New York Times Co (NYT) 2003 Q3 法說會逐字稿

Good day and welcome to the New York Times quarter Three, 2003 Earnings Conference Call.

Today's call is being recorded.

A question and answer session will follow today's presentation.

If you would like to ask a question, please press "*1".

For opening remarks and introductions, I'd like to turn the conference over to Miss.

Catherine Mathis.

Please go ahead ma’am.

Thank you and good morning, everyone.

Welcome to our Third Quarter Conference Call and by now all of you have seen our earnings press release as well as our add revenue release.

We have several members of our 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, the C.E.O. of "New York Times" digital, Jim Lessersohn, our Vice President of Finance and Corporate Development.

Stu Stoller, our Corporate Controller and Tony Benton, our Treasurer.

Our discussion today will include forward-looking statements.

Our actual results may differ from those predicted, and some of the factors that may cause the results to differ are included in our publicly filed documents, including our 2002, 10K.

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

This conference call is being Web cast, and an archive of it will be available on our Web site, which is www.nytco.com and beginning at 2:30 today, an audio replay will also be available.

The instructions for the audio replay are in the earnings press release and a transcript of the conference call will also be posted on our Web site.

So, with that, let me turn the call over to Russ Lewis.

Thanks, Catherine.

Good morning, everyone.

Today we reported earnings of 33 cents a share for the third quarter that put us a penny above the guidance we issued in September but below last year's earnings of 38 cents a share.

Ad revenues improved in the month of September, up 2.4%.

Of course, that was not sufficient to lift earnings above last year's third quarter results given the ad softness we experienced earlier this summer and the impact of increased health benefits and newsprint costs.

During the quarter, however, we were successful in moving forward with our company's overall strategic plans.

For example, during the quarter, the "Times" newspaper, as part of its national expansion, opened up its 251st home delivery market.

This helped our flagship newspaper improve its daily circulation by 5.2% and its Sunday circulation by 4.1%.

Additionally, in the quarter, the company's digital division, NYTD, recorded its highest level of revenue and operating profit, while maintaining the status of its flagship www.nytimes.com as the number one newspaper site on the Web.

Also during the quarter, we continued to receive public recognition for the work of our talented staff.

For example, for the third year in a row, Janet was named one of Fortune's 50 most powerful women in business and for the second year in a row, the "Times" received the Newspaper Association of America's highest award for excellence in newspaper advertising.

The company's multiple media platform efforts were recognized during the quarter when programming from "New York Times" television won two Emmy awards.

These and other laurels we've received help indicate that despite the difficult economy, we remain on track for continued long term success.

While the outlook for the advertising environment seems to be slowly improving, we know we cannot rely solely on that expectation.

So, we continue to remain focused on controlling our expenses.

Throughout the year, we've been carrying out a program to make systemic reductions in our cost base and in September, this initiative resulted in our lowering the company's full year expense guidance to the 3% to 4% range excluding the IHT.

And we're continuing to emphasize expense management, so that we can achieve our strategic goals in the most efficient, cost effective fashion possible.

Now let me quickly ask Len and then Janet to provide you with more information on the quarter and then we'll take your questions.

Thanks, Russ.

Overall for the quarter, newspaper group ad revenues excluding the IHT improved by 0.5% with weak ad revenue growth and increased costs, EPS declined compared with the third quarter last year.

Generally, the third quarter is the lightest quarter for advertising and the fourth quarter is usually the heaviest.

But this year, the seasonality may be more pronounced as advertisers held back on spending during July and August and waited until after labor day to allocate their dollars.

Advertising performance in September and early October appears consistent with the seasonal pattern as the advertising revenue picture continues to improve.

Janet will provide you with much more detail on our advertising performance in just a few moments.

Once again, New York Times digital achieved new records of our revenues and operating profits for the quarter.

Ad revenues grew 25% with real estate and auto showing particular strength and operating profit more than doubled.

The outlook remains bright with newyorktimes.com closing large contracts with AOL and General Motors.

In the broadcast group, revenues and operating profits declined mainly because of lower political advertising.

In the third quarter of this year, political advertising totaled just $1.6 million compared to $5.8 million in the same period last year.

Comparisons will also be difficult in the fourth quarter of this year versus the fourth quarter of 2002, when we saw a record $13.3 million in political advertising.

Next year, we expect to benefit from the increased advertising the elections will bring.

Total costs in the quarter, excluding the IHT rose 4.8%.

Of this benefits in newsprint accounted for about half of the increase.

As Russ indicated, we're both focused on and committed to restraining expense growth.

Some costs can be characterized as immediately controllable and some outside our direct control at least in the short run.

We are determined not to simply accept expense growth in these areas.

We're making both, manufacturing and process improvements and benefit plan changes to reduce these systemic costs that are escalating rapidly.

On the newsprint front, for example, we're continuing to find ways to cut expenses.

One area where we have enjoyed some success is in reducing Web breaks, breaks in newsprint as it's traveling through the printing press.

Through the work of a cross functional task force, we decreased the number of Web breaks by 38%, adding approximately $3 million to the bottom line and that's a permanent reduction, not a one-time savings.

We are also becoming more adept at managing the size of the print order to reduce newspaper returns and optimize circulation sales.

The other major area of systemic cost increases is benefits.

Over the course of the past several years we have reviewed our employee benefits with an eye toward mitigating increases in medical benefit costs.

As a result, our employees as well as our retirees are sharing more of the costs of their health care.

We've also reduced the number of plans offered.

We have streamlined administrative procedures and have educated employees on cost effective choices.

We believe these changes have reduced expenses by $4 to $5 million in 2003 and have helped lower the rate of growth in these expenses compared with the national trend.

In 2004, we plan to further offset increases in medical expenses and achieve greater savings.

Turning to share repurchase.

This quarter we were a bit more active buying back 1.6 million shares at a total cost of $71 million.

For the year, we have repurchased 4.2 million shares at a cost of $186 million.

We have approximately $115 million remaining on our authorization.

In September, the company made a $10.-- $10.5 million tax deductible contribution to its employee retirement plans.

We will continue to review interest rates in the stock market's performance and will likely make additional tax deductible contributions for qualified pension plans during the fourth quarter.

We expect that our total contributions for 2003 will be less than our contributions last year, which were approximately $147 million.

Capital spending in the quarter amounted to approximately $19 million, bringing the year to date total to $86 million.

Of this amount, about $43 million was for our new headquarters.

In September, we reduced the total CAPEX expected in 2003 to $140 to $170 million.

Due to a delay in our development partners getting financing for its portion of the new building, this has postponed construction and at this point, we expect occupancy in 2006 or 2007.

Now let me turn the call over to Janet.

Thanks, Len.

In the third quarter, strong national advertising categories of the "Times" included entertainment, up 9%, telecommunications, up 25%, transportation, up 17%, and technology up 22%.

National advertising revenue was particularly strong at the "Times" in September, up 9%, and national linage rose 4%.

Similarly, at the New England newspaper group, we saw robust increases in entertainment, technology and telecommunications.

In addition, health care showed strong growth.

Help wanted and hotel advertising remained soft at both the "Times" and the "Globe."

Financial services and American fashion were weak at the "Times."

Color advertising continued to be a strong story at the "Times."

For the quarter, color advertising revenue grew nearly 50% and represented 22% of total advertising revenue, up from 17% in the same period last year.

We continued to make strides with our brick and click efforts with year to date revenues up 5% to $22 million.

At the IHT, we continued to see success with our bundled buy.

This year, we have generated $1.6 million in incremental advertising sales for the IHT to advertisers such as ABM, AMRO, Shell Gucci and Reuters.

As we look ahead, we face difficult comparisons for advertising revenues in the fourth quarter.

Last year, ad revenues in the newspaper group rose 4% in October, 7% in November, and 17% in December.

Still, based on what we see today, we expect to see year over year growth in ad revenues in the fourth quarter.

Entertainment advertising is expected to benefit from both the quantity and the quality of new releases.

This year, 40 releases are slated for the fourth quarter, versus 36 in 2002.

And the strong lineup of new films includes Mona Lisa's smile, Runaway jury, Lord of Rings, The Return of the King, The Last Samurai, Matrix Revolution and Master And Commander.

In addition, the change in the date of the Academy Awards which will be in February rather than the usual March means that some entertainment advertising is likely to be pulled into the fourth quarter of this year.

In telecommunications, portability of mobile phone numbers which begins November 24 is likely to stimulate advertising.

This past Sunday, Hewlett Packard placed a 24-page insert in the magazines, the largest single insert in the magazine's history.

And next Sunday, the magazine's 25th anniversary of luxury homes and estates special advertising section will appear.

Ad pages are up 10%, the highest paging total ever for this section -- in this section's history.

The magazine continues to do very well in September, it moved to number four position in PIB's ranking of U.S. magazines by ad paging, up from number seven last year.

Ad paging for the Times Special Cars news section, which will be published nationally next Wednesday, increased 13%, compared with the same section last year.

Overall, we expect to see advertising gains at all of our newspaper properties in the fourth quarter.

On the circulation front, volume at the "Times" grew nicely in the quarter, up 5.2 daily, and 4.1 on Sunday.

Our success in growing circulation came largely as a result of highly effective use of acquisition channels, strong marketing and promotion programs and improved retention of existing subscribers.

As Russ mentioned, we actually added our 251st market this month and we will continue to add others.

But more importantly, we plan to expand availability in our existing markets.

At the Globe, we raised home delivery prices on September 29.

This is expected to add approximately an $11 million in revenue over the course of the next 12 months.

Currently, 48% of the globe's subscribers pay by credit card, an important factor in improving retention.

The globe is second only to the Times in the percent of subscribers paying by credit card.

One thing you may have noticed is that the other revenues at our regional newspaper group increased nearly 20% in the quarter.

Over the past year, we have successfully focused on creating additional revenue streams at our smaller newspapers by doing more outside commercial printing and database marketing.

And we have added to advertising revenues through the creation of sophisticated magazines focusing on areas of interest to the communities we serve.

Two examples are SAVIOUR, an upscale wine, travel and entertainment publication in Santa Rosa which is in the heart of Sonoma County, and Gainesville magazine which covers the people and lifestyles of this city and north central Florida.

As Len mentioned, we continue to look at ways to contain and reduce cost.

In September, the guild, which represents approximately 1,500 employees at the "Times" newspaper, reached a tentative agreement on a new eight-year contract.

Under the terms of the contract, wage increases will average just 2.6% per year through 2011.

In addition, we have the flexibility to adjust the size of our workforce.

We expect the contract to be ratified before the end of the month.

As we look ahead, we will continue to concentrate on containing and reducing costs, as we continue to successfully execute our clearly defined national strategy, and companion local market strategy.

And just one final note, the Red Sox playoff run has been worth nearly $500,000 worth of incremental revenue to the "Globe."

I expect that we will get even more advertising by the time the Sox/Yankees series is over and the up side is greater still when the team makes it to the world series.

And now I would be pleased to respond to any questions you may have.

Thank you. (operator instructions) First question will come from Kevin Gruneich with Bear Stearns.

Hi, thanks.

I was wondering if you could address what the non-newsprint cash costs were up for the newspaper group in Q3, and what the year over year change in average FTE's was for the quarter?

Kevin, it's Len.

Cash costs were up a little over 4% for the quarter.

And the question on FTE's?

What was the change year over year for the newspaper group?

We're relatively flat.

I mean, you do understand that we have variable FTE's that move with volume, but generally, excluding any changes in variable, FTE's were pretty much flat for the quarter, excluding the IHT.

Just a point of clarification when you say a little bit more than 4%, again you are talking about non-newsprint cash costs in the newspaper group.

That's correct, for the company, actually, it's 4.2%.

And It's the same for the newspaper group?

We get within spitting distance of a tenth.

Okay.

And just lastly, could you speak to newsprint pricing going forward?

Sure.

As you know, they -- the announcement of the $50 increase is not sticking, and it's likely to be somewhere in the $35 range for the rest of the quarter.

For next year, unless there's a material increase in volume, we're looking at, you know, pretty much a similar increase in pricing.

Perhaps slightly higher for the year, but no surprises.

Great.

Thanks, Len.

Moving on, our next question will come from Paul Ginocchio with Deutsche Banc.

Could you give us an update on maybe total cash flows that the HQ will consume maybe to 2006 and also obviously circulation was great this quarter, but it's still down year to date.

Where are you on the ten-year goal for daily and Sunday?

In regard to the ten-year goal as far as 2004, we will be 55% of our way on the daily and 59% of our way on the Sunday.

And the ABC statement will be released in the month of October.

We will be up 5,000 --approximately 5,000 daily and 5,000 on Sunday.

It's Russ.

Let me just add that the earlier softness we saw in circulation when we talked to you at the last quarterly conference call, we attributed it correctly to the year over year impact of 9-11 and some other factors.

We told you it was a blip, which it indeed was.

As you can see from our quarterly circulation numbers both copy and revenue at the "Times," the circulation growth is strong, and we indeed expect a very robust, more typical growth pattern result in the ensuing six month ABC period, which would be ending next March reported next April.

So, to the extent that anyone was concerned about circulation matters, we hope these numbers will, as we indicated, three or so months ago, will demonstrate that there's plenty of room for us to run in terms of national circulation growth for the "New York Times," newspaper.

I'll let Len talk on the building, but as we mentioned, we gave you our Capex numbers for the year, including the building, and given the deferred state of the building, we're not going any further than that.

Obviously, in December, we'll --as we always have done, we'll give you our cash -- excuse me, give you our Capex guidance for the following year, but that will be impacted by the state of our developers' financing, which right now is as we have said for the last quarter or so, are at a stand-still.

So, we have pushed back the occupancy date to later in '06 or indeed, even in '07.

And that's got us plenty of time to continue to work on building costs, (indiscernible) Shell and then interior fit-out that's down the road and we'll keep you posted.

December, we'll give you an update.

Let me just correct.

I was giving a 2004 forecast on the progress on the national expansion.

On daily, through 2003, we will be 50% of our way on daily, and a little over 50% on our way on Sunday circulation growth.

OK.

Thanks.

Could you just update me on the credit cards for "Times" I think it was 72% last quarter is that correct and what was is it this quarter?

It is 65% to 70% if it is ranging between 65% to 70% right now, we are very pleased with the progress we have made against credit cards.

The retention, as I think you know, Paul, is one of the highest in the industry if not the highest.

We are in the 90% range in regard to retention for subscribers two years and over.

Thank you.

Moving on, our next question will come from Mark Hughes (ph) SunTrust.

Actually, it's actually Toby Summers (ph) for Mark.

I wondered if you could comment about employment classified pricing and maybe where you see it in terms of verticals or industry groups that may be leading the way.

I know that Empire State index came out and their six-month employment outlook increased, is that something that you have been feeling?

We haven't really experienced a surge in recruitment advertising.

What has been happening is we --each month we have shown improvement, and the declines are getting smaller.

But at least in the New York market, there's some concern that our economy is trailing the rest of the country.

So, we're not wildly optimistic about recruitment.

We think we're reaching bottom, but we don't expect to see any kind of recruitment advertising growth unless there's real job growth.

In September, we got much closer to flattening out at the "Boston Globe."

I think we were in the mid to low single digits, maybe down 4%, something like that.

And the "Times" situation continues to moderate, but we don't have any great inside knowledge.

We read "The New York Times" just as you do, but I might add, Martin and I ask Martin to just comment briefly on the success we're having on the digital side in terms of our classified business.

As you know, we report those numbers separately.

I gather some companies don't, but we report our digital numbers separately.

And of course, that includes some help-wanted revenue as well as other categories.

Martin?

Sure.

Help wanted, digital help wanted revenue for the quarter was up over 20% and year to date, it is up almost 12%.

So, we have seen continuous improvement throughout the year on the digital side, and I might add that we are seeing continued improvement in digital only sales.

I mean, that's a particularly important number to track because it tracks the digital only demand for the help wanted side, and isn’t attached to print-side per se.

So, we track both sides.

We track the up sells as well as digital only.

With respect to the other classified verticals, real estate is up almost 40% for the quarter, and up almost 53% year to date.

Automotive again, digital is up over 62% for the quarter and up almost 48% year to date.

So, we continue to see robust growth on the online side of the classified businesses across the board, and again, increasingly, on the digital-only side.

And of course, our -- with a little bit of a quip, our newsprint cost is very low with respect to those ads.

But even though we are doing increasingly well on the digital only, it's the strength of our brick and click effort, the strength of our combined journalistic efforts, the strength of our combined ad sales efforts that is leading to that successful result, and accounting in some good measure for the very good profitability and revenue numbers that we talked about earlier.

Next question, please.

Our next question will come from William Bird with Salomon Smith Barney.

I don't know if I missed it, I was wondering if you could comment specifically on what the help wanted revenue decline was in September and also just wondering your general thoughts on the do not call list and you know, over what percentage of your new subscriptions are from telephone solicitations and how do you see that list affecting your strategy going forward?

The help wanted number for the "Times" declined in help wanted 17.2%.

At the globe it was 4.5%, and at the regionals, it was 1.2%.

In regard to how we look at acquisitions, we certainly use telemarketing.

We as you the web, we use direct mail.

We use DirectTV and in regard to new orders, where we seem to be getting the bulk of those, not only in the quarter, but going forward, we see a lot coming still through telemarketing.

We see about 14% come through the web, about 4% through direct mail and in regard to direct TV, we are seeing about 13% there as well.

But from a standpoint of do not call, We are very, very well prepared in regard to the do not call, because we have been converting to these other channels for a number of years now.

We have been using the web, of course, lots of direct mail through our efforts with our agency Digi-Thought, and a lot of direct TV and FSI use as well.

From a standpoint of the decline of likely prospects, it's about 35% at the "Times" and about 45% at the globe, but again, the acquisition channels that we have built up outside of telemarketing really are helping us at this point in regard to new acquisitions.

Thank you.

John Janedis with Banc of America securities has our next question.

Just one quick question on the real estate category.

The comp there seems to be getting a lot more difficult.

Could you talk about the rental market versus resell and builder advertising, please?

We are seeing more challenge in the real estate market yet, primarily because of the comps and because inventory is waning at this point but there is still a very strong sales activity in the marketplace.

What we are doing also is focusing very much on luxury homes as I noted.

Our luxury homes section that will appear in the magazine is the largest in history.

So, from a stand point of not only concentrating on old homes, we are very much focused on luxury and we are also increasing our national reach in regard to the real estate market.

I just want to add, Janet, if I could, on the prior question on home delivery acquisition sources, this past month we had over 9,000 orders that we took in for "The New York Times" on nytimes.com, and that's a record other than the month that coincided with 9-11.

So, that is -- that's also very encouraging for us in terms of home delivery growth going forward.

Next question.

Our next question comes from Steven Barlow with Prudential Securities.

Thank you.

In your guidance you keep on talking about 2% to 4% increase in circulation revenue gains.

Based on the first three quarters, it seems like that number is too low.

I wonder if you could comment on that and then if could you -- I don't know what -- you mentioned a 35% and 45% number for "Times" and Globe what I'm trying to get at is what is your percent churn at in Boston.

Thanks.

In regard to circulation excluding the "Herald Tribune" what we are looking at is 2.6% year to date.

In regard to churn numbers we don't give out our churn numbers.

The 35% and 45% are primarily the percentage of decline that we see on the do not call list.

But as I said, those other acquisition channels are making up very nicely for any acquisition concerns that we may have in regard to the telemarketing list.

Thanks.

Moving on, Peter Appert with Goldman Sachs has our next question.

Janet could you drill down a little more perhaps in terms of the retail trends you are seeing, in terms of subcategories, where you are seeing relative strength or weakness and any color you could give us on the fourth quarter expectations would be helpful, thanks.

In regard to softness in retail, we have seen a lot of softness in the department stores off and on really during the course of the year.

We have seen that particularly at the regionals, particularly in fact with Dillard’s.

But we are starting to see that come back quite nicely at the Times in particular.

We have gotten very strong schedules really post Labor Day from many of the larger department stores, Bloomingdales, Sachs, Nordstrom’s, Neiman-Marcus.

We have also, even cracked new business with Marshall Field’s.

We are also seeing, I think you saw this in the front page of The Times, the other day in regard to the return of the luxury goods marketplace, which certainly bodes well for what the times will represent going forward in this fourth quarter.

We are seeing that lift in fashion jewelry.

We are seeing it in a variety of sectors.

As far as mass market, that's a different story, really, I think that ties in more with store openings to a large extent when there are store opens.

We see much more activity, particularly in fact at the "Globe", when indeed they have experienced store opens with Target and Coles within the last year, 2002.

Going forward in regard to the categories, I think we're going to see the same kind of categories perform well in the fourth quarter.

That will be technology, telecom entertainment, I think you will see a lift in regard to the retail market, and what we are also seeing is a very strong showing in regard to automotive display.

We are getting a very large percentage growth in the October time frame.

We saw this in September as well with many - but not only the big three in Detroit, but many of the foreign automotive companies coming in with larger schedules in this time frame, which will bode well, I think, for the fourth quarter.

That's great.

On the department store improvement, would your sense be that that is a -- perhaps a migration by the department stores towards a more national approach to their spending plans which is specifically benefiting then the "The New York Times" versus say the regionals or the Globe?

I think that is true to a certain extent.

But I think that there are also multiyear contracts and incremental spending patterns that have been proposed to a lot of the larger department store, that indeed if they have shored up their money for the fourth quarter, they are certainly going to spend that in order to reach the goals that we have set for them and the Globe has set for them as well.

We have experienced nice national growth with a lot of the, you know, certainly Macy’sand Bloomingdales and Sachs.

And we have been pitching them, of course, on the national circulation growth that can benefit those national chains.

Great.

And then just one last thing, a clarification, you mentioned the help wanted numbers for the "Times", "Globe", etc.

Were those the September numbers or the third quarter numbers?

Those are the September numbers.

Can you give us the third quarter.

Yes third quarter on the "Times" is 15.5%.

The New England newspaper group is 9.2% and (technical difficulty) are 3%.

That's negative three, correct?

Negative.

Moving on, Lauren Fine with Merrill Lynch has our next question.

Thank you.

Just on your guidance on ad revenues for the year, you're looking for a gain of 2% to 4%, but year to date excluding IHT, you're up 1.7%.

And I guess in view of the difficult comparison, I'm wondering about your confidence about, you know, hitting the low end of that.

And then I guess I still want to go back and understand on circulation, you did lower your circulation revenue guidance, yet your circulation is now trending back up again.

Are you getting a lower revenue per copy, or is it just some of the newer circulation comes in at a discount initially.

And I'll stop there for now.

Lauren, I will take the last question.

You have to look at "The New York Times" but then you have to look at the rest of the company. "Boston Globe" and NITRANG are basically flat.

The good performance at the Globe at the "Times" is offset.

And as Janet indicated earlier, we're running at around 2.5 to 2.8% in circulation revenue which puts us you know, roughly smack in the mid of the range, and we think that the "Times" will continue to perform as they're doing, but we also think NITRANG and the Globe will perform at the current rate they're performing, hence the 2% to 4%.

And in regard to the fourth quarter, Lauren, I think it goes to what I said earlier in regard to people shoring up a lot of their dollars for the fourth quarter.

Which as you well know really does begin to show stronger growth in October.

Even though the comps are difficult and they are.

We do expect to see growth at the "Times," the "Globe," and the regionals year over year in regard to some of the categories.

And as I said, particularly in the retail sector and many of the national categories that have already done well, we think that there is up side potential.

Entertainment in particular, primarily because of the things that we have planned, holiday preview, and what I said earlier in regard to advertising moving into the fourth quarter because of the early academy award event this year, I think that really does signal that the fourth quarter can be a strong one for us.

We're happy with the rate performance, particularly in the national category, and we're happy with what we saw in terms of volume and rate in September.

So, that's what makes us, as they say, cautiously optimistic.

Great, and one last question.

What percent of "The New York Times" circulation is New York these days?

Hold on, Lauren.

We'll get that for you.

And we'll come back to it.

But -- here it is.

On the daily, it's 55/45. 55 not New York, 45 outside, and on Sunday, it's 48 as on a Sunday, and NDM, and outside, 52%.

So you can see it, it is as we have said all along, it's going to continue to migrate because of the robust growth in the national area, and that's all part of our plan.

Those copies are higher revenue copies, and they certainly support our national advertising thrust.

So, from a long-term strategy point of view, we feel that we are pulling out of the gloomier days of the ad recession, and supported by our national circulation growth, our long term strategy remains 100% intact.

Great.

Thank you very much.

Our next question will come from William Drewry with Credit Suisse First Boston.

Hi, two questions to close the loop on the outlook for the fourth quarter.

Russ, are you saying that you think that obviously rate will be up on a year over year basis, but that volume, total volume will grow?

In Q4 as well as question number one and then question number two, on the building with the financing issues that your partner is having, is there a risk there that you have to find a new partner for this building, and if so, would that delay versus your current timing outlook even further?

Well, on the latter question, I would be reluctant to say anything negative about --even though that's not really pejorative about the development partner, but obviously, it's a difficult climate for large commercial projects of that nature.

And as long as there's no financing, the project will --will not go forward.

And we certainly expect that the market will improve in the future, and -- then we would be prepared to move forward.

But projecting exactly what will happen is not something that I want to do, as they say, the future is not susceptible to definitive predictions.

And --

What?

And on the ad rate, and volume, Len will give you a little more detail on that.

We are hesitant to talk about the fourth quarter in any detail but we're hopeful that the declines in volume will stabilize in the fourth quarter.

Given our great -- given our good translation into rate debt, that's a helpful sign.

Bill, you were asking us about volume in terms of national advertising, weren't you?

Yes.

We were up 4% in the third quarter, and we expect to be up in --

In September, I think we were up 4% in the -- yes.

Let me slow down.

We were up 4%.

We were up 4% in the -- in September.

Our revenue was up 9% and our lineage was up 4% at the times in September, so that indicates that if we could repeat that performance that we would be in pretty good shape, but as we said before, one month that does not a season make.

So, that's -- that's one important reason for the optimism.

Lineage up 4% in September, national lineage at the times.

Okay, just one follow-up, if I could, on the building issue.

Would you be willing to, you know, increase the percent of the original investment, whatever -- I don't think you ever revealed that, but i.e. shoulder more of the burden of the investment to get this building constructed?

Bill, again, I don't want to project the future, but we have not been nor will we be terribly interested in being in the real estate business.

If you know what I mean, we don't want to be a landlord.

Obviously, this is a very old building we're in.

It's between 75 and almost 90 years old, depending on which part of it you look at. and it's given us very good service, and no matter what happens in the future, we're going to have to spend reasonably significant amount of money on making sure that our staff has first class quarters to work in.

So, again, I think for the moment, it may be a little frustrating for you, but the building is -- the building issue is-- I hesitate to characterize it, but it's going to be -- oh, here's a word, stalled for the moment.

And we'll just have to see what transpires.

You know, there's some politics involved with liberty bonds and all of that stuff, so we'll just have to be patient, but again, we promise to update you in December as we normally would on our CAPEX expectations, and move forward from there.

I -- I think that covers it.

Great.

It's Len.

It's more than likely that RATNER will get its financing.

It really is a question of at what price.

As the economy continues to improve, and there's some firm -- firm rental proposals, that will improve the situation, but from our perspective, we're owning the portion we are in.

We really don't have much of an interest in owning any more than that, and in -- you know, if you paint the gloomiest possible picture, there are other financial developers who could step in.

We're not too concerned about that.

OK.

Thank you.

Barton Crockett with JP Morgan has our next question.

Hello.

It's Frederick Searby (ph) from JP Morgan.

Just a couple of questions.

One, if could you just touch upon the circulation at the New England newspaper group.

It sounded like you're implying that we saw a decline.

You obviously had a very strong kind of snap-back here at the "Times."

But in -- specifically with the "Globe," I mean, is that going to continue, and are we cycling against a price increase?

Can you refresh me what's causing that?

Their ABC will be 17,000 down on daily and about 900 copies up on Sunday.

They are cycling against price increases.

They just took another price increase in the June time frame, which is probably going to be accountable for about $2 million, for this year.

That, needless to say is nice for our bottom line but they are cycling up against another price increase that they took in fact last year.

That has an awful lot to do with what you are seeing in regard to the circulation declines.

But from a standpoint of the creativity that they're showing, as the "Times" does in regard to acquisition channels, just as we have learned a great deal about direct mail, direct TV, usage of the Web, the "Globe" has certainly done that as well and have been very successful in cultivating those new channels.

The first large, the large first anniversary of 9-11, there was a very strong education campaign last year, that they do not have this year.

So, that indeed has had an impact in regard to September as well.

Home delivery declines are really due to the impact of some of the telemarketing legislation.

But there were single copy increases in October of 2002 outside of the NDM and Sunday in June that certainly have a lot to do with what you are seeing in regard to the numbers right now.

And as Russ is fond of saying, I think it's important to keep in mind that while copies will be down somewhat on the daily for Boston, revenues are going to be up quite nicely in the fourth quarter as a result of the price increases.

That's an important thing to keep in mind.

And, if the Red Sox can pull out a miracle this evening, which we're certainly hoping for, then the strong circulation gain that that's giving us will continue.

But--

You guys are conflicted on that account, so -

Let me tell you something --we're not conflicted in the least.

We at least this person isn't.

We've got 17% of the Red Sox, and we are -- at least Russ Lewis is rooting for 100% of the victory.

I was an old New York giants fan.

So, I'm not conflicted at all.

And one just follow-up.

Can you just tell us what's happening with Discovery Times and network where you are in terms of traction and how that's shaping up?

We are very pleased with the growth that we have seen in the number of households.

They're in 30 million households and there's very keen interest in regard to the advertising community in light of what we have done with original programming on the channel.

We worked very closely with Joe Aberzaid, their director of advertising with many cooperative programs with advertisers that of course run print schedules but also want cable opportunities as well.

General Motors, as I think you know is a charter sponsor of discovery times.

Thank you.

Brian Shipman with UBS has our next question.

Thanks, good afternoon.

Noting the sequential improvement in help wanted into September, you are running into some very tough comps late in Q4.

In fact, I think you were positive slightly in November, but also in December.

Is it possible that we might see sequential deterioration into 4Q, before things really start to get better permanently into the new year, if not any chance of turning that positive in the near term, thanks.

You know, I'm not sure we can read the tea leaves that finely, and you know, when you say is it possible?

Anything is possible.

But, please bear in mind that help wanted at the times, for example is now, I think, 7% of total revenue, and therefore, is well eclipsed by categories such as entertainment and some of the others, that Janet has talked about.

So, you know, it cannot keep going down forever, and it will turn and predicting exactly when that will happen is something we're just not able to do or willing to engage in, but when it does turn around, obviously, that's going to be of considerable assistance to us.

But, you know, help wanted recruitment is not the, it does not have the impact on us, either at the "Times" newspaper or company-wide as it once had.

We've always said that the "Times" is -- and the rest of our newspapers but particularly the "Times" are durable enough to go where the money is.

And you know, a little bit like the guy who robbed the banks, we go to where the money is, and that's why when help wanted waned, we looked for other sources of revenue, and we will continue to do that, certainly not ignoring or abandoning help wanted in any way, shape or form, as Martin indicated earlier, we're putting a lot of effort into help wanted, both in the brick and click and in the online-only area, and we're having a lot of success at the "Times" Web site and also at bostonworks.com, which is doing very well, in among other things what we call the power ratio when we measure its effectiveness against folks like monster.com.

Next.

Moving on, our next question will come from Christa Sober with Thomas Weisel partners.

Hello.

Most of my questions have been answered but I was wondering if you could give us, Janet, the growth in your top categories in September tech, telecom and entertainment just to get a sense of what sort of rebound we saw there and one just clarification question, Len, I think you gave the cash X newsprint increase, but could you give the cash X newsprint increase X IHT for me, please.

That was excluded --

That was, that was around 4% XIHT.

4.2%.

OK.

For the company and for the "Times."

Perfect.

The newspaper.

Both for the company and for the newspaper group.

OK.

Christy in September, entertainment was up 30%, telecommunications was up 29.5%, transportation was up 16%.

Another strong performer was corporate, which was up 65%.

And tech?

Just one moment, I'll get tech for you.

It looks like 22% up.

I was just going to -- 22%.

Perfect.

Thanks.

Our next question will come from Catherine Flaherty with Blaylock & Partners.

Miss Flaherty, your line is open.

Next question.

Hearing no response I will move on.

Once again as a final reminder, it is "*1" to ask a question or make a comment.

And, James Marsh has the next question with S.G.

Cowan Securities.

Hello.

Two quick questions.

First I was hoping you could give us an update on what's going on with the pre-print business at the New York Times, I think third quarter volume was down about 4%, seems to be bucking industry trend(inaudible).

Just wondering if you could shed a little light on that.

Secondly, I was hoping could you give us a sense for, you mentioned circulation as percentage of total "New York Times" circulation in New York area, but how's that penetration rate changed in New York over the last three years or so, just give us a sense, is that increasing or decreasing relative you’re your other growth rates?

Thanks.

In regard to preprint.

Preprint is down now 2% through September year to date, and softness in FSI is really the result of a lot of travel and international related sections.

Plus, the bankruptcy is a whiz and softness in the consumer electronics area.

It's important to note that the "Times" has never been a very large preprint newspaper.

Many people convert primarily to ROP and the use of the magazine.

In the last year, we have seen, last two years, we've seen more growth in preprints primarily because of newsprint prices being lesser, and certainly because people feel as though they can target their message more appropriately through pre-prints, but in reality there are reasons for them, of course, to convert to R.O.P. in regard to adjacencies against news and editorial.

This is Len.

Quick on the penetration.

We really don't look at penetration rates the way we might at the globe or in our regional newspaper groups --group when we talk about the Times because it's an audience strategy.

It is not a mass-market geographic strategy.

Penetration in New York has always been a relatively small number and it is more than likely, if it's been relatively flat or perhaps slightly down over the last few years in New York.

But it's under --

My sense is that it's about 12%, and it's been in that neighborhood for a long time.

We are not mass, we are class.

We are going after a certain audience size, and if we were at 12% penetration at -- in Sarasota or Santa Rosa, that would be an awful thing, because we look to be between 40% and 50% penetration in our regional newspapers.

But on the other hand, that is not the "Times"' strategy as Len says.

We’ve got an audience strategy and obviously, there are other newspapers in the market that do a good job of penetrating other segments of the marketplace.

So, it's -- you know, it's a good question, but it's one that is important to note we don't --we don't play in that game.

Of course, we are a premium priced product, given the commensurate premium quality report that we give folks, we put more money into our news report than any other newspaper in the country, and so, by definition, that's going to appeal to a more upscale audience that can afford that -- to help us pay for that news report.

Excellent.

Thank you.

We’ve got time for just one more question.

Thank you, our last question will come from Douglas Arthur with Morgan Stanley.

Just a quick follow-up on the September strength and National.

What -- if National total in September was up 9%, what were the weak categories in National in September and what is the outlook for those categories going forward?

Thanks.

The weaker categories really hotels and banking.

Those seem to be a little bit weaker than, you know what we have seen even at the beginning of the year.

American fashion was also weak.

Not so much on the luxury side, but on the mid market, the bridge market And some financial services in September were also quite weak.

Now, we have seen that turn-around, Doug, in October.

We have seen a stronger performance in the October time frame in regard to the financial markets, but we did see some softness in September.

But in reality, those are the categories that we are showing the weaker side.

And before Catherine closes the conference, we wouldn't want to end on a down note, so we are actually going to project a Red Sox victory tonight.

Katherine.

Thank you very much for joining us on our conference call.

If you have other questions, please call me later today.

Take care.

That concludes today's conference.

Thank you for your participation.