New York Times Co (NYT) 2003 Q1 法說會逐字稿

Hello, and welcome to the New York Times Company first quarter earnings conference call.

At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation.

If after the presentation you would like to ask a question, you may do so by pressing one, followed by four.

It is my pleasure to turn the floor over to your host, Catherine Mathis, Vice President of Corporate Communications.

Thank you.

Good morning everyone.

Welcome to our first quarter conference call.

By now, all of you have seen our press release, both on the earnings and advertising revenues, and we have several members of the senior management team here today to discuss them with you.

Including Russ Lewis, our President and CEO, Len Forman, our Chief Financial Officer, Janet Robinson, the Senior Vice President of Newspaper Operations and President and General Manager of the New York Times Newspaper, Martin Nisenholtz, CEO of New York Times Digital, Jim Lessersohn, our Vice President of Finance and Corporate Development, Stu Stoller, our Corporate Controller and Tony Benten, our Treasurer.

Our discussion will include forward-looking statements.

Our actual results may differ from those predicted, and some of the factors that may cause them to differ are included in the publicly filed documents, including the 2002 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.

The conference call is being webcast and an archive will be available on our web site, www.nytco.com, and beginning at 1:00 p.m. today an audio replay will also be available.

The instructions for the replay are in the earnings press release.

A transcript of the conference call will be posted on our web site as well.

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

Thanks very much, Catherine.

Good morning, everyone.

We appreciate you joining us today.

Certainly, the last few weeks have been challenging for our country and for the world.

During this time of war and economic uncertainty, we continue to focus successfully on our company's purpose, which is to enhance society by creating, collecting, and distributing high quality news, information, and entertainment.

One indication of our success came last week when a team of Boston Globe journalists won a Pulitzer Prize for the reporting of the abuse scandal in the Catholic church.

Clifford Levy received a Pulitzer for his reporting on the treatment of mentally ill patients in New York state regulated homes.

We're proud of the awards.

More importantly, we're proud of the social change that results from the work of our talented staff.

As a Pulitzer Prize winner once said, laurels are nice to wear but never to rest upon.

That’s true in journalism and that is certainly true in business.

So bearing that in mind, in the first quarter, we continue to make solid progress in implementing our long-term business strategy.

The primary element is to operate the leading news and advertising media focused on the national and increasingly global knowledge audience.

Our essential initiative in this regard is the successful transformation of the New York Times into the country's highest quality daily national newspaper.

During the quarter, we continued The Times national expansion by adding new markets for home delivery, bringing the total to 241, up from just 210 a year ago.

New York Times.com is the digital component of our national audience strategy, and it remains the number one newspaper site on the web.

In March, traffic hit an all-time daily high of 30m page views, and that's compelling evidence of the demand for the high quality news and information we provide.

At the beginning of the quarter, we strengthened The Times' portfolio aimed at that large audience when we completed the purchase of the International Herald Tribune.

Now our full ownership of the IHT allows us to better leverage The Times world class journalism and its expansive base of national advertisers into the international arena.

We have already sold combined times and IHT packages to a number of top tier advertisers and expect the list to grow in the weeks and months ahead.

We also made progress on extending The Times journalism into television with a debut on March 25th of our digital cable channel discovery times.

General Motors is already signed on as a sponsor and other major advertisers will soon be added to the roster.

The second element in our long-term strategy is to operate the leading news and advertising media in each of the local markets that we serve.

The success of our local market multiple media platform approach can be seen in Boston where our growing portfolio including the Boston Globe, Boston.com, which is the Northeast’s leading news site, the Worcester Telegram & Gazette and New England Sports Network or NESN as it's commonly called.

NESN gives The Globe a ubiquitous broadcast outlet for award winning sports journalism as well as providing joint ad sales and cross promotions opportunities.

We're emulating this multiple media platform approach in our regional newspaper and Broadcast Groups to ensure our position of operating the leading news and advertising media in each of the local market that we serve.

We're confident that the continued successful implementation of the long-term business strategy with the national, global and local components will enable us to continue growing our earnings in the months and years ahead.

Let me turn the call over to Len and Janet.

They will focus on how we've been meeting our short-term financial obligation this is quarter while at the same time pursuing the long-term strategic goals.

Len

Thanks, Russ.

In the first quarter, our earnings per share were $.45, up 29% from $.35 in the same quarter last year based on generally accepted accounting principles.

Our GAAP EPS includes a net gain of $.02 which is made up of a $.03 gain from the expiration of unused advertising credit, less $.01 of income from the non-compete agreement and a $.02 charge related to the closing of a small job fair business.

Last year our $.35 GAAP EPS included a net charge of $.04 per share, mainly because of workforce reduction expenses at The Globe.

As you know, under SEC rules required by Sarbanes-Oxley, we're restricted in our ability to provide adjusted or non-GAAP EPS.

We will continue to identify recurring and nonrecurring items for you without presenting the adjusted EPS figures.

Revenue in the quarter improved over last year as a result of a better advertising climate, at least that was the case up until March.

Since then, we've seen a weakening in advertising at our newspapers with the onset of military action in Iraq.

Janet will provide you more detail on newspaper advertising in just a moment.

The impact of the war on advertising has already begun to moderate, but we still expect to see an effect in the second quarter.

It is too early to declare victory on the advertising.

Certainly the war affected our Broadcast Group where first quarter revenue of $30.2m was still above the $32m in the same period 2002, despite the company's television stations preempting advertising and regular programming to bring viewers news of the war and advertisers canceling or postponing ads.

Operating profits, however, decreased 23% in the first quarter primarily because of higher cost of compensation and benefits.

A portion of these costs were associated with a project at WREG our Memphis television that we believe will enhance revenues going forward.

At New York New York Times Digital, it slowed from the nearly 40% that occurred in January and February to a still healthy 22%.

Our print-and-click(ph) initiatives with New York Times.com enjoyed continued success with fourth quarter sales totaling $10m, up 21% of 2002.

For the quarter, NYTC operating profit grew $181,000 last year to $3.2m in ‘03, a truly impressive improvement.

On the expense side, total costs excluding the IHT were on par with last year's first quarter.

Expenses for compensation and benefits rose and the company incurred additional costs related to coverage of the war in Iraq.

These increases, however, were largely offset by two factors.

The first is a payment we received in settlement of the claim for the reimbursement of remediation expenses incurred College Point printing facility.

These costs had been expensed beginning in late 2001 and continues right through the first quarter.

The terms of the settlement are subject to a confidentiality agreement.

Secondly, news print costs were lower in the first quarter of '03 than they were '02, excluding news print and the IHT, total cost rose 1% in the quarter.

For the balance of the year, we will remain focus on limits expense growth.

It is an important priority and we will search for ways to reduce costs.

If we were to expense a significant revenue shortfall going forward, we would implement the contingency plans we have developed to reduce further our controllable costs and size our business in line with revenues.

Overall, however, we still continue to believe that our expense totals for the year will increase 4.5% to 5.5%.

Entering the year, we knew that war was a possibility and we were conservative on our earnings guidance.

Today, it is more cloudy than any I've seen in my nearly 30 years in the business.

As one of you wrote, it is bad as a sand storm in Iraq.

While there continues to be a great deal of uncertainty with the geopolitical outlook and the economy, we believe we can achieve a full year EPS growth rate in the mid-single digits to low double digit range this year.

We believe our growth strategy, coupled with our financial discipline, will continue to serve us well.

Now, let me turn the call over to Janet.

Thanks, Len.

Certainly, the head line this quarter has been the war.

As Len said, up until the early days of March, we were, indeed, seeing a stronger advertising environment.

Year-over-year, growth was running in the 6% to 7% range with a broad base of categories showing strength.

With the onset of the war, advertisers began to postpone placement.

March revenues for The Newspaper Group decreased 1.6%, excluding the IHT.

As you would expect, travel related categories such as transportation, hotel, have softened significantly since the beginning of March.

New brand and product launches have been delayed in the technology, media, and automotive category.

Advertising has been uneven across retail categories while improvement remains soft.

If there is a silver lining in this cloud, it is that 2003 advertising budgets remain intact.

When the war ends, we anticipate the spending will bounce back, and we believe we are well positioned to capture a significant portion of those advertising dollars.

Even during this period, some categories have remain robust.

At The Times, technology products increased more than 50% in this quarter, as a result of increased or new business from Hewlett Packard, Compaq, Cisco, Microsoft, Xerox and Epson.

The entertainment category continued to turn in an outstanding performance, up 11%.

There were two more wide releases in the first quarter of this year, compared to the same period a year ago.

Similarly, there are four more wide releases planned for the second quarter this year, compared to 2002.

Real estate, particularly residential grows, up 10% in the first quarter, and that comes on a 12% gain in the first quarter last year.

Financial services advertising rose 19% in the quarter, with increased or new business from Merrill Lynch, Chubb and T. Rowe Price.

And advocacy advertising was the one category increased because of the war, advertising.

It rose 72% in this quarter as people in organizations both for and against the war voiced their opinions on the pages of The Times.

Categories where we saw weakness in the quarter included banking down 65%, hotels down 15%, and help wanted down 14%.

The New England newspaper group saw strength in the entertainment, financial, telecommunication, residential real estate, and health care category.

Like the times, they saw weakness in help wanted, which was down 23% in the quarter.

In addition, decreases occurred in the quarter in the travel, technology, and education category.

We continue to make progress on some significant revenue initiatives, one of which is color, which has continued to increase as a percentage of advertising revenues at The Times.

In the first quarter, it amounted to 19% of total advertising revenues, up 5 percentage points from 14% in the first quarter of 2002.

In January, The Globe introduced a new flat rate program for color advertising that we expect will add $3m to revenues in 2003.

We are enjoying successes with our New York Times and IHT bundled buys.

EDS, Movado Watches and Concord Watches, the U.S.

Department of State, New York University and the Hong Kong Academy for Performing Arts have already taken advantage of our global buy program.

New positions, marketing programs are being developed to meet the advertising needs of large multinational corporations as well as small and medium size businesses and organizations in categories ranging from technology to education to luxury goods to recruitment.

We believe it is a broad base of news coverage provided by The Times and the IHT has result indeed a broad base of advertisers, which will increase as we move forward.

With regard to circulation, the times strong revenue and steady copy growth trends are unique in the industry.

From 1998 through 2002, circulation revenues climbed 29%, and for 2003, we expect growth to continue.

Effective March 30, we increase the price of the Sunday times on the newsstand, which we expect to generate $5m to $6m in 2003.

This revenue is included in the forecast of circulation revenues growing 3 to 5% this year.

In the first quarter, circulation revenues at the times was up 5.1%.

Over the past five years, daily copies increased 3.4%, and Sunday copies grew 2.3%.

While we expect to see a decline for both daily and Sunday in the March 2003 ABC period, we experience significant gains in the aftermath of 9/11 when we saw the average increase of 41,000 copies both daily and on Sunday.

Overall for the year we have continued to expect an increase in copies sold versus 2002.

As many of you know, we established a ten-year goal at the end of 1998, of increasing the times national circulation by 250,000 copies daily, and 300,000 copies for Sunday.

By year end, we expect to be close to or over the 50% mark for both daily and Sunday.

Circulation revenues and the volume at the New England newspaper declined as a result of decreased copy sales at the Boston Globe, compared to the first quarter of 2002 when copies rose significantly as the result of the war on tourism, the New England Patriots participation in the Super Bowl and the crisis of the Boston Archdiocese of the Catholic Church.

As we look into April, we're encouraged by what we see but remain cautious.

We continue to see the effects of the war in the second quarter, categories such as technology products, entertainment, live entertainment, health care and telecommunications are strong where as help wanted and travel related categories remain soft.

While there are uncertainties on the horizon, what remains constant is the commitment to the national and increasingly global expansion and our multimedia platform approach in all the markets we serve.

The broad coverage provided by our properties provides a foundation for a strong and increasingly broad base of advertisers.

We believe that our consistent focus and disciplined strategies for growth that will benefit our shareholders now and in the future.

At this time, we'll be pleased to take your questions.

Thank you, ma'am.

The floor is open for questions.

If you have a question, press one, followed by four on your phone.

To remove yourself from the queue, press the pound sign.

While you pose the question, pick up the hand set to provide optimum sound quality.

Once again, that is one, followed by four.

Our first question comes from William Bird from Salomon Smith Barney.

Can you give us some sense how large the reimbursement of remediation costs was, respecting what you can disclose in terms of your non-disclosure agreement.

In April, would you be more specific about what you see?

Do you think the rate of growth in April will be worse than that in March.

Thank you

Bill, on the legal settlement.

Unfortunately, I can't give you any ballpark figure, even given the fact we've entered into a confidentiality agreement in settlement of our claim.

But we just -- we can reiterate these were expense that is we took last year.

We expensed them and are simply, in effect, reversing that this year.

Second question.

Bill, this is Janet.

What we're going to see is more of the same in regard to the stronger categories and the weaker categories.

Technology and entertainment, real estate and financial services, telecom, they're all continues to show, you know, some decent signs of growth and stability during this difficult period, but the softer categories are continues to show softness in April.

Those, of course, include the transportation-related categories, hotels and transportation, I should say.

Help wanted, as well, of course, continues to be soft.

Health care continues to be soft as well.

What we are counting for is the effect of Easter.

Easter will have a negative effect on both The Globe and The Times.

We prepare for that as we're looking at the sequencing during the course of the year.

In addition, The Times had a slower automotive showing in March, primarily because the auto show section was moved to April.

In light of that, that may give us a lift in regard to the automotive side in April.

The effect of Easter does affect a number of categories, particularly retail and many of our classified categories.

So I think we're in for a little bit more of the same in regard to April

The auto show aside, could you comment on auto advertising trends going forward?

Also, I was curious on national advertising.

The proportion grew pretty meaningfully this quarter.

I was wondering if there's been change in strategy or how you market it.

Thank you

In regard to automotive, many of the launches have been postponed in the automotive category on national automotive.

Many of them, of course, start with broadcast, as I think you're aware, and then couple that with print.

Much of that has been postponed.

I think that may not be forever, certainly.

I think that will be a little bit later in the year.

We're seeing a little bit of an effect of that.

We're also seeing dealers hurt pretty hard during this period, particularly because of the economy and war.

Both are relate to car sales.

In light of that, the dealer support is less than what they’ve had in the past.

In light of that, they're not advertising in a robust fashion.

We think that will continue for a little bit, certainly, as the war goes on, but when, indeed, the war is over, we think that will return.

In regard to national advertising, again, there are categories that are performing very nicely.

As I said, technology, entertainment, financial services, telecom is a great share war going on in the telecom sector.

There are national categories that are performing extremely well that are unphased by the economy and the conflict.

In light of that, we're building upon the growth there as we, of course, watch what we see as far as softness in retail and softness in some of the classified categories

Thank you.

Thank you.

Our next question is coming from Peter Appert from Goldman Sachs and Company.

Hi.

Good morning.

On the cost side, Len, maybe you could speak to this issue.

The 4.5% to 5.5% projection for the full year seems perhaps it is high in the context of what you were able to do in the first quarter.

Could you speak to that issue?

What we saw in the first quarter was we had the benefit of the settlement as well as news print remaining soft and, hopefully, we'll see revenues pick up and will likely see news printing expenses pick up as well.

We're still looking at a 3.5%, roughly, increase in wages for the year and our other costs going up in the 2% range.

So we're still, at this point, comfortable with the 4.5% to 5.5% range for costs for the year

And we've also, Peter, got war related expenses, both in terms of personnel and news print that will play a part as we go forward.

How much depends on the geopolitical situation.

Right.

Okay.

I guess the issue was to what extent you knew the remediation benefit would come in the current quarter.

It was a legal settlement, Peter.

The timing of legal settlements are always uncertain.

It was certainly unclear as we closed 2002.

Right.

Okay.

Second, lastly, do you have a sense of the TV pacings and what they look like currently?

The pacings are slightly off from where they were a year ago.

It's very uncertain, but I think one thing we've learned with TV pacings is they are very volatile.

We expect to see them come back; we expect to see the pacings come back as well.

Nothing on the TV side would give you an indication there is a pop back in the April, May time frame?

It is too early to talk about April and May at this point.

We'll have a better sense as the month progresses

Thank you.

Thank you.

Our next question is coming from Christa Sober from Thomas Weisel Partners.

Hi.

Three questions.

First on the circulation side.

You guys have the 9/11 comps made first quarter a little tougher.

It looks like you're trending below Q'01.

With regard to that, if you could because you have increased the number of print sites out there, I was wondering if you could delineate what your non-metro growth is versus metro growth is.

I’m just trying to find out where the declines have come.

And related to that, do you guys feel you've now lost a little bit of the lever with regard to additional price increases at The Times?

I know you've implemented several over the past several years.

Do you see that's going to slow a little bit going forward?

Then I'll ask one more question after that.

Thanks

In regard to where we've seen some softness, it is in the metropolitan area as opposed to outside of the metropolitan area.

Home delivery and single copy outside have shown some nice growth rate.

But we are seeing some softness in the NDM.

As you know, we have been on a march with regard to prices increases for The Times, both single copy and home delivery for a number of years, the most recent being in New York going to a dollar in December on newsstands and then just this past weekend going up in all of our regions, Northeast, national, and metropolitan in regard to our Sunday.

What we are seeing is we are -- we have predicted well in regard what copy loss we would see with regard to the revenue increases.

We're not surprised in any way in regard to some of the copy loss we are seeing, that is of course, the price you pay when you are aggressive in regard to premium pricing.

I want to correct something I said earlier in regard to the New York Times.

I was giving you the total number, the complete newspaper group as far as advertising circulation increase only being 5.1%.

It is important to note in the New York Times in the first quarter, circulation revenues rose by 8.0%, which is quite a very nice showing in regard to the announcements as far as premium pricing.

On the pricing leverage side, our premium quality equals premium pricing strategy remains alive and well and with an 8% circulation revenue gain at The Times, we don't feel that there's any dent made in that strategy.

In terms of the copy softness, I think it speaks more to the difference in the 9/11 and anthrax related terrorism stories and the Afghan war on top of that, versus the story we've had for the last month or so, or, really, the last few weeks of March so we don't see anything discouraging in our circulation picture at the New York Times, period,

Thank you.

Two quick ones for Len.

First, on CAPEX.

What was it for the quarter?

I noticed share repurchases actually picked up for the quarter.

I was wondering what your outlook is for share purchases going forward?

Thanks so much.

We did accelerate share repurchases in the quarter.

We're still sticking with our forecast for the year, which is, essentially, that we'll be up or slightly -- we'll be up or a little more than last year, but roughly in line with where we were.

On the CAPEX side, we were $49m for the quarter, and we're still staying with our forecast for the year.

Thank you.

Thank you.

Our next question is coming from William Drewry from Credit Suisse First Boston.

One cost question and one revenue question.

On the cost side, would it be possible to break out for the quarter on a year-over-year base what is compensation was versus what the increase in pension and the increase in benefits?

If you could separate out the salary expense a little bit?

Then on the revenue side, just wondering, given the trends that you're seeing in technology and financial, if you think, at this point, you're taking some share from the Wall Street Journal considering the trends in this category have been going in the opposite than yours.

Thanks.

Janet, why don't you start with that one.

So we can calculate the cost question for you Bill.

We are thrilled to see what we're seeing with regard to the growth on the technology and financial services side.

As I noted, we have not seen those categories show signs of weakness during this period.

It has been difficult for some of the other categories.

It's not just, you know, the Hewlett Packard’s and the IBM’s of the world.

It is across-the-board.

We're getting a strong B to B business and telecom business that supports the technology and B to B side.

On the financial services side, very strong commitment from UBS Warburg and American Express, Merrill Lynch.

Again, a wide range or base of advertising.

In addition, what we are seeing with regard to shares is we are taking it away from The Journal.

Right now, they have gone down another 2.5% -- percentage points in regard to the share while we have gone up 2.1%.

We're also seeing decreases in regard to Fortune, Business Week, and New York Magazine.

New York Magazine, of course, not related in this business field to any great extent.

There is definitely a capture of share, Bill

Okay.

Janet, can I just ask one other quick question?

Sure

Can you give us the sequential progression through the quarter of help wanted for the times and The Globe, which you usually do, if you have those numbers available?

I do.

Hold on one moment.

In regard to January, we were down 14%.

February, we were down 16.8%.

March, we were down 10.7%.

So for the quarter we were down 13.9%.

Let me tag on to that relative to a question asked earlier about the strength of national and the size of it.

At the New York Times now, national advertising is responsible for or represents 65% of the total revenues.

So that is directly as a consequence of our national expansion strategy.

We said years ago that we saw a secular trend occurring the growth of national newspaper advertising, and while we've seen some volatility caused by the economy and the war, we believe that that's exactly the right place for the New York Times to be nationally and, indeed, as we turn globally so we'll be much less sensitive to either classified or retail as that trend continues

Bill, to get back to your question on salaries and pension.

We're looking at, roughly a 3% to 4% increase in salaries and benefits, and I'd say it's about split half and half between wages and benefits, give or take a couple of tenths of a point at this point

Thanks very much.

Thank you.

Our next question comes from Doug Arthur from Morgan Stanley.

A couple questions.

Len or Russ, in light of what you said about costs and revenue trends early in Q2, there are numbers for Q2 in the $.55 to $.60 range.

Can you talk about the likelihood of that?

Secondly, you're still, I guess, projecting breakeven to a loss in the joint venture line, despite being down 6.2 in Q1.

Can you talk about the impact of newsprint on that, how you're going to get back to breakeven and any thoughts you have on newsprint?

Thanks

Well, just in general on that line, Doug, it is, basically, a seasonal variation with regard to the line.

We do expect newsprint to help us out.

So we are confident that the ranges we gave of breakeven to $4m loss are achievable during the year.

Obviously, in keeping with what we've said before, Doug, given the cloudiness, we're not prepared to give guidance on the second quarter at this point.

We are sticking with the full-year guidance that we've given previously.

As the war unfolds and the cloud begins to lift and, hopefully, peace takes hold, we'll be prepared to give guidance.

Also, on the joint venture line, part of the answer, I think, Len, correct me if I'm wrong, is the purchase price allocations that have been made with regard to NESN.

Just as a follow up, Len, on the -- you talked about 1% costs without newsprint and the IHT.

Is that for the quarter Q1, I assume?

I assume it excludes the impact of this reimbursement?

It's for the quarter, and, yes.

Yes, it does exclude the reimbursement?

Yes, it does

Thank you.

Thank you.

Our neck question is coming from Lauren Fine from Merrill Lynch Global Securities.

Thank you.

A couple quick questions.

On the New York Times on the national circulation, have you taken a look at what your retention has been one, two, three years after you started do home delivery in an area and give us a sense of what those trends look like.

Secondly, for the New England Group, the circulation declined were greater than the increase a year ago.

I'm wondering if you are seeing some impact from some of the prior rate increases.

Third, are you seeing any anti-American sentiment at the IHT?

In regard to retention on the national scene, Lauren, we are seeing a strong story.

The times have enjoyed, really for a number of years, a strong retention story year after year in regard to going after people who, indeed, we can retain long-term.

We've been selective in regard to how we marketed to the right people who are potential loyalists and, in light of that, that has reaped benefits for us in regard to the retention factor.

A figure I would like to throw out is that 70% of all the people who are home delivery subscribers of The Times are on credit cards.

I think you well know that credit cards is a very nice correlation between credit card subscriptions to retention.

In addition, as far as The Globe is concerned, they suffered just as The Times suffered in regard to the comparison year-over-year as far as not only 9/11, but The Globe also had additional factors such as the ones that I noted earlier, the archdiocese, the Catholic Church scandal and the Patriots involvement in the Super Bowl.

From that perspective, they had more of an effect than the times did.

They have had price increases in the Boston area.

That, of course, underscores our commitment to premium quality, premium price and in light of that that does, of course, affect copy growth.

They have plans in place this year to bring their copy line up which we will see ending as the year progresses.

All the activities I talked about earlier with respect to the Boston Globe are, in part, geared at increasing circulation.

The promotion we get with NESN, the co-branding of a sports program, Friday sports that Sports Plus, its called on NESN, that mirrors the print offering in the Boston Globe, the local sections are also -- that Janet has talked about many times are geared towards improving circulation, and the great journalism that's coming out of The Globe with the Pulitzer’s.

By the way, when the Red Sox get on a tear and start to go for the World Series Championship, I'm sure that will increase circulation as well.

On the retention side of things, we haven't seen any change in that or, most often quoted statistic is the one, when we get a subscriber for two years, retention at that point is about 90%.

We haven't seen any falloff in that.

One other point I want to make, Lauren, is the fact the Boston Globe has increased their credit card subscriptions to 44%, which is a 6% increase over the last year and a half or so.

So from that perspective we are seeing stronger retention on the Boston Globe side.

Again, going after loyalists to The Globe.

Did we talk about the anti-Americanism?

I don't think that's been a large factor at the IHT.

It's more something discussed and written about, but people in Europe and Asia seem very interested in reading the American point of view.

That's why single copy sales at the IHT are, indeed, up, not down.

One last question on newsprint.

Can you comment on what your expect stations are near term for March 1st price increase to eventually role in partially or completely and the timing of that.

Sure.

The big players are sticking to what they have said with regard to the increase, and the small players have taken some capacity offline but have not implemented it fully.

I think the average for the month was something like $22 to $25, which would suggest that the full increase hasn't happened or, certainly, it has been postponed.

Our expectation is that it will look pretty much like the last increase, in which they made an announcement and rolled back and two-thirds took in the marketplace.

Unless there's a dramatic change one way in either direction with regard to volume, we think that's likely to be the case.

Great.

Thank you.

Thank you.

Our next question comes from Brian Shipman of UBS Warburg.

Thanks.

Good morning.

A couple questions.

The pretax gain of 8m bucks, unused advertising credit, was that related to wartime advertising pullback at all or was this an older issue?

Then, secondly, did you make any pension contributions in the quarter?

Do you plan any pension contributions later this year?

The first issue on advertising, that was related to an earlier deal with Street.com and had nothing to do with the current situation.

They chose not to take advantage of it.

It was a fortuitous timing as to when it occurred.

On the second question, I think you are asking whether or not we made any pension contributions in this quarter?

Right.

The answer was, no, we did not.

Do you plan any for the year?

I think it's a question of how we see the year unfold with regard to the performance of the stock market and our returns.

I think it's way too early to make that call.

Perhaps some changes in the pension accounting rules that I've been reading about in the New York Times.

Okay.

Thank you.

Thank you.

Our next question comes from Steven Barlow from Prudential Securities.

Good morning.

Len, could you talk about the department stores in New York.

January, February, March is all down.

Is that the start of the trend?

I don't remember whether November and December were down.

Your outlook for April and then, what percent of the New York Times advertising is the department so we can judge that?

A side question, you talked about more editorial costs with the war as a way to quantify that and a way to offset that.

Did you actually sell more copies of the paper in the last two weeks of March?

Lastly, for Len, you talked about the tax rate in the press release.

I know there is Sarbanes-Oxley stuff going on.

Should we use the 39.5 here, or was there an adjustment we need to make?

Department stores constitute 3.2% of the total advertising number in the first quarter this year.

We did see in November, December, a strong incline in regard to department store advertising.

If you remember correctly, there was a very short season as far as retail in the fourth quarter, and department stores did perform very well during that period.

That said, of course, there business was not strong during the holiday season.

So in January, February; and March, there was a strong pullback across all of the department stores, federated, Nordstrom’s, Lord and Taylor and Saks as well.

That said, we're seeing a moderate return in the April timeframe, spring timeframe.

We are going to see some stores openings in New York.

Blooming Dale’s is opening in Soho; they’re also opening in Garden City home furnishings store.

That will bring additional revenues in the department store categories.

In addition, they are gearing up for more of a competitive environment, particularly because some of them are coming back nicely, particularly Saks with multi-page units in the magazine as well as ROP.

On the question of whether or not additional circulation will offset additional costs during the war, it is hard to say specifically.

It is fair to say the additional copies and the cost of the newsprint is offset by the circulation revenue.

In other words, the money we bring in when we sell those copies, obviously, that's one of the good parts of our -- just one of the good parts of our circulation revenue strategy because we're taking in a dollar for every daily copy, for example.

But I think it's also fair to say that while it offsets the newsprint cost, it doesn't necessarily offset the additional costs in terms of the newsroom.

So that has to be made up either with advertising revenue down the road or additional cost-saving measures.

That's what Len was referring to earlier.

Yeah.

Steve, you had a question on the tax rate.

The 39.5 is the rate you should use for the balance of the year.

Just a follow up with Russ.

Is this a way to quantify the increase editorial costs because of the war?

I hesitate to do so for two reasons.

One, it is not a straight line, by any means.

It, obviously, depends on the developments from here on out, and, secondly, I consider it -- we consider it to be, what should I say, a proprietary number.

We're not anxious to tell others how much we're spending on our war coverage.

We just -- we do it better than anyone else, is our belief.

How much it costs, we don't announce.

I think the point, though, Steve, is that the increased costs being incurred as a consequence still we're comfortable in saying the overall cost increases are within the range we gave out earlier, and that we will begin -- we're making changes and expense savings elsewhere in the organization in order to compensate for the increased costs.

We don't expect these costs to go on indefinitely.

Thanks.

Thank you.

Our next question is coming from Barton Crockett from J.P. Morgan.

Hi.

I wanted to get more color on the trends in technology and financial advertising, which were interesting.

In particular, I was wondering you could tell us if you're hearing from your advertisers or based on your own understanding of what's going on what the reason is for the variance in your performance versus what we've seen out of the Wall Street Journal in the first quarter?

In other words, are particular advertisers telling you they are doing ads in The Times and not The Journal or doing ads more frequently in the times than The Journal or is it a possibly a mixed issue.

Where for instance, at The Journal, they have more tombstone advertising than you have at The Times.

On the other end of the spectrum, can you tell us why banking was down 65%?

It is simple.

Just better management.

Okay.

Are there any other advertisers telling you they're doing more runs than you in The Journal.

There are many advertisers telling us that.

In fact, we get more multi-page units, flasher units in regard to the campaign.

It is important to note we're getting more B to B than we have in the past.

We have a concerted effort behind garnering that business, not only from The Journal, from a variety of other competitive sources.

I think our story is holding up very well with our advertising base in light of that.

Again, the technology sector is very broad.

It's hardware, software, the telecommunications being part of that as well.

And we have very much focused on these categories in the last few years, particularly as we have invested in our business coverage.

In light of that, I think that bodes well for us going forward.

They will get, the Wall Street Journal will get more tombstone advertising than we do.

Right now, there isn't very much of that as you well know.

From a standpoint of us continuing to focus on financial services and the technology and the telecommunications arena, you count on us to do that and be aggressive in regard to garnering share

To add a point that may be sensitive with the audience we're talking to, but, you know, if you could say that the '90s were the era of business and investing, it's clear that the major focus of events this year and going forward are, you know, geopolitical.

And while, in the past, there may have been some question about whether or not national news and, certainly, whether international news was important or relevant to people, I think there's no question now that people are absolutely convinced and understand that what happens around the world does have an effect on them, and we think that very much plays to the strength of the New York Times, our national expansion, what we've done at NYtimes.com both nationally and internationally and what we are doing with the International Herald Tribune.

We think that plays to our strength and will continue to do so in the years ahead because someone said, gee, it would be great when we get back to normal.

This may be normal for a while.

People are going to read the New York Times to understand what's going on, and they're going to read our local publications and watch our TV station to find out how it affects their individual markets.

The answer to your question regarding the banking category; that is really the effect of the Hewlett Packard [inaudible] site.

So the banking is investment banking and commercial banking?

Yes

Barton Crockett Okay.

And then the final question here, on newsprint, can you give us in the quarter what the trend was in terms of percentage change in consumption and your price paid?

Yeah.

We were down a little under 4% in newsprint expense in the quarter.

I think it was 3.8%.

About a little over 1.5% is due to rate and 2% is due to tons, the volume.

Okay.

Great.

Thanks.

Thank you.

Our next question is coming from Kevin Gruneich from Bear Sterns.

Thank you.

Understanding you can't discuss the amount, could you review with us specifically what the remediation costs were for and, also, if you could exclude them, just talking about The Newspaper Group as a whole and excluding those costs?

I suspect they're nonrecurring.

Give us a pro forma non-newsprint cash cost increase for the newspaper?

In terms of characterizing it, I want to be careful because, as I said, with the confidentiality agreement, to put it bluntly, we don't want to give back the money we got because we violated a confidentiality agreement.

Simply put, we had some -- as we did announce last year, we had some failures in the infrastructure of the College Point Plant having nothing to do with the printing but having to do with the infrastructure.

We had an argument with some folks who were responsible for it, and we were in court, and the upshot was a settlement and you will not be surprised to learn both parties said they felt it was a fair and satisfactory resolution.

Again, we took those expenses last year.

They hit our P&L.

This is just the payback, so to speak, and going forward it won't have any impact next year and the year after because we fixed whatever aid us, if you will, in terms of the plant infrastructure.

Len.

Kevin, what was the second part of your question?

Excluding the nonrecurring costs and others, I was wondering, for The Newspaper Group if you could give us the non-newsprint cash increase for the quarter?

Newsprint, non-newsprint cash cost, we won't break out the nonrecurring costs.

We're up a little over 1%.

Yeah.

We don't want to do anything that lets you back into the number either because, well, I can't say any more than it's subject to a confidentiality agreement.

Okay.

I won't tell anybody.

I have two last questions.

Put it this way, Kevin.

If you'll promise to reimburse us the money personally, then I'll tell you what it is.

I'll pass on that.

Could you update -- could you tell us what the pro forma revenue and EBITA change was for IHT and just update us on head quarters progress?

No.

I'm afraid we won't break that out on the P&L at this point.

You know, you should understand that on the IHT, there's not a huge impact or material impact.

When it was on the joint venture line, it was, you know, minus a couple, $3m or plus a couple, $3m in its best year.

You're not going to see a significant impact on that until we really crank it up into our strategy, and we're not due to go to our board with a plan for the future of the IHT until November.

So as we get towards the end of the year, we'll be happy to talk with you more about it.

Our CAPEX forecast for the year, Kevin, includes an estimate of the building of $75m to $80m.

Our intention, Kevin, is to break ground later this year.

Occupancy is not due until 2006.

How much was spent in Q1?

About $40m, $41m in Q1.

41m?

Yeah.

Toward the end of March we made a payment related to the development of costs on the land.

Kevin Gruneich Got it.

Okay.

Thanks.

Thank you.

Our neck question comes from Michael Kupinski from A.G.

Edwards and Sons.

The broadcast expenses looked higher.

Were there any war-related costs to the numbers?

What type of investments are you talking about in terms of revenue enhancements in Memphis?

Can you quantify those costs?

Finally, auto classified were down in March, which had been a strong category.

Do you feel that was an anomaly related to the war or is it getting more difficult in terms of comparisons?

Just in terms of the expenses in Memphis related to something we call project “Knock-out”, they fall interest a few categories.

One is increased news programming.

A second is a new sort of sidewalk studio that we have in the downtown area.

Thirdly, we've gotten a helicopter.

All of those things are geared towards improving the ratings of our station, WREG, and with those improved ratings, which we are seeing, we expect to generate additional revenues to pay for the project in fairly short order, but, obviously, not immediately.

There is a lag.

There's some increase costs due to the war, but it's not on the order of what we see in the newspaper part of the business.

In terms of auto it is it relates to the television business, I think part of the impact is in markets, for example, like Norfolk, where we have a large military complement. 40,000 or something, I'm not sure what the number is, people.

Basically, they are on the other side of the Pond.

We see it in a couple other markets, Oklahoma is another ones.

That also happens to be in an area where there is military bases.

Are the cost increases in broadcasting should moderate more in line of the guidance you were giving in terms of total --

No.

We expect forecast expenses to be up for the year for the reasons we said.

It is a relatively small percent of our cost base.

What we looked for is, certainly, by next year, that the revenue that we generated as a result of the additional expense will improve our bottom line and improve the margin.

Okay.

Thank you.

Thank you.

Our next question comes from Doug Arthur from Morgan Stanley.

I'm beating a dead horse here.

On the underlying cost increase, my sense was your answer to Kevin’s question on the 1%, did it or did it not include reimbursement was somewhat different from mine.

Could you clarify that again?

Say it once more, Doug

The underlying cost increase non-newsprint, non-IHT, did –or did not it include the reimbursement?

Your answer was it did not it.

It did.

The 1% does includes it.

If I said it did not, I misspoke.

It did include it.

Going forward, consistent with your guidance from December, 4% to 5% underlying cost in newsprint is where you're at?

Yes.

Thank you.

Thank you.

Our next question calms from Paul Brimberg.

Your line is live.

We'll move on to the next question coming from Mike Rosen(ph) of [inaudible].

Yes.

My question has been answered.

Thank you.

Gentlemen, I'll turn the floor back over to you for closing comments.

Thank you very much for listening in on our conference call.

If you have any other questions, please give me a call.

Bye now.

Thank you.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a great day.