Persistent execution of our revenue growth strategies, continued sharp focus on costs, and continued willingness to invest when it is in the best long-term interests informant franchise.
Now, a word about our earnings expectations for 2004.
The momentum we built in the fourth quarter of 2003 strengthens our confidence in the guidance we gave last month of 2004 base earnings of at least $2.10 per fully diluted share, but we have seen encouraging signs of reviving ad demand before only to be disappointed, so we are tracking trends very closely.
Further, we're also assessing the revenue and cost effects of the new direct mail business in St. Louis.
We will consider updating our 2004 guidance as we make these assessments.
Thank you, and I'll turn the call over to Alan.
Alan Silverglat - SVP, Finance
Thank you, Bob, and good morning, everyone.
As Bob indicated, I will review our fourth quarter and full year results in a little more detail.
The final results were somewhat better than expected thanks the a strong December that boosted fourth quarter ad revenue.
For the fourth quarter we reported net income of $14.3 million or 66 cents per fully diluted share.
As detailed in the earnings release, these results include pretax charges of approximately $500,000 dollars to adjust the carrying value of certain non-operating investments and $200,000 dollars for employment termination inducements during the fourth quarter.
Earnings absent these charges our base earnings were 68 cents for the quarter and $2.01 for the full year, up from $1.88 in 2002.
Operating income for the fourth quarter increased to $27.5 million from $25.2 million a year ago.
On a comparable basis operating income has increased 8.7%.
Fourth quarter comparable expenses were up 3%, primarily reflecting a 3.6% newsprint price increase.
Higher circulation expense related to acquiring single copy distribution businesses in St. Louis, and higher bad debt expense compared with 2002.
We did keep close control of discretionary expenses.
For the full year 2003 comparable operating expenses increased 6/10%, 1/10 percent without newsprint.
Labor and benefit costs increased 1%, incorporating a 2. 2% decrease in FTEs.
Circulation costs are coming down as we acquire distribution routes in St. Louis.
St. Louis circulation costs were down 2.2% for the full year.
We held a tight reign on discretionary expenditures such as promotion.
Having referenced our cost control, I think an important to remind you of one of the points Bob made.
We used the resources saved via cost reduction to fund our initiatives directed to product improvement and market expansion as well as to help drive operating margin improvement, a balanced approach.
2003 capital expenditures totaled about $12.5 million.
Recognizing projects carrying over into 2004 we now expect the 2004 capital expenditures will be in the 10 to $12 million range.
Pulitzer ended the quarter in strong financial position with cash and marketable securities of around $176 million, down from $194 million a year ago.
The decline was primarily due to the discretionary funding of pension and post retirement healthcare obligations and the purchase of newspaper properties and distribution businesses.
Finally, EBITDA increased 4.6% to $106.3 million from $101.6 million in 2002.
As Bob noted, 2003 was the third consecutive year in which we have improved our EBITDA margin, adding 2.1 margin points over the three years despite a tough revenue environment.
Now I'd look to turn it back to Bob.
Bob Woodworth - President and CEO
Thank you, Alan, and now we'll be happy to open it up for your questions.
Operator
Ladies and gentlemen, if you wish to ask a question, please key star 1 on your touch tone telephone.
If your question has been answered or you wish to withdraw your registration, please key star 2.
Once again, ladies and gentlemen, if you wish to ask a question, please key star 1 on your touch tone telephone.
Your first question comes from the line of Toby Sumner with SunTrust Robinson Humphrey.
Please be go ahead.
Toby Sumner - Analyst
Good morning.
I had a question for you about classified.
If you talk about what your outlook is for employment sort of going into '04, if there are any particular verticals or, in particular, markets that you have seen particular strength and maybe have an expectation for continued strength in '04.
Alan Silverglat - SVP, Finance
Toby, good morning.
This is Bob.
I'll give you an overview and then turn it over to Terry and Mark.
I think the best way to describe particularly employment is uneven, we've had some strength in Tucson, as you've seen in the numbers, some strength that PNI, some strength in St. Louis, although a bit spotty.
In trying to assess recruitment for 2004, we are not banking on a strong resurgence.
We just think it's prudent to not assume that we're going to have revenue that may not materialize and just keep a sharp eye on the expenses so that we ultimately deliver on the bottom line.
I'll let Mark and Terry give you more of the flavor for classified in general.
Mark Contreras - SVP, Pulitzer Newspapers
This is Mark, Toby.
Just in general, the trend for, let's start with help wanted within PNI, for the year we ended up roughly flat to slightly down, but in the last quarter and particularly in last month we have reason to be optimistic.
We're not planning for that trend to continue throughout all of next year in help wanted.
We had a tough year in auto really across the board for PNI and we anticipate some strength going into next year, and real estate, frankly, was one of the great drivers for us in classified in '03.
We are not anticipating that the same head of steam continue all into '04, but hopefully that gives you some flavor for those three verticals within PNI.
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Yeah, Toby, this is Terry.
In St. Louis the 11th and 12th periods we just completed mark the first time that we have seen recruitment revenue be on the plus side in a couple of years.
And while that was certainly nice to see, as Bob noted, in our plans going forward, because it has been so spotty, we have not planned to see, you know, a robust improvement there through the course of the year.
That said, we've been very, very active in behind-the-scenes kind of work on our recruitment solutions, both print and online and in our staffing, so, again, the revenue picture turned a little more positive.
It was more rate than volume at this point, unfortunately, and we're busy building a lot of online and print capabilities behind the scene as it does come back.
Toby Sumner - Analyst
Just a follow-up on that particular print and online package, could you describe what your typical package is and what sort of share you think you may have in St. Louis in the recruitment market?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Well, again, it will probably take quite a while, and I'll be happy to go into more detail offline, but the issue essentially is currently all print and display liner ads, excuse me, liner and display ads that run in the paper also run in a database that is fully searchable and has a resonating matching capability.
We have over 90,000 local resumes in that database, and any candidate who puts a resume in that database then will automatically be e-mailed any job match that comes through our -- through the newspaper or directly online.
We package that with a variety of pricing.
The print ad is stand alone pricing, as is common, and then the online up sell ranges anywhere from $100 to $300 in that range, depending on the features that the employer chooses.
At this point, again, essentially all of our print ads are in the online database.
It's just one database.
And we still will allow any advertiser to choose online only.
At this point that's a very small percentage.
In terms of share, depends on which measure you're looking at, if you're looking at the number of local jobs in our database versus a monster database of local jobs, we have, you know, well over 80% of the jobs locally are in our database.
The inroads, though, that monster or hot jobs or career builder are making in the markets are something that we pay a lot attention to.
We still have the majority position, but those are solutions that as the market comes back can we've got to be prepared to answer.
We think that the power of our print and online and the functionality particularly of our online and our ability to promote locally and the size of our sales force give us an advantage if we take care of business.
Toby Sumner - Analyst
Thank you very much.
Operator
Your next question comes from the line of Stacy Fleck with Merrill Lynch.
Please go ahead.
Stacy Fleck - Analyst
Hi, good morning, just a couple of questions.
Is there any way to quantify what percent of your retail revenues in St. Louis are now coming from the local territory accounts?
I'll follow up with a couple after that.
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Again, total revenue, Stacy, this is Terry, of total revenue at the Post-Dispatch it's about just over 15%.
Total St. Louis, it's about just over 20% of our total revenue.
But importantly that base that is been growing quite rapidly.
You the look at the local territory revenues, particularly since we change our sales structure a year ago June, June of 2002, we have averaged well more than double digit gains each period since then.
And while some other parts of the market in terms of advertising may be material major accounts, national, etc., what we've been able to accomplish in local territories and in preprints, things that we have more of a direct impact on in our local market, is probable at the thing that we are most encouraged about.
Stacy Fleck - Analyst
Great.
And it looks like you've got some pretty good realization in December in St. Louis within the retail category.
Was there anything unusual going on there?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Again, we looked at our rates and we made some rate adjustments in November of this year, and the retail segments that we normally would not have made just looking at some of the opportunities that we had.
Stacy Fleck - Analyst
Okay.
And I guess just a follow-up question for Alan.
The tax rate was a little bit lower than what I expected in the fourth quarter.
What should we expect headed out into 2004?
Alan Silverglat - SVP, Finance
Stacy, the tax rate came down reflecting some favorable views of our state tax planning, and we adjusted the rate down to slightly below 37-1/2% I think slightly above 37-1/2% going forward is a good expectation. 37-1/2 to 38.
Stacy Fleck - Analyst
Great.
Thanks.
Operator
Your next question comes from the line of Michael Kapinski with AG Edwards.
Michael Kapinski - Analyst
Congratulations on a good quarter, you guys.
I know it was a difficult environment but it sounds like it's turning on you a little bit.
Could you give an update on the labor negotiations in St. Louis?
And then secondly, Terry, I was wondering if you can talk a little bit about the retail a little bit more.
Did you get any benefit from the new mall that opened up in the fall?
And then also did you pick up any grocery in the December month in St. Louis?
And then I have a couple other follow-up questions.
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Michael, regarding the labor, we continued to be active in negotiations with the newspaper deal.
I would say that we’restill very encouraged and optimistic that we'll get a resolution there.
It's been a year now, and we would like to see this get resolved and get full focus become on day-to-day business and we'd like to see our employees get a pay raise.
They do deserve that, and we want to move forward.
But, again, as you know, these things are things that you've got to just stay engaged in and keep making progress, and until you're completed, you can't say you're completed.
And that's something that we're still focused on, but we have been encouraged by the tone of the talks of late, and just our commitment to say engaged until we get it resolved.
Turning to the retail selling sector, you mentioned the new mall.
There was a new, for those who aren't in the market, there was a new shopping center that opened in the quarter.
That had -- it had some positive impact clearly but nothing at all of the magnitude of the Galleria opening last year.
So it was definitely a positive for us, but not in the order of magnitude that we saw last fall in 2002.
Grocery, again, a category we're encouraged by in the quarter overall we did see positive gains in grocery, and we did have a nice bit of grocery business in the 12th period.
As Bob mentioned in his remarks, we're extremely encouraged by the fact that we are now in the direct mail grocery business.
That is something that we've spent a lot of time in the last couple of years building infrastructure to be prepared to go after, both with our database and also with the plant expansion to give us the capability to do the packaging, and as Bob noted, we'll be launching that program direct mail in March of this year.
Michael Kapinski - Analyst
Was the pickup in the grocery in December, was that a function of the direct mail campaign that you -- that you're launching?
Do you think that they just came in the paper or was this just a pickup from your, I question, from Dearbergs or was it an actual account win like from Shnooks in the 12th period?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Again a good question.
The last not a direct association with the direct mail program for grocery.
We've been building the grower grocery business since we had that section last year but specifically we've been working on a schedule, an ROP schedule from Shnooks who is the largest grocer in the market and the fourth quarter that schedule came to fruition so we have an ROP commitment from them that was incremental to our business.
Michael Kapinski - Analyst
Okay.
And then turning to Tucson, with the new management change in Tucson, what is the advantage for Tucson at this point?
Particularly because if you look at again at paper circulation is just falling off an abyss, and I was just wondering if there was any, with the new management change, a particular change in strategy in how you market your paper or both papers in that market.
Mark Contreras - SVP, Pulitzer Newspapers
Michael, I’ll take a crack at that.
This is Mark.
We, along with began at, have -- Gannett have both of us strongly agree 1.
One of them is growing advertising market share.
We still have opportunities there to get closer into the mid 30% range compared to the 30s that we're in now.
We also have an opportunity to grow profit there at a much faster clip.
We also have a commitment to growing combined penetration and circumstance lags so that is one of the four major pillars of our strategy that Gannett agreed on.
And then lastly they continued to build an e-media franchise both in terms of revenue and audience there.
So we have got a pretty clear, pretty well-defined strategy developed in collaboration with Gannett and we're very optimistic that we'll be able to move on all four of those.
One of those, though, addresses your question about combined circulation penetration.
We need to move on that.
Daily paper, as you know, has grown consistently.
Sunday is a little softer this year, but it has historically grown, and as you mentioned the afternoon paper is ahead.
Something we're going to have to figure out in conjunction with our partner.
Michael Kapinski - Analyst
Finally, can you give me your who the to newsprint price announcements, what you think about that and whether or not it will all go through and when?
Alan Silverglat - SVP, Finance
Mike, it's Alan.
We, you know, watch very closely, like you, the action taken by activity with the recent announcement of a price increase.
We don't anticipate significant price increases during quarter 1.
Our outlook does anticipate a 10% plus movement over the course of -- you know, over the course of the year.
Michael Kapinski - Analyst
Okay.
Thank you.
Operator
Your next question comes from the line of Steven Barlow with Prudential.
Please go ahead.
Steven Barlow - Analyst
Thank you.
On your new grocery initiative here, it sounds like there may be some, I guess some losses going forward.
I wonder if you can just sort of indicate maybe what you're thinking, you know, plus or minus EPS because of that initiative for the year.
Alan Silverglat - SVP, Finance
Steve, it's Alan.
Let's me take a stab at it and then Terry can follow up if he wants, but the, you know, the business is new and, as you might understand, it's highly driven by fixed costs at the outset, so there will be some early on development and periods where revenues will not equal costs, particularly in the first and second quarters of this year.
As it goes on, you know, the pace at which we reach break even and then obtain a profit is totally driven by the pace at which we acquire new business, and we're developing -- I mean, this is all new recently announced, and we're developing a feel for that pace as we speak, so our outlook is not definite at this point.
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Steven, this is Terry.
The only thing that I would add to that is, as you know this business, and we're fortunate to have some people working here who have had a lot of experience in building a direct mail grocery business, once you have some base players in, the profitability picture becomes more clear, the quicker that you can ramp up single sheet and single card business to fill out that package.
That's something that we feel very confident in our ability to do, and the course of the last year and a half in the local territories what we've been able to do is growing single sheet business gives us that much more confidence.
What we have is another vehicle to offer distribution means for advertisers, and we think that this will be a perfect complement to the journals and to the Post-Dispatch and the market.
We've modeled a couple of different scenarios as Alan mentioned depending on the speed of our ramp up and filling out that single sheet business, and now it's just a matter of how we actually perform there.
Steven Barlow - Analyst
And would it be right to think about this is you've got the two grocery stores so you wouldn't add any more grocery stores to the product list; it really would be other retailers that would fit into the delivery package in the home?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Not necessarily, Steve.
We will continue to pursue other grocery business in the market and, again, our weight and our model has the flexibility to do that.
But ongoing we think that the package itself becomes more profitable, and frankly even more valuable the more the single sheet and card businesses, we can fill it in.
We have noted before that there are about, you know, 40,000 businesses that look like advertisers in our market, and we're only doing business with about 10,000 of them.
This is a perfect means of trying to offer an alternative to get that other additional business and take it away from other direct mail competitors.
Steven Barlow - Analyst
You mentioned the increase in your retail prices in November.
Could you give us an indication, Terry, on what you think your overall rate increase in '04 will be for the St. Louis paper and then, Mark, if you would comment on Tucson and the PNI Group.
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
As we have tried to explain before, our pricing models are just so varied, depending on the category of business that we're talking about and even within a category, the different rate -- excuse me, different volume columns that we're talking about, and we try to play to that. if kind of forced to ballpark I would say it would be somewhere in the five to six range overall, but, again, you have to be very careful there because it varies so significantly between open rates and first and second level rates and bottom of the rate card rates, those kinds of things, in and amongst all of the categories.
Mark Contreras - SVP, Pulitzer Newspapers
And, Steve, this is Mark.
I think in each market we really take a very distinct look at the opportunities there by looking at where we are now in terms of CPMs compared to life size papers situated in similar situations, so I will tell you that as a general approach, we try to make sure that we are top tier performers in terms of CPM pricing in each of our markets, but, for example, if we have a private party pricing price so high that we lose private party classified, we're going to lower them, but, again, I encourage you to look at our rate process as a big pegboard, and there's lots of points of entry that we talk about and adjust to make sure that we're being as very aggressive as possible.
Steven Barlow - Analyst
Okay.
Thank.
I'll switch to Alan for one second.
Alan, could you help us out on just if pieces of the cash flow statement?
What was your pension and healthcare contribution tort for the year?
What did you opinion on the purchase of the eight properties in Mark's group, and then what did you pay for the distribution businesses?
Would you just ballpark in millions per category, please?
Alan Silverglat - SVP, Finance
The discretionary component of the health care funding will be slightly in excess of $30 million, all in for the year it will be about 35 total recognizing the component that was more or less required.
And then the businesses that we have acquired, we don't, you know, disclose individually the purchase prices, but it's, I think in the year it's probably in the neighborhood of 3 to $5 million, all in that we have -- pardon me -- I should say probably about 10 to $15 million that we've spent on acquisitions.
Steven Barlow - Analyst
So does that include the roots as well as the tack on properties?
Mark Contreras - SVP, Pulitzer Newspapers
Right.
Bob Woodworth - President and CEO
This is Bob, just a follow-up comment on the rate question, I mean, we want to be clear about this.
I think Terry and Mark hopefully articulate our strategies, but if you look back at what we have been able on do on a CPM basis over the last two years, we have found it fairly gratifying that we have substantial pricing power in our markets, but it's the result of a lot of detailed analysis, not an across-the-board increase.
But I mean, we're quite pleased that we're delivering value and able to implement fairly significant rate increases.
Steven Barlow - Analyst
I appreciate your comments, and I certainly know it's not a blanket 3 to 4% that goes across every category.
That you to ever do electric at it market by market and category by category.
That was helpful.
Alan Silverglat - SVP, Finance
Thank you.
Operator
Your next question comes from the line of Doug Arthur with Morgan Stanley.
Please go ahead.
Doug Arthur - Analyst
Yeah, I was just wondering if you could clarify your comments on newsprint.
I think you said despite these announcements, that you still don't expect newsprint to be up more than 10% or around 10% for the year, so it does imply that you think very little of the price increase will go in and that the odds of a second price increase later in the year are fairly slim?
So that's question one.
And then just a background question, the strong growth in help wanted in Tucson, can you just remind me what's been driving that in it's been going on for three or four months.
Thanks.
Alan Silverglat - SVP, Finance
Doug, it's Alan.
First on newsprint, by the time, you know, that ad driven increase would roll through, it wouldn't impact the full year, and we do anticipate a second round of increase or that the mills will try to get a second round of increases, but where it's all going to fall out, we think is going to be driven by, you know, by the demand in advertising, and I don't think that they will be able to push through much beyond that, you know, that the core volume increases will support.
On Tucson.
Mark Contreras - SVP, Pulitzer Newspapers
On the help wanted, Doug, this is Mark, on the help wanted question in Tucson, it's really, the increases that we're seeing are a function of two things.
The first being natural help getting back into that economy, but secondly it's approach in sales.
There's a program that the advertising director in Tucson, a woman named Susan Lindsey has introduced called maximum reach which really extends the number of insertions that a help wanted advertiser gets.
So much of the increase in revenue is the result of that program as well.
It's really a factor of the healthier economy and the new sales program that was started in July.
And what we have seen every month since July is that sequentially stronger performance culminating in December with something close to 20%.
Doug Arthur - Analyst
Great.
Thank you.
Operator
Your next question comes from line of Peter Appert with Goldman Sachs.
Please go ahead.
Peter Appert - Analyst
Good morning.
Alan, do you have any thoughts to what we might anticipate in '04 in terms of any continuation of the investment losses you've had to recognize quarterly and then also any thoughts in terms of incremental severance costs we should be looking for in.
Alan Silverglat - SVP, Finance
Sure, Peter.
On the incremental severance costs, the only thing we pick up are the costs, or we report as a -- an adjustment from reported GAAP results to base earnings are the costs associated with those positions permanently vacated.
We, today we have no plans to, you know, for any of that action.
It happens, I would say, occasionally during the year, so to tell you that it's probably going to be zero is not right, either, but we have no anticipation or expectation of any today.
On the in investment activity, we saw some up tick in the underlying investment performance in December, so if that's -- if one month makes a trend, we would hope for no losses, but we have learned many times that one month doesn't make a trend and our policy is just to adjust, you know, to the market value reported by the managers.
Peter Appert - Analyst
Okay.
How about carrying value or book value of investment assets at this point?
Alan Silverglat - SVP, Finance
It's all in well below $20 million.
Peter Appert - Analyst
And then, Terry, fair to say that basically in St. Louis you had no total market coverage product before the introduction of this direct mail offering?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
No, Peter.
Again, we have -- we are in somewhat of a unique situation in St. Louis with the ownership of the Post-Dispatch and the distribution to all our subscribers, and then as a separate business the ownership of the "Suburban Journals", the 37 different weekly publications there that essentially are delivered to every household, that gave us the capability reach in any and all households with an ROP or a preprint message, whether it was sold by the journals or sold by the Post-Dispatch.
However, overall grocery in this market had been in the mail for some time and there was quite a bit of direct mail business anyway, so essentially it's just yet another means of being able to target the market with the direct mail program, so we see it as complementary and a way to go after business that has a preference have preference for some direct mail delivery.
Go ahead.
Peter Appert - Analyst
I was just going to ask from the customer's perspective is direct mail delivery less expensive than your PMC offering?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
It varies.
And, again, what will happen is the preprints that the customer, for example, the grocery's preprints will be delivered with the newspaper to household that subscribe to the post dispatch, and they will be delivered to households that do not subscribe through the mail, and that will be, you know, with the robust database we have now, we have the capability of having that clean knockout list.
Mark Contreras - SVP, Pulitzer Newspapers
Peter, this is Mark.
I just would add that this is a very -- the business concept here is really a solid one.
We have direct mail programs up in Tucson, Provo, Napa and Flagstaff, and the -- they have just, they have continued to be increasingly successful in attracting base players, first and foremost, but more importantly some additional folks we hadn't done business with in those market.
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
We see it as moving into an entirely new line of business, so that is extremely complementary.
As Bob's talk about, our notion is audience and extended reach in the marketplace, and then increasing ad market share by being able to deliver messages to the households and in the way the advertiser wants to do it.
Since direct mail has already been established, for us to be able to move into that line of business is a real plus for us.
Bob Woodworth - President and CEO
It's Bob, just a real quick comment.
The fundamental issue here is that these programs work.
I mean, the two grocers who will go into the paid circulation of the Post-Dispatch and the direct mail non-subscriber piece, as you know, this is a delivery vehicle that's been used in other markets, and proved to be very, very effective in terms of generating results for advertisers.
We're going to promote it.
We're going to do everything we can to make sure we're delivering value to the two grocers and the other advertisers that will be in this product.
And over a period of time this will develop a critical mass that will really, we believe, will be a very effective vehicle.
Peter Appert - Analyst
Right.
Is there any risk to possibly cannibalizationof the suburban journal revenue stream as a result?
Bob Woodworth - President and CEO
There possibly is some, but the journals, absence you know, I think are a very, very local product, and that is our niche with the "Suburban Journals", both on preprints, single sheets, less distribution inserts and ROP, so there could be some over time, but the key is that we have, really, we have such an opportunity here in the preprint arena that we think we can continue to build business both in the journals, in the Post-Dispatch, and with our direct mail program.
Peter Appert - Analyst
Right.
I'm sorry if you already addressed this, but are you hiring a separate and dedicated sales organization for the direct mail product?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
Peter, no, we, again, that's the beauty of having the size of the sales force we have, the combined number of feet on the street at the "Suburban Journals" and at the Post-Dispatch allow us to call on more people.
We'll have different people who have that expertise in our business now who coordinate the activities of direct mail, and we will importantly measure them as separate businesses so that we do keep track to be sure there is no -- there is no cannibalization of our existing preprint business.
Peter Appert - Analyst
Right.
And the last thing, Terry, and I realize this is mighty early in '04, but any flavor on how January is progressing in St. Louis, anything interesting in terms of business trends?
Terry Egger - SVP and Publisher, St. Louis Post-Dispatch
No, not yet.
Again, one of the things as Alan commented, on Peter, we're just pretty cautious because we had a very strong fourth quarter in '02 and that led to some optimism but things didn't quite materialize in the economy at the beginning of '03, so we're still playing it pretty close to the vest in that regard.
Peter Appert - Analyst
Okay.
Thank you.
Operator
Your next question comes from the line of Stacy Fleck with Merrill Lynch.
Please go ahead.
Stacy Fleck - Analyst
Just one quick follow-up.
The newsprint price increase a little bit less than we had expected.
Was there anything unusual in the quarter?
Bob Woodworth - President and CEO
Not really, Stacy.
There's always a few adjustments, but, you know, I think that what you're seeing is the effect of some inventory buildup just rolling through and we're working to hold our costs down as, you know, what drove the statistic you referenced.
Stacy Fleck - Analyst
Great.
Thanks.
Operator
Once again, ladies and gentlemen, if you wish to ask a question, please key star 1 on your touch tone telephone.
Your next question comes from the line of Steven Barlow with Prudential.
Please go ahead.
Steven Barlow - Analyst
Thank.
Just a follow-up.
On guidance, Alan be you've given us at least 210.
Any thoughts on the first quarter?
Can we look for a four handle on the number?
Alan Silverglat - SVP, Finance
Steve, it's more than a fair question, and it really comes back in part to our direct, you know, mail outlook.
As we get a little more into the business, we'll try to give you some help as to what that -- you know, what that might mean.
Steven Barlow - Analyst
Okay.
Operator
Once again, ladies and gentlemen, that's star 1 for questions.
It appears there are no further questions, gentlemen.
Bob Woodworth - President and CEO
Great.
Thank you.
I just want to close with a few comments.
At Pulitzer we're executing long-term strategy that we believe will enable us to deliver revenue growth, cost control and earnings that will stack up well against our peers and in 2003 we believe we delivered on those strategies with good revenue growth despite a difficult environment and tough comps particularly in the fourth quarter, cost control that we expect will be among the best in our industry, even with our willingness to make strategic investments, and improved margins and solid earnings growth.
We're confident you'll see more of the same in 2004.
We appreciate your interest and time today.
Thank you for joining us.
Operator
Ladies and gentlemen, thank you for your participation in today's conference.
This concludes the presentation.
You may now disconnect.