New York Times Co (NYT) 2002 Q2 法說會逐字稿

Good morning.

My name is Shennele.

And I will be your conference facilitator.

At this time I would like to welcome everyone to the New York Times Company 2nd quarter earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer period.

If you would like ask a question during this time, simply press star, then the number 1 on your telephone keypad.

If you would like to withdraw your question, press star, then the number 2 on your telephone keypad.

Thank-you.

Miss Mathis, you may begin your conference.

Good morning, everyone.

And thank-you for joining us today on our 2nd quarter conference call.

By now, all of you have seen our press releases on earnings and ad revenues and today we have several members of our senior management team here to discuss them with you, including Russ Lewis, our President and Chief Executive Officer;

Len Forman, our Chief Financial Officer;

Janet Robinson, Senior Vice President of Newspaper Operations, and President and General Manager of the New York Times newspaper.

Ellen Taus, the CFO of New York Times Digital.

Jim Lessersohn, our Vice President of Finance and Corporate Development.

And Stu Stoller, our Corporate Controller.

Our discussion today will include forward-looking statements, our actual results may differ from those predicted and some of the factors which may cause them to differ are included in our publicly-filed documents including our 2001 10-K.

We are undertaking no obligation to publicly update any forward-looking statement, either as a result of new information, future events or otherwise.

This conference call is being webcast and an archive of it will be available on our website, which is www.nytco.com.

And beginning at 1:00 p.m. today, an audio replay will also be available by calling 1-800-642-1687 in the U.S. or 706-645-9291 outside the United States.

And the access code is 4653327.

The replay will be available until 5:00 p.m. on July 18th.

And a transcript of the conference call will also be posted on our website as well.

With that, let me turn the call over to Russ Lewis, our President and CEO.

Thank-you, Catherine and good morning, everyone.

My colleagues and I are pleased to be here this morning to report on the positive trend line that you're seeing in our 2nd quarter operating results that were released earlier this morning.

Given all the tumults taking place in the business world these days, it is reassuring to be part of an organization whose business it is to report the truth as oppose to covering it up.

Since 1851, our company has successfully based its business on high quality, accurate reporting.

And we believe we're well positioned to continue doing just that, well into the future.

I can say this because the Times Company has both a business model and a long-term strategy that are as successful as they are easy to understand.

We have transparent financial statements, including a solid balance sheet and a healthy cash flow.

And we've demonstrated that we can grow our core businesses both nationally and local through the methodical implementation of our sound business strategy.

We've also supplemented that core growth with modest and financially prudent acquisitions and investments.

So, before Lynn hits the highlights of our 2nd quarter financial performance, let me take just a few minutes to reiterate how we're growing our businesses.

Our strategy, simply put is to operate the leading news and advertising media in the national [INAUDIBLE] audience market served by the New York Times newspaper and also operate the leading news and advertising media in each of the local markets we serve.

With respect to the first element of our long-term strategy, we continue to build our portfolio of multiple media properties aimed at capturing the lucrative, national knowledge audience served by the New York Times brand.

As you know, this is our most important long-term strategic initiative.

The Times newspaper dominates the high quality national knowledge audience that advertisers covet because of its demographics, brand loyalty and spending propensities.

And we intend to keep it that way.

Our primary tactic in this regard is the successful transformation of the New York Times into a national newspaper with robust circulation growth and a growing share of the national advertising market.

This national element of our long-term strategy also has a strong digital component led by nytimes.com, the leading newspaper site on the web.

To complement our print and digital business, the Times is also developing a strong television component to help us in reaching this national knowledge audience.

This includes our recently-announced joint venture with Discovery Communications, which provides for co-ownership of the Discovery Civilization channel and the long-term agreement to sell a minimum of $40 million worth of New York Times produced programming to the full Discovery network of channels.

This growing portfolio of multiple media businesses is helping us accomplish the first element of our long-term strategy, which is to operate the leading news and advertising media focused on the national knowledge audience.

With respect to the second element of our long-term strategy, which deals with the local markets that we serve, we're taking a similar approach.

For example, in Boston, our largest local market, we've amassed powerful portfolio of Boston area media properties across a wide variety of platforms.

This portfolio includes the Boston Globe, the adjacent Worcester telegram and Gazette and a cluster of four locally-zoned editions of the Globe.

Two of which were added in the second quarter.

We also operate boston.com, New England's leading regional website.

And, of course, earlier this year we became a minority partner in the Boston Red Sox baseball franchise, which includes the New England's sports network. [Nessin] as the network is called, will serve as a television platform for the Globe's nationally-acclaimed sports reporting.

At the same time, the Red Sox-Nessin partnership is also providing the Globe with important promotion, marketing and joint sales -- joint ad sales advantages.

Through this growing portfolio of print, television and digital platforms, we now operate the leading news and advertising media group in Boston.

And we built this portfolio of properties without spending a fortune.

In some, we continue to believe that we have a great business here, with both national and local components.

And despite all of the current marketplace trevails, we are as optimistic as ever about our long-term future.

Of course, we're also pleased that the short-term is trending upwards, as well.

So, to talk about that, let me ask Len to give you the highlights of our 2nd Quarter financial results.

And then we'll take your questions.

Thanks, Russ.

And good morning, everyone.

Our 2nd quarter earnings per share of 52 cents came in just as expected at the high end of the range and right on consensus.

This is a 4% increase over last year's level adjusted for the adoption of FAS-B 142.

As a result of the many cost initiatives we took over the course of the past year to reduce our fixed cost rates, combined with favorable newsprint prices, our very robust circulation revenue growth and continued improvements in the advertising market, operating profits grew nearly 5%.

Business continues to improve slowly but steadily, our total revenues have improved each month of the year, beginning with the decline of 7.6% in January and ending the first six months of the year with a year-over-year gain of 1.6% in June.

Advertising while still slightly below last year's level showed steady improvement throughout the 2nd quarter.

And given our operating leverage, even small improvement can lead to sustained operating profit growth.

Strong categories at the Times included Real Estate, which is now the largest classified advertising category, up 13%, banking up 72%.

Media up 37% and Hotels up 26%.

Entertainment, which is the largest national advertising category for the Times, making up 14% of its ad revenues was up 27%.

This quarter, the Entertainment category was helped by the largest string movie preview in Times history.

Which generated twice the amount of revenues as last year.

Weak categories in the quarter were the usual suspects, after a 45% drop in the first quarter, the rate of declines slowed considerably in the 2nd quarter with Help Wanted/Classified down 21% at the time.

And we also saw steady improvement as the quarter progressed.

Help Wanted was down 23% in April, 21% in May and 19% in June.

Clearly the trends moving in the right direction.

Technology products continues to be soft, down 43% at the Times in the quarter while Financial Services fell 31%.

Fortunately both Technology and Financial Services are relatively small categories, each making backup 3% of the Times' total ad revenues.

In the quarter, the Times continued its national expansion by bringing more features from the New York edition to its national readers.

In April, we made our Arts, Dining and House and Home sections available across the country and we also introduced the new national Friday section called Escapes, which focuses on recommendations for weekend destinations, automobiles, weekend homes and real estate.

Escapes has been very successful in attracting new advertisers, particularly in the real estate area and generated 3.35 million incremental revenues since its April launch.

Strong categories for the New England newspaper group were similar to the Times.

Entertainment up 17% in the quarter.

Banking was up 109% and Real Estate rose 21%.

In addition, the Globe continues to solidify its regional strength with the successful launch two of new biweekly zone products, Globe North and Globe Northwest.

That offer increased local news coverage and targeted advertising.

So far this year, zone revenue in Boston is up almost $2 million.

Help wanted was down 35% for the New England group for the 2nd quarter and like the Times, the group showed continued improvement having been down 54% in the 1st quarter.

Circulation revenues to the newspaper grew an extraordinary 13%.

And that kind of growth is just unparalleled in our business.

Circulation revenues for the group now represent 30% of total revenue and for the Times alone, 32%.

And that's up from 28% a year ago.

In April, we added another contract print cycle to Times national edition in Columbia, Missouri, that makes five new sites in the last 13 months.

We're now in 220 markets cross the country for home delivery and well on our way to our goal of 250.

Because of our strong performance, we've revised upward our guidance on circulation revenue growth.

Previously, we had expected it in the range of 5 to 7%.

It now looks like it will be in the range of 6 to 8% for the year.

Looking at our digital business, NYTD achieved its fourth consecutive quarter of operating profit, helped by robust advertising growth of almost 25%.

It's now on target to reach operating profitability for the full year of 2002.

Turning to the expense side of the business, costs were up about 1% in the quarter.

Excluding newsprint and special items, costs rose 4.6%.

Over half of this increase stemmed from higher bonus accruals linked to improved performance, increased benefit cost and an increase in third-party printing costs relate to the New York Times national expansion.

The five newsprint sites added since the end of the second quarter last year have caused abnormal expense growth in the quarter.

In addition, there was an expense associated with a major repair at one of our metropolitan production facilities which accounted for 1percentage point of the full 4.6%.

For the full year however, our guidance remains unchanged.

And we expect that total cost will be up 1 to 2%.

Losses at our joint ventures totaled $2.3 million in the quarter, primarily due to the effect in our recent investments in Discovery Civilization and the Red Sox.

For the year, we expect results from these equity investments to be in the neighborhood of a loss of about $5 million.

This number depends largely on the non-cash accounting valuation of assets being performed at both properties.

And it is expected to be completed later this year.

During the quarter, we spent $1.2 million on share repurchases, down from previous quarters, mainly due to the investments I just mentioned.

Approximately $388 million remains in our share repurchase authorization.

For the balance of the year, we expect a modest rate of share repurchase.

Looking ahead, our performance for the balance of the year depends on economy strength and the health of the advertising market.

Prospects were a robust expansion has markedly diminished in recent weeks as a consequence to the turmoil in the financial market.

But while we continue to see steady sequential improvement in the year-over-year advertising declines, there is, of course, no certainty that it this continue.

Accordingly, we're refining the range of a full-year earnings guidance to $1.90 to $2 per share with the result dependent upon the strength of the ad recovery.

For the third quarter, we expect earnings per share to be in the range of 34 to 38 cents.

With that, let me I open the call to any questions you may have.

At this time, I would like to remind everyone, if you would like to ask a question, press star then the number 1 on your telephone keypad.

We will pause for just a moment to compile the Q&A roster.

Your first question comes from Lauren Fine of Merrill Lynch.

Understand more about the refining of your guidance, I mean I understand the financial markets have been tumultuous, but what are you seeing in July ad revenues; are you seeing something specifically that's causing you to be more cautious specifically for the 3rd quarter?

No.

No?

No.

N-O!

It's Russ, Lauren.

No, you know, we're -- there's nothing that's really changed in the last month or so.

If you and perhaps some of you are reading something like that into our press release, but you shouldn't, if you connect the dots from January through June in terms of our ad revenue performance and overall revenue performance, you know, we've improved every month steadily and you connect the dots and the arrow clearly points in the right direction.

We don't have any -- anything in front of us that's telling us that that is not going to continue.

But, you know, given the current tumultuous environment both, you know, it takes me twice as long to get through the paper in the morning between reading about the Middle East and -- and the corporate government matters, not to mention other things like campaign finance reform.

So, it just particularly involved a -- in terms of all the corporate governments it just seems prudent to reiterate that while a trend is unargueabley in the right direction, there is no certainty that it will continue.

And if, you know, if a day when the stock market goes down 400 points and up 400 points, that doesn't demonstrate that things are a little bit squishy out there, then I guess nothing will.

So, I hope that's responsive to your question, Lauren.

It is.

Let me just ask two quick follow-ups if I could that are much more mundane, I suppose.

You indicated bonus accruals were up in the quarter.

Were you making bonus accruals in the 2nd quarter a year ago?

And if so, you know, are they comparatively up that much more than a year ago?

Yeah, Lauren, this is Len.

They were, but we reversed them when we paid no bonuses last year.

You're comparing a large number against a zero from the year before.

So, you didn't accrue in the year ago second quarter you were actually reversing already?

I think that's the case, right?

I didn't --

Lauren, we can't quite hear you.

Could you speak up a little more?

I can try, sure.

Okay.

I just want to make sure I understand Len's answer.

We reduced, Lauren, as the year progressed and we saw the advertising market deteriorate and began to reverse the accrual as we went along during the year.

But were you already reversing in the 2nd quarter or were you still accruing a bonus in the 2nd quarter?

No, we were reducing in the second quarter.

We took an adjustment downward in the 2nd quarter and over the balance of the year, the third and fourth quarter, we did reverse some more.

Okay.

And then my last question is: could you share with us what your interest rate assumptions might be, that are implicit in your interest rate expense guidance for the year?

We're coming out low given your 2nd quarter performance.

We are looking for very modest increases in interest rates going forward.

We've made an adjustment in terms of we've issued $100 million roughly in medium-term notes this quarter, where we tried to lock in very attractive five-year rates and if you see an increase above what you expected, it's probably that shift from somewhat, you know, very heavy emphasis on commercial paper to a little bit more on the long end range to lock in the attractive rates.

Great, thank-you very much.

Your next question is from Christa Sober from Thomas Weisel Partners.

Hi, guys.

Could you comment a little bit more on, I know you're not seeing really positive trends in July/ August, but can you comment on how the visibility has continued to be extraordinarily short?

And then in Boston, if you could just -- I know you gave us some comments on specific categories going on there, but if you could highlight why you think it's not turning as quickly as your New York properties?

And finally, the $3.5 million you said that was incremental, I think, was that just for Escapes?

And if so, could you just highlight, you know, anything after seeing a full quarter of the expanded national version of what that might be adding to the overall picture?

Thanks.

I'll let Janet answer the question on advertising.

I'll just touch the Boston comment.

We're -- I said I believed that Boston was actually showing similar changes in advertising at the Times and there is nothing out there to suggest that the recovery that the Times is experiencing is not also being experienced by Boston at roughly the same rate.

They're actually doing reasonably well on the revenue side.

I think that there are very positive trends, really, at both the Times and the Globe.

If you were to look at the advertising revenue for both the Times and the Globe, it is down 7.9% at both properties.

The categories may be a little bit different, but in reality, both newspapers are performing very nicely and we expect that positive trending to continue going forward.

The categories at the Times are entertainment, media, hotels, real estate, credit cards and banking and at the Globe, we're seeing entertainment, banks, wireless and some of our retail categories performing and real estate performing very well in Boston.

So, I think an assumption that Boston is not performing as well as New York is the wrong perception.

In regard to our launch on early April in regard to the new sections going national and the launch of Escapes, we are thrilled with the performance.

The $3.5 million is the incremental advertising that we have received from Escapes and that is continuing to show great promise going forward.

It has been extremely well received by readers and by advertisers.

One of the reasons why you see a nice hotel list in regard to the ad revenue is primarily many of those advertisers and our real estate advertisers have embraced the section.

That said, all of the sections running nationally aren't Dining In, Dining Out and House and Home have been very well received by readership but again, also very well received by our advertisers, as well.

To date, since the launch, we've brought in about $10.5 million in advertising for those sections going forward and we expect that to grow as the year goes on, as well.

Janet, do you want to say anything about the visibility in the 3rd quarter, which, of course is our lowest quarter in terms of business?

It is very difficult, particularly in the 3rd quarter to see how advertisers are going to be booking.

There is a very short lead time, shorter than has been in many years in regard to what we see, but that said, there are many categories particularly for the Times and the Globe that commit farther ahead.

Primarily because of premium positioning that they do request.

This is true not only in the New York Times magazine but also true in the many sections, particularly the "A" book and some of our special sections for the New York Times.

It is also becoming true at the Globe as well in regard to premium placement there.

And if you don't mind, it's Russ, I'm just going to bore you for a second.

Janet correctly noted that year to date, the ad trends at the Times and at the New England newspapers are identical, down 7.9%, but, of course, as we said in the beginning, if you connect the dots, whether it's at the Times newspaper or New England or total, you're going to see the arrow pointing upwards.

So, I will bore you by giving you the numbers for January through June for the New York Times newspaper.

We started ad revenue down in January, down 14% and change.

February down 11 and change.

March and April together with the Easter split down 8% and change.

May down 2% and change.

And June down less than 1%.

That's at the Times.

So you connect those dots.

New England newspapers, similarly starting down in January.

Down 21% and change.

February, 8% and change.

March, April, again together with the Easter switch, down 4.5%.

March, down 3.8% and in June, down only --

Whoo-hoo go market!

It's not that exciting, whoever said that.

I don't know it wasn't me, either!

June is down 1%.

We've got a similar improving trend in help wanted in terms of checking the dots in the right direction.

And, of course, we've seen improvement all along and substantial double-digit-plus numbers in both real estate as a total and -- and strong numbers in auto, particularly in Boston.

So, I wouldn't want anybody to get carried away by our statement that, you know, growth -- there is no guarantee of certainty in this trend continuing.

There isn't, given the current squishiness of the climate.

But on the other hand, we don't know of anything that would change the direction that gets pointed to, if you connect all these dots.

I apologize for boring with you all the numbers.

Next question, thank you.

Your next question comes from Doug Arthur of Morgan Stanley Dean Witter.

Yes, a question for Janet on circulation, going back over the last 10, 15 years, the Times has been pretty adroit at increasing newsstand and home delivery prices when newsprint costs are going up.

Obviously this year newsprint has been incredibly depressed.

Your circulation numbers have been [INAUDIBLE] fantastic.

If -- if we do eventually get a sharp increase in newsprint off really historic lows here, are you confident that the strength of the franchise is such that you can increase newsstand and home delivery aggressively again in '03.

Bob, this is Len.

If we get a big increase in news print prices it means that the ad market is coming back pretty strongly.

And given the leverage that we've got it doesn't take much, even with big increases in newsprint prices.

We have a lot of cash in the bottom line with the comeback and advertising.

Doug, we also, as we increase the value of the Times, you know, as evidence with what we did running our sections nationally, readers are very willing to pay a premium price for our product.

We do not rule out moving the price up again, both single copy and home delivery, primarily because we think the market will take it.

Great.

And can you just, Len, make a quick comment on TV paces?

I'm sorry, Doug, you sort of faded on me, you said broadcast TV?

Yes, broadcast TV paces?

Yes.

In July they were up 6% and August, 3%.

And looks like for the quarter, 3rd quarter, around 4%.

Thank-you.

Your next question comes from William Bird of Salomon Smith Barney.

Yeah, just two quick questions, first, just wondering when national advertising eventually recovers, do you think that national newspaper advertising will resume its above-average growth rate.

And then secondly, you know, given the growth you'll experience made color premiums, do you have any more plans to more rapidly expand the proportion of color advertising in the Times?

Thanks.

We definitely feel that national advertising will come back in national newspapers.

We will be a strong beneficiary of that, primarily, as you well know, Bill, because of the broad base of advertising we continue to attract.

The two categories, that I think are hardest hit are technology and fountains, as you know.

From a perspective of the Times as far as national categories, our broad base really does help us during a weaker economy, but during a stronger economy, when we see it coming back, we feel we will do very, very well.

In regard to color capacity, we have increased our color capacity as you well know, with our print sites nationwide within the last 18 months.

And when, indeed, a lot of color returns with a lot of our national advertising, we think that we will be in a very good position to capitalize on strong color premiums.

We've seen very strong color growth in our advertising already.

Color is -- this past year, we raised color 20% and in the 2nd quarter alone, we received 10.7 million in color premiums, which is the 34% increase.

And through this first half, we have about 18 million in color premiums, which is about 32% over last year.

So even during a softer, economic time, the quality of the color that the Times produces and the fact that it attracts a lot of advertising even now, sends a very good message in regard to what we see in the future.

And Bill, I'd also just say that there are national categories growing at double digit right now.

There is unevenness into weak categories and strong categories.

If and when the economy really does grow at a robust fashion, we will benefit from the weak categories coming back, but we've also seen pretty good growth.

Bill,2000, 13% of our advertising was color. 14% in 2001.

And 16% through the first half of this year.

So, I think that is sending a very clear message that color is important to our advertisers and will be going forward.

Just another note, out of the 34 categories, talking about the power of the Times, 27, we're number 1 or 2 in 27 of those 34 categories.

So again, in a more difficult times, we are doing very well.

And at the risk of piling on, you know, Mr. Bird that, prior to this latest downturn, we talking about and most of the commentators talked about a secular change and increase in use of national newspaper advertising and we are as confident as can be that that trend will continue as the economy picks up steam and whether it is on the circulation side, where we're seeing as Doug questioned us, we're seeing robust revenue gains even circulation gains, even in the face of rate increases.

Whether on the circulation side or on the advertising side, we're really going to continue from the Times benefit from this secular increase in national newspaper advertising and color advertising which is a component of it.

We're going to continue to benefit from all that and if you could see us, you could see a group of people that are extremely confident that we've chosen the right strategy for the New York Times newspaper in terms of the continuing national expansion of the Times.

Just to add one more thing, Bill, you know, if share is important, which it is very important to us, when we look at ourselves in comparison with the other national newspapers, we have gained 3.9 share points at the expense of at least one of our competitors and when we're looking at a combined look at national magazines and national newspapers, we have also gained 3.3 share points.

So, again, you know, during more difficult times, it's not only capturing advertising, it's also capturing share.

Thank-you.

Your next question comes from Barton Crockett of J.P. Morgan.

Hi, I was wondering if you first just sort of refresh us on the environment last year, you know, after September 11th, in terms of how much of an incremental expense hit did you guys have that we'll be cycling against in this coming quarter?

And how much of an incremental revenue hit did you have net of the condolence ads?

Well, we are looking up for the year at 1 to% expense.

If you recall, we took most of our expenses in -- through June last year, our expense cuts.

And we're recycling that through.

So, for the year we're pretty confident that will make the 1 to 2% growth.

Okay.

But no additional color in terms of that specific month at this point?

Okay.

We will look to see if we can come up with something.

Nothing top of mind.

Okay.

But as we continue to talk, we will see if we can find you something.

Okay.

That's fine.

But again, all those things are factored into our internal forecasts going forward and the guidance that we've given you in terms of expenses and EPS performance going forward.

Okay.

So, what are you assuming terms of newsprint pricing this guidance that you're giving?

Yeah, we -- you've seen the announcements of -- of the increase effective in August and because of our contracts it really won't hit us until September.

So, we factored in the latest increases into our forecasts.

And half from the beginning of the year.

We've always expected an increase in the 3rd quarter.

So, that takes effect in September on your forecast?

Yes.

Okay.

All right.

And then I know your new as an owner here and there are issues to be worked out, but you know, you now have a stake in the Red Sox.

And I was just wondering if you a sense of if by, God forbid, but if there were a baseball strike, you know, what would be the potential exposure there per game missed, any sense of what earnings implications that might have?

One thing we can reassure you off the bat, there'll be no cash impact because of the way the investment has been made.

On the earnings front, we're very confident that the two sides will continue to talk and get serious and get this thing settled for the greater good of everybody, including the New York Times company.

And we will be prepared to deal with whatever comes about.

Right now on the -- on the fronts that we are looking at in terms of our investments in the Red Sox and Discovery, we're focused now on the appraisals that are necessary for us to understand the full impact.

Bart, we have 15% of the investments, so, it's not a huge amount and it's, in fact, if a strike does occur, it's unclear whether it will materialize, but if it does it would happen so late in the season with such a small investment there, wouldn't be a big impact on us.

And we also get to stop paying all those significant player salaries!

So, in terms of our company, we don't expect any material impact.

But I'm hopeful that we're not going to -- nobody in baseball, either players or --

MHK.

Will want to repeat 1994.

Did I miss the innings today?

Hello?

Hi, I'm not sure where that's coming from.

Someone is cutting in.

Well, simply put, this is not an era for millionaire ball players to be acting too aggressive in terms of contract demands.

Next question, sorry.

Your next question comes from Steven Barlow of Prudential Securities.

You circulation numbers, you got about a 10% increase so far in the 1st half.

You only want 6 to 8 it looks like the trend is coming down.

Any particular reason that would be coming down?

Or just cycling through what's happened so far?

I'm surprised the gain in the 2nd quarter.

We're cycling through the price increases and don't expect the volume increases we had in the early part of the year, as well.

We had the big spike-up because of September 11th and to hold on to the 40,000 plus gains we've made is a heroic achievement, anyway.

So we don't see much upside beyond that for the year, which impacts the overall revenue game.

And then in terms of New York Times digital, you've had sequential revenue increases.

Would you think, Ellen, that you would have revenue increases for the rest of the year?

Yes, as we look forward, we see the trends for the first half continuing on revenue.

Perhaps tapering off in the 4th quarter because that's where we began to see a pickup last year but aside from that cycling through, we don't see any real change, piece of strength through the many advertising categories.

Do you have some of the advertisers locked in through the rest of the year at this point, in terms of visibility?

You know, we're still seeing shorter term, shorter length than we had previously, however, they're beginning to extend out.

I wouldn't say we have a great number of advertisers who have locked in through the balance of the year, but the length of the buy is starting to extend out by a couple of months.

Thank-you.

Your next question comes from Peter Appert of Goldman Sachs.

Len, I think you said the expectation was you're going to be less aggressive with regard to share repurchases in the second half or modest share repurchases, I guess more specifically.

Is that due to the higher levels of capital spending you're planning that you indicated the mid-year media review and might that then imply that share repurchases over the next several years would be modest?

I think if you compare the numbers to a year ago, that was an extraordinary level of share repurchase.

We used the proceeds from the sales of the magazine group to buy back our stock.

So, I think looking forward and going out, I think a lower level, more consistent with previous years is certainly more likely.

And as far as the specifics of the last several months, we've -- we've made our investments in Discovery and made our investments in New England.

We've -- we're beginning to pay down some debt and we have a modestly higher level of capital expenditures.

So, all of that is a use of cash.

Could I pin you down to a specific range then, in terms of what we might look for in terms of annual share repurchases going forward?

No, I think it's too early for that.

Okay.

I think I read what you said that you would anticipate that the August price increase is going to be implemented.

Is that fair assessment?

Well, it's been announced.

The question as to whether it will be implemented is -- is unclear at the moment.

I think from the perspective of the newsprint suppliers, they're looking at a tight marketplace even though advertising revenue hasn't necessarily come back.

They've taken down a lot of capacity so there's lot of downtime.

The weakening dollar has increased their exports.

So, all of that is essentially putting them for the first time back in relative balance of supply and demand.

So, I think there is a reasonable expectation that it will stick, but as I said it won't impact us for an additional 30 days and we've already built in that price increase into our forecast for the year of cost of 1 to 2%.

If it does stick, if it does stick, which is certainly a question mark, it would be very unlikely to be the full amount of the increase that would stick.

Uh-huh.

So, we certainly feel that given the overall advertising market that -- which is still not positive in terms of year-over-year gains, that an increase in newsprint prices is unwarented and the message that we're giving to our newsprint manufacturer friends, we prefer to see increases when ad revenues are increasing because then both of our businesses are benefited.

So, they're go try to get an increase and we're gonna resist and hopefully we'll be successful, but if we're not, it will be well into the 4th quarter and it will not be the full amount of the increase.

Peter, it's Len again.

And just as a reminder, newsprint makes up just about 4% of our overall cost base.

It is no longer the material factor that it was five or six years ago.

You said 12% right?

Yes.

Last item.

Any thought about any preemptively expensing option costs?

We're certainly following the developments which is certainly one of the things taking us longer to read the paper every morning!

But we've certainly made no decision about it.

I'm happy to report, as you probably know, that in addition to the reporting of the impact of options in terms of diluted shares, we report very fully and in accordance with the generally accepted accounting requirements.

We report the impact of our option program on our income on the back of our 10-K filing pages, I think it's --

31.

30 and 31 and, you know, it's in big print.

It's not in tiny print and it's a good readable explanation.

So, we're already giving the market that information, whether or not we will turn around and treat it as an expense, we'll have to wait a little longer to watch the developments, but obviously if there is a pronouncement, just as we are today, we will conform to the requirements of the accounting rules and the stock exchange.

Great.

Thank-you.

Your next question comes from Kevin Gruneich of Bear Stearns and Company.

Hi, thanks.

Hey, I'm happy that you're looking for full year profitability in the New York Times Digital with four quarters of profits under your belt already.

I wondered if you were going to set up a profit objective for '02?

And then, second question on -- on broadcasting noting that costs are up quite a bit.

I know some of this has to do with benefits and pension and all of that, but I was wondering if you could talk specifically about programming costs and what the -- what the digit TV cost meant to that line, to the cost line, and the way you're looking for broadcast costs full year?

Kevin, it is Len.

On the cost side, the -- the primary two elements that are driving broadcast costs up are the expenses associated with satisfying the requirements on converting the stations to digital format.

And our normal wage increase to the year.

Most other costs are flat to down.

They're doing, as they usually do, a pretty good job at managing expenses.

Once we've recycled through the digital costs, you will begin to see a more normal picture on cost.

Seven of our eight stations have already converted to digital.

So, the full hits coming in 2002.

With regard to your first question, we always set profit goals for all of our organizations, it is part of our budgeting process.

So, NYT Digital won't be treated differently than other business units.

What are they shooting for this year?

That's not something we typically disclose.

Let's just say, we're a year ahead of where we thought we would be with regard to profitability of NYT Digital.

And we're quite pleased with the performance and revenue.

Do you expect sequential profit improvement?

In terms of annually, or monthly or quarterly?

I mean, we certainly expect to see sequential improvements on an annual basis in terms of operating profits.

You know, we -- maybe, you know, why there's a little bit of -- why there's the interest on your part is that we announced an aggressive flow of cash flow profitable, which we did last year, one year ahead of time.

Our goal this year, which we had set up last time was to get to operating income profitable and we certainly expect to be there this year and rest assured we -- several of us at this table are pushing Martin and Ellen Taus as hard as we can to give us the biggest pop in operating income that we can get this year and setting up a stretch for next year.

But, again, we don't -- whether it's digital or anyplace else, we don't talk about the internal hurdles that we're setting.

Kevin, one thing perhaps to keep in mind is that we are -- we experienced, like the rest of our business, seasonality.

And as we head into the 3rd quarter, judging from the past few years of operating NYTD, we do expect the third quarter to reflect the seasonality we see in the other media business.

This is Janet.

I just wanted to go back to Barton Crockett's question regarding 9-11 and the aftermath of 9-11.

Yes, of course there was a very strong investment being made in the part of the Times, which, of course, gave us seven Pulitzer prizes in the last quarter of last year and advertising was not as strong needless to say about we would have liked it during the period, which was understandable.

But one of the things we may need to remember is the fact that circulation growth and circulation revenues began to rise in the period, as well.

So what was expended in regard to the expenditure in regards to the news report, circulation was very, very handsomely rewarding in regards to the readership.

So I think that's an important point for us to remember.

It is Kevin again, if I could just follow-up, by the way I appreciate John, Martin and Ellen, the team over the New York Times Digital.

Just one last question on broadcast.

Your revenue numbers are lighter in terms of comparisons than we're seeing in the industry in general.

Are there a couple of markets that are especially soft?

Yeah, we have two -- two markets where we're having some troubles and we're very focused on trying to turn those around.

The rest of the stations are actually looking pretty much like the industry and in some cases beating the industry numbers.

Those markets are?

TKR is having a bit of a problem.

We've installed a new management team down there.

We've changed the news report.

We're confident that with the strategic changes that have been made in the station, that you will see an improvement in the numbers.

And the other station is Grant.

That's a function of -- its ratings and the ABC, which has been weak.

By coincidence, we're -- several of us in the room are leaving at 4:00 today to go down to Norfolk and visit with WTKR, so, you're correct.

The softness is in a couple of the properties.

The rest of the properties are more reflective of what's going on in the peer group and I believe, we noticed that after a couple of years of leading the peer group in terms of broadcast revenue growth, that that has slipped slightly and we're paying an awful lot of attention to it.

But again, not to make light of it, broadcast is now 5% or less of our total revenues, so, the impact on the bottom line is not -- not major.

Thanks.

Your next question comes from William Drewry of Credit Suisse First Boston.

Bill, are you there?

Can you hear me?

Yes.

Sorry.

Just two questions, you gave out one, the monthly detail on Help Wanted for The New York Times in the 2nd quarter, could you do the same for the Boston Globe, you mentioned it was down 35% for the quarter.

Could you just give us the monthly progression there, that's number one.

And number two, just to make sure I've connected the dots correctly, at the low end of the range of 34 cents for the 2nd quarter, that would double-digit earnings growth for us versus up only 4% in the 2nd quarter and with circulation somewhat cycling through a little bit tougher comps, should we assume then that advertising should be up, you know, low single digits for the 2nd quarter?

Is that's what's embedded in your- or implied in your expectations for the low end of the earnings range there?

Thanks.

We're looking certainly at the numbers -- if the dots are connected and the trends continue to work the way they've been working, we should see positive ad growth beginning in the 3rd quarter.

Okay.

In terms of the earnings estimates, I think Catherine will correct me if I'm wrong, I think we were at 35 cents last year --

That's correct.

On an apples to apples basis.

So, obviously, we're -- the lower end of that range obviously reflects the comment about, you know, the outside -- androgenous, or whatever fancy word people use -- environment and the things that we don't control, like the market going down, you know, like the market going down 400 points in a day and obviously toward the upper end of the range.

That reflects a continuation of the dots going in the right direction.

So, I think you should look at those -- put it this way I look at those 3rd quarter estimates as very much consistent with the trend we've seen in the first six months and a sensible range which will accommodate a continuation of the trend that we're seeing but also recognize the reality, whether we said it or not, the reality is out there that this is a -- a bit of a confusing time for the market and the economy as a whole.

So, if you're -- if anybody would read more into those numbers than that, then you're -- you're reading more into them than we put into 'em.

And just looking at first call it says that the adjusted year-ago comparison for Q3 '01 was 30 cents, you say 35, what would be the difference there?

It was 35 cents.

I don't know why first call has it incorrectly, Bill.

That was the adjusted number.

Okay, it says 30 cents on first call.

Just in case there is confusion.

Bill, you also asked about the Globe?

Yes.

The numbers for Help Wanted, percentage declines, starting in January were 61.3%.

February was 48.7%.

March was 50.4.

April was 38.

May was 37.

And June was a tad under 32%.

Great.

Thank-you very much.

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