New York Times Co (NYT) 2003 Q4 法說會逐字稿

Please stand by for the New York Times Company Q4 2003 earnings conference call.

Good day.

Welcome to the New York Times quarter four, 2003 earnings conference call.

Today's call is being recorded.

A Q&A session will follow the presentation.

If you'd like to ask a present, please press the star key followed by the digit one.

For opening remarks and introductions I would like to turn the conference over to Catherine Mathis.

Please go ahead, ma'am.

Thank you.

And good morning, everyone.

Welcome to our fourth quarter conference call.

Today we have several members of our senior management team here to discuss our performance and results with you.

Russ Lewis, our President and Chief Executive Officer

Len Forman our Chief Financial Officer, Janet Robinson Senior Vice President of Newspaper Operations and also President and General Manager of the New York Times newspaper.

Martin Nisenholtz, the CEO of New York Times Digital, Jim Lessersohn, Vice President 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 publically filed documents including our 2002 10-K.

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

This conference call is being webcast.

A archive of it will be available on our website which is www.nytco.com.

And an audio replay will also be available.

The instructions are in the earnings press release.

We will also post a transcript of the conference call on our website.

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

Thank you very much, Katherine.

Good morning everybody.

Before Len and Janet take you through our results for the fourth quarter of 2003, I wanted to take just a minute to comment on the year we just finished, and also the year we've just begun.

In '03 we managed to improve our GAAP earnings per share in net income despite the continuing challenges presented by what hopefully will turn out to be the final effects of a prolonged advertising recession.

At the same time, we made significant progress in the continued implementation of our long-term business strategies.

And that is, of course, to operate the leading news and advertising media in each of the markets in which we compete, both nationally, and locally.

While $3.2 billion in revenue and diluted EPS of $1.98 represented only modest gains over 2002, the improvements that we made in '03 on both the news and business sides of our company have set the stage for us to achieve greater gains in '04 and beyond.

For example, during the year we increased the national availability of the New York Times by adding 674 home delivery zip codes in new and existing markets.

We sold 50 percent more color advertising, and leveraged the resources of the times to strengthen the International Harold Tribune.

At the New England Newspaper Group we continued to build on the success of the Boston Globe's own products, adding more than 850 new advertisers.

And we saw advertising in circulation revenue gains there as a result of the Globe's premium pricing strategy.

Our regional newspaper group successfully launched five new and very quickly profitable magazines.

While New York Times Digital achieved record revenues at $88 million and more than doubled its operating profits to $20 million.

All of this was accomplished, of course, despite an environment of war, and the continued ad recession that characterized 2003.

Nonetheless, we successfully endured and now 2004 has brought with it the promise of better business conditions.

The national economy appears to be entering another growth cycle, Wall Street is rebournding and the national newspaper advertising market seems to be ready to resume its long-term secular growth trend.

And because we've been consistent in implementing our long-term strategy during the difficult economy of past few years, we are now very well-positioned to take disproportionate advantage of a new rising economic tide.

So with all that as back drop, let me turn the call over to Len and then Janet for some comments on the quarter.

So with all that as backdrop, let me turn the call over to Len and then Janet for some comments on the quarter, Len.

Thanks, Russ.

Good morning, everyone.

Our fourth quarter earnings per share came in at 73 cents, up 6 percent from 69 cents in the fourth quarter last year, and higher than we anticipated mainly because of stronger than expected advertising in December.

As many of you know, in January 2003, the company purchased the remaining 50 percent interest in the International Harold Tribune that it did not previously own.

Since January of last year, results for the IHP have been included in the newspaper group.

Before that time, the company's partial ownership interest was reflected in the joint venture line of its income statement.

To provide useful comparisons the results of the IHT are excluded from the revenue and expense the numbers that Janet and I will mention.

With the one-year anniversary of our purchases of the IHT this month, going forward the comparisons will be on an apples to apples basis.

Newspaper advertising rose 4 percent in December.

A very strong showing particularly given that they increased 17 percent in December '02

Overall for the quarter newspaper group ad revenues grew 2 percent and circulation revenues rose three percent mainly as a result of increased volume at the Time and the effective price increases at the "Globe".

Other newspaper revenues grew nearly 16 percent in the fourth quarter.

This resulted from a variety of initiatives, including increased distributions of other publications by the Times, higher revenues at Globe Specialty Products which provides advertisers with direct marketing service in the Boston metropolitan area and additional revenue from outside commercial printing at our regional newspaper.

The broadcast group's revenues and operating profit declined in the quarter mainly because of the difficult comparisons to the fourth quarter of 2002, when political revenues reached a record 13 million.

As relook at '04 we expect the broadcast group's performance to improve as its benefits from both the Olympics and the presidential elections.

Currently pacings are up 9 percent for January and 4 percent for the first three months although it's early to gauge how the quarter will ultimately turn out.

Once again our digital division demonstrated outstanding growth with fourth quarter total revenues of 27 percent, ad revenues of 31 percent and earnings more than doubling.

Digital's fourth quarter operating margin expanded from 17 percent to 29 percent and, as some of you may recall, in 2001, we stated that our goal was for New York Times Digital to be EBITDA profitable in 2002.

At the time we said it, we thought it would be a stretch, but, in fact, Digital's EBITDA moved into the black in 2001, a year ahead of schedule.

And the division had an operating profit in 2002.

In 2004, we expect to see double digit revenue and profit gains.

Beginning with our January advertising revenue release, we will include information about the performance of our digital, and broadcast businesses so you can easily compare our results to those of our competitors, particularly when it comes to print and digital advertising.

Turning to the expense side, despite higher benefit costs investments in our properties and increased [inaudible] prices, expense growth remained restrained rising just 2.5 percent in the fourth quarter.

Our STE count at the year-end was down 50 positions from where it was at the end of 2002, and we expect the company's STE count at the end of 2004 to be at the same level as the end of last year, as we continue to focus on limiting expense growth.

Capital spending in the fourth quarter totalled 29.5 million, including 9.5 million for our new headquarters.

For the year it was 115.7 million including 52.4 million for our new headquarters.

Depreciation and amortization was 37.5 million in the quarter and 147.7 million for the year.

During the fourth quarter we made a $100 million tax deductible contribution to our qualified pension plans bringing the total contribution in 2003 to 110.5 million.

The combination of our contributions and the strong performance of our pension assets in '03 has reduced the funding gap that existed at the year-end 2002.

If interest rates move higher we would expect to end '04 in an even better position.

Looking at 2004 our earnings guidance remains unchanged.

Earnings comparisons will be the most challenging in the first quarter of '04 versus the same period last year, when we received a one-time reimbursement for mediation expenses incurred at our college point printing facility and when ad revenue growth was strongest.

We plan to provide more guidance on the first quarter in early March.

Now, let me turn the call over to Janet.

Thank you, Len.

As Len mentioned, the year ended on a decidedly positive note as newspaper group advertising revenues rose 2 percent in the fourth quarter driven by a better than expected December.

Several of our large national categories at the time performed particularly well in the fourth quarter, entertainment which makes up 15 percent of the Times advertising revenue and is our single largest category increased 14% in the fourth quarter, benefitting from films that generated strong box office receipts, including "Lord of the Rings", "The Last Samurai" and Something's Gotta Give.

Other robust categories were banking, up 76 percent, transportation, up 21 percent, financial services up 31 percent, and media up 32 percent.

At the Globe, we saw significant gains in financial, up 36 percent, telecommunications up 24 percent, entertainment up 15 percent, and packaged goods advertising up 175 percent.

The Times weakest national categories in the fourth quarter were technology products down 24 percent, and hotels down 22 percent.

While the Globe's were factory automotive down 31 percent and travel down 9 percent.

As we reported in the Times quote: "at the luxury end holiday sales were hopping.

The nation's high rolling shoppers full of pent-up desire to spend propelled luxury stores like Neiman Marcus, Tiffany and SAX to hearty increases last month," unquote.

The Times itself was the happy beneficiary of the advertising that helped drive this.

In the fourth quarter, department store advertising increased six percent, fashion jewelry store advertising grew 13 percent and home furnishishing store advertising rose 12 percent.

Color continued to be a great story at the Times.

Since 1997 when color was just 9 percent of the ad revenues, we've sen tremendous growth in its use.

In the fourth quarter, color accounted for 27 percent of the Times add revenues up from 22 percent in the same period in 2002.

And we expect it to further increase this year.

Similarly, the Globe's color revenues rose in 2003.

Up 36 percent as a result of an increase in the number of color ads, as well as a restructuring of our color pricing which dramatically improved the rate yield.

Classified remained the most challenging area and in our ad revenue press release we provided a breakdown about how each classified category performed at each of our major newspaper groups.

Just to recap briefly.

While help wanted advertising showed improvement in the second half of last year, it was still down almost 10 percent in the fourth quarter at the newspaper group.

And real estate advertising, which showed year-over-year gains in each of the first three quarters declined five percent in the fourth quarter.

Classified automotive put in a strong fourth quarter performance up seven percent at the newspaper group.

At the IHT we continue to make progress on enhancing the newspaper and its business performance.

Since last January when we acquired the 50 percent that we didn't already own, the IHT adjusted late news deadlines to provide readers with later breaking news and added print sites in --San Palo, Kuwait City and Sydney.

In conjunction with the New York Times the IHT began offering a very successful combined buy that provides global advertisers with an opportunity to place their ads in both publications.

This initiative resulted in approximately 2 million in additional revenue in '03, and this year we hope to double that amount.

We have also introduced a revolutionary pan European buy called Euro Reach that will allow advertisers to place ads in a network of European papers, including the IHT.

And recently we announced a significant number of new columns and features that we believe will make the paper even more compelling for readers and advertisers alike.

We continue to leverage revenue opportunities outside the pages of the times through our group advantage buy, which allows advertisers to buy ad packages across company properties.

Last year group buys generated 9.4 million in incremental revenue, up 120 percent from the previous year.

And the Times [inaudible] quick revenues also continued to grow reaching more than 30 million in '03.

With regards to circulation, as Russ mentioned earlier, we've increased availability of the Times across the country.

Last year we added new home delivery markets and increased our penetration in existing markets.

In the fourth quarter, circulation revenues increased 2 percent as the benefits of our third quarter marketing efforts carried over to the final quarter of the year and copies sold increased both daily and Sunday.

At the "Globe", circulation revenues rose 7 percent reflecting the September home delivery price increase, and a higher Sunday news stand price.

While we do not anticipate circulation price increases for either newspaper this year, we do expect to see copy growth.

Looking at the first quarter, one favorable sign that we've seen -- that we've seen came on January 11 in the form of the big help at the Boston Globe.

This semi annual recruitment section was up 10 percent in the number of ads and increased 14 percent in revenues.

Similarly, the Times new semi annual recruitment section which debuted this past Sunday saw a 36 percent gain in revenue versus the same Sunday a year ago.

We expect that advertising comparisons will be the most difficult in January and February compared to the same months in 2003, when ad revenues for the newspaper group grew increased 5.5% and 4.7% respectively.

Throughout 2004, we will continue to concentrate on the Times national expansion and the integration of the IHT.

We expect to see improved growth at the Globe with particular strength in zoned revunues and Globe specialty products.

And at all of our properties we plan to extend our brands into new areas and platforms while maintaining our focus on continuing- on containing and reducing costs.

And now we're pleased to respond to your questions.

Thank you.

If you would like to ask a question today press the star key followed by the digit one on your touch tone phone.

We go first to Paul Ginocchio with Deutsche Banc.

Hi there, just a quick question on the IHT.

Can you give me any idea what the profitability going to be next year will be worse and better than 2003 after all these investments, and how should we measure the progress of the investment in IHT?

Well, as you know we purchased the IHT in support of our long-term business strategy, and the investments we're making aren't going to have an immediate pay-off.

It's in anticipation of the turnaround in the ad market in Europe.

And we're building for the long-term.

So I would be hesitant to talk about when you'll see that return, but it's our intention, otherwise we wouldn't have made this investment to see the financial pay-off going forward.

Okay.

In the second question is on your pension, what do you think the deficit would look like relative to the end of '02?

It's a little early for that.

We'll have our actuarial work done shortly.

What I can tell you is that we've had a pretty good performance in our assets this year, and with the $110 million funding, the gap will be reduced.

At the end of the day it really is going to depend on the actuarial assumptions and the interest rates that we'll be required to use in the discount rate for liabilities.

Okay, but you're thinking it will be less this year?

Yes, it will.

Okay.

Thanks.

We go next to Kevin Gruneich with Bear Stearns.

Thank you.

I was wondering, first of all if you could give us an update on the headquarters, Len?

Sure, Kevin.

We seem to be back on track.

While we don't -- while our partner does not yet have a firm financing deal, they are very close to signing one, and we're proceeding.

We're likely to spend, as we indicated in our guidance, somewhere between 110 and 120 million this year, which is up from '03, when we spent far less than we thought.

So, we seem to be back on track, and the plan is to be in the -- in the new headquarters sometime in 2007.

What's the schedule for breaking ground?

Soon.

It probably within the next 30 to 60 days.

Good.

And then, one follow-up.

Could you isolate the key components of the other publishing revenues and indicate how much of that was specifically programing revenues related to your discovery joint venture?

-- it was primarily -- we don't break that out.

It was primarily the items that I mentioned.

It was related to the GS -- GSP activities.

It was related to C&S publication.

The distribution of publication.

I mean those were the primary sources of it, and printing at our newspaper plants regional newspaper groups.

Those are really the three major elements of that.

Since we're a large wholesale distributor of other newspapers and periodicals, we have the opportunity to control, if you will, or change the price charge that the wholesale level to the retailers, and that's one way in which we make sure that our wholesale distribution businesses keep up with the revenue growth and the pricing growth of our own newspapers.

We don't want to have anybody taking a free ride.

Thanks.

One last question.

The 6 percent increase in news print pricing was -- is kind of light relative to your peers in Q4, could you talk about what might have driven that?

I think that might have been lighter than what you were thinking months ago and also kind of the outlook for '04 right now?

It's a combination of a few things, Kevin.

A- we used less volume -- less paper than we had anticipated.

It was also just the timinging of when the price increases went through and our specific contract deals that we have which were -- we have an obligation not to chat about publically.

But that's the primary reason.

Going forward, obviously we're looking at a big increase in the low double digits given where we were this year, particularly in the first quarter.

But our expectation is that the pricing patterns will follow the price increases of the last couple, which is an announcement, and then a phase-in over a period of months.

Thank you.

We go next to Michael Kupinski with AG Edwards.

Thank you.

The circulation revenue growth at the Times was just a little lighter than I was looking at.

It was 4.2 percent in the prior quarter, and at the Globe it was up an impressive 6.6 percent probably due to the price increase, but I was just wondering if you can just add a little color on the revenue growth -- circulation revenue growth at the Times.

I know that I think you're doing some price promotions and things likes that.

So if you can just add a little bit of color on there.

My second question is related to share repurchases.

I didn't see any in the quarter.

What your plans might be for 2004.

In regard to the circulation revenue for the full year, as you see, we are up 3.6 percent.

We did not, of course, take any rate increases.

The Globe did, but we did not in the fourth quarter.

But our discounting procedures are really no different than what we've always done.

Needless to say, you know, we are cognizant of the fact that we would like to offer programs to potential home delivery subscribers, but we have a very even mix, I think, in regard to how we are discounting.

And we have also seen some very strong home delivery growth in the fourth quarter, particularly in regard to credit cards.

Earlier in the year our credit card subscription was 63 percent, now we are up to 71 percent.

So from a standpoint of retention, that also bodes very well in regard to keeping those readers intact.

And, of course, I would be remiss if I didn't, as I always do chime in and say that it's very instructive to compare our circulation revenue increases with the decreases that are prevalent in the peer group.

So we feel continually good about our circulation growth prospects.

On the share question, we purchased about 440,000 shares in the fourth quarter and spent a little -- a touch under $20 million.

We did issue share options in the fourth quarter which may offset -- or may give the impression that our share repurchase were smaller than that.

And, as you know, our strategy over -- as we said, is on average to try to offset those share issuianses.

We spent a little over $200 million this year, in share repurchase and we have a little under 100 million left in our authorization.

And if I may have one more follow-up.

In terms of the advertising environment in the first quarter so far, I noted that some of the radio advertisers are saying that entertainment, auto, and retail are showing signs of accelerating into the first quarter.

I was just wondering, these just happen to be pretty key categories for the New York Times.

I was wondering what, especially in terms of entertainment as your largest category, I was wondering what you're seeing in the first quarter so far related to some of those categories?

Sure.

You know I'll give you what categories are strong for us out of the box in January.

Telecom is indeed very strong with AT&T, Verizon and Sprint.

Automotive is strong, particularly out of Detroit. but, we are also doing well with factory automotive in the foreign automotive sector as well.

Department stores is doing very nicely for us.

Many of the larger department stores are fulfilling their contractual agreements with us.

They did that certainly during the month of December but that's continuing to benefit us in January.

Insurance and B to B is up during the month of January.

Transportation with Delta, United, Continental and Jet Blue is up as well.

Media is showing very nice signs as well with a lot of cable and broadcast advertisers advertising quite heavily.

And fashion jewelry is continuing to show strong showing in January.

On the soft side, corporate advertising is softer for us in January.

There are late starts with some of the corporate campaigns.

Entertainment right now is a little softer, but that's primarily because in the middle of the month there was a bit of a hiatus before the Golden Globe announcements, and also before the Oscar announcements which, of course, occur today.

Right after the Oscar announcements, they start to move up the scale quite dramatically, and that indeed I think will benefit us going forward.

The timing of the change in the Oscar nominations and the Oscar show primarily has moved much of that advertising more into December than into January and February, and certainly March when indeed we got heavier advertising due to that date.

Financial is a little softer.

Merrill Lynch had a very large campaign last January that has moved to a latter part of this first quarter.

Hotels are a bit softer.

Live entertainment is a bit softer, primarily because of fewer shows.

And technology is also a little bit softer with a very large branding campaign from HP moving to the February/March time frame as well.

I just want to add that our experience has shown, and perhaps yours as well, that particularly over the last several years, January is not terribly indicative of future business performance either on the upside or the down side.

So we've -- we would be well to just give you a caution in that fashion either up or down.

Well taken.

Thank you very much.

We go next to Mark Hughes with SunTrust Robinson Humphrey.

Toby Summers for Mark.

Regarding circulation if you could just clarify was the 71 percent of the subscribers paying with their credit card for the Times?

Yes and for the Boston Globe the percentage is 50 percent that's up 10 percentage points from 2002.

Okay.

And I was curious, in terms of do not call list and telemarketing, could you describe how you're sort of orders are looking whether it be from the website, or other means?

There are four major areas that we look at in regard to acquisitions that certainly is direct mail, DirectTV, web acquisition and certainly telemarketing.

We were way ahead - and CRM.

I should add CRM.

What we are doing -- what we did, really, was to get way ahead of the curve in regard to the do not call legislation to really start our direct mail with our complimented CRM very early on.

We have been very successful in regard to what we have done in regard to internet marketing and direct mail marketing.

So those acquisition channels have proven to be very successful for us.

So from a standpoint of the do not call legislation it really has not impacted us very much at all.

From a standpoint, you know, just giving you an example in regards to the website, 73,000 subscriptions came off the www.nytco.com and 7500 came off of Boston.com.

So, the internet is playing a very important role in regard to circulation acquisition.

Are those figures for the quarter or the year?

That's for the year.

In the quarter, how many did you get from the -- in the Times?

I don't have it broken out by quarter.

I have the number.

For the fourth quarter it was 21,000.

Do you happen to have the number to compare that to the third quarter?

No, I actually don't have it.

But it's very, very close to the third quarter.

Okay.

We run approximately 20,000 starts a quarter off of www.nytco.com.

Thank you.

One last question.

How many markets is the Times currently available in?

255.

That's home delivered.

It's much more widely available, of course, on news stands.

Thank you very much.

We go next to James Marsh with SG Cowen.

Hi.

Two quick questions related to classified.

One related to help wanted.

Looks like the industry seems to be poised to turn positive in the first quarter.

I wanted to get a sense for what you thought the shape of the help wanted recovery would look like for the company as a whole?

And then secondly I was hoping you could comment on the real estate weakness.

Is there anything in particular that's driving that?

Any tough or any reason why we shouldn't be expecting weakness as we look into '04?

I think in regard to help wanted that will be dictated by what job recovery we are looking at.

Needless to say the New York market is very hard hid in regard not only to the unemployment numbers but certainly any job recovery.

And in light of that I think that is definitely impacting our returns.

But from the standpoint of the full year, I think as we look forward we are doing some very interesting things in regard to the combination sale of both print and online.

Certainly our super Sunday last weekend bodes well for a repeat of that which we are planning to repeat at least once, perhaps even more during the course of the year.

And the activity that we are getting on our website, certainly tells us that the combination print and online with what we've done with job market is serving us well.

Also, from a standpoint of the resumes that we've collected, we have 544,000 resumes on www.nytco.com which, I think, also says that we are sending a very good message in regards to this being a site where you can find real jobs.

You probably have noticed that we are also advertising quite a bit more in regard to what the effectiveness is of job markets.

Boston has done a very nice job with Boston Works.

They were positive in December, and I think that what their success with big help which will be again repeated in September, I think also bodes well for their performance during the course of this year.

But again I think a lot of this is contingent with what we are seeing in regard to job recovery.

In regard to real estate we are seeing some softness in real estate and it's primarily in the transient advertisers.

It's not in the agency at all.

The agencies in fact are up, in fact about 7 to 8 percent in the fourth quarter.

But, transient advertisers, we are seeing some weakness there.

This has direct bearing on lower volume or lower inventory and it also has direct bearing in regard to weather both in Boston and in New York.

Great.

Excellent.

Thank you.

We go next to John Janedis with Bank of America.

Hi.

Good afternoon.

Somewhat related question.

You've had nice a pickup in actual online job postings do you see that as a share shift or maybe a leading indicator of a pick up of the category, or maybe something else?

And then, just on the other line for the newspaper segments any kind of expectation for '04 the Q4 number was a pretty big number.

I'm just wondering what kind of month moderation you expect.

Thank you.

I'm sorry, John on '04 what were you --

In terms of 2004 full year you had something like 20 percent or so revenue growth at the other revenue line.

Ah-hah, okay.

Well, to answer the question about the pick up on online jobs, just to give you a little bit of a flavor.

For the quarter, we were up 18 percent, and for the year we were up 13 percent in online help wanted, which are nice numbers.

I wouldn't suggest that they are not.

We have not yet seen, I think it's fair to say, a wholesale recovery of the online job market because, if you -- if you compare, for example, help wanted online to real estate, which was up 49 percent for the year and automotive which was up 56 percent for the year online, you can see that there's a disparity between those numbers still.

And we would like to see, over time, those percentage gains catch up.

And when they do, you know, we'll know that we are in a more robust job recovery.

Nonetheless, I think you're correct in pointing out that a significant pick up has taken place on line, and -- and no one would dispute that.

I think, also, Martin and I feel very strongly about the fact that we consider ourselves -- our sales forces to be doing a very good job in regard to selling print and online.

This is not only in the help wanted category, but certainly in all of our categories.

But I think both of us are very encouraged in light of the fact that we are seeing that effort work so well.

On the other revenues, probably suffice it to say at this point, we could anticipate them to be within the same revenue range that we gave you for the year for advertising.

Thank you.

We go next to Edward Atorino with Blaylock and Partners.

Hi, good morning.

I want to follow-up you were talking about the other revenue line, Russ?

Yes.

As being in the same range as the advertising?

Yes.

That would sound like an awfully big slow down compared to the fourth quarter.

Is there something just unusual in what happened in the fourth quarter versus going forward in terms of the distribution numbers or whatever?

And to what extent can you sort of drive those numbers or control those numbers?

Well, again, as I said they are principally attributable to price.

Right.

And volume increases with respect to other publications that we carry.

Janet, do you have anything on the fourth quarter?

In regard to the fourth quarter as well, as far as the other revenues, there were a lot of our new businesses if the regional newspaper groups.

Oh, yeah.

The commercial printing is included in that --

Right.

-- which you know we have done well with.

Our database marketing efforts.

Our special products which primarily relate to the magazines that Russ has told you about which we did four or five last year, in fact.

It also includes some -- four new weekly newspapers editions that we have launched in the Ocala Lakeland area.

And, it also includes all of our web activity in the regionals as well that now, you know, is really quite a nice number for us.

One -- -- one point.

We opened up a new printing capability in Tuscaloosa in 2003, and that began to build over the course of the year.

You will be cycling through that basically?

We will be cycling through that in the next year.

Okey doke.

Thanks.

We go next to Peter Appert with Goldman Sachs.

Janet, two questions for you, please.

The retail turn around in the fourth quarter versus third is quite noteworthy.

You mentioned the department stores fulfilling contracts, I'm wondering if that might imply we should anticipate some deceleration in the retail growth you know going into the first part of '04 as contracts are fulfilled, you did mention some of the contingencies are in January.

Related to that I'm wondering if it meanings that since the retailers seem to be rushing at end of year to spend as promised does it mean they renew these contracts at lower levels going into the new year?

No, they don't renew at lower levels.

We have many contracts with really all of the department stores.

Many of them saved a lot of their dollars for the holiday shopping season this year.

Similar thing, in fact, happened last year as well, where we saw a very strong incline during the October/November -- November/December, primarily.

I think this ad is really a -- function of really economic times.

They are always going to do more in the fourth quarter.

I think in the last two years they've saved their spending primarily to push holiday shopping.

In regard to the first quarter, I think that these are staggered to a large degree, so they all don't stop in the first quarter.

So I wouldn't say that every department store contract is going to be fulfilled or completed by the end of January, or the end of February.

They are staggered throughout the year.

There's also a phenomenon going on in the first quarter, something called self shopping which primarily is taking advantage of the sales that exist in the department stores and also in fashion jewelry.

Because there is a very strong uptick in the purchase of luxury goods, this is also boding well for what we're seeing in regard to fashion jewelry and department store spending in the first quarter.

And of course we are hoping that continues through the entire first quarter.

What portion, Janet, currently of the retail business is contractual?

I -- a fairly large portion of the department stores is, I would say.

I would take a guess it's probably in the 65 to 70 percent range.

The other fashion jewelry stores and some of the other smaller boutiques, the number is quite less.

I would say that's probably in the 30 to 40 range.

But, we can give you an exact number.

I would think that would give you pretty good visibility then on the '04 retail revenue number, at least that base number.

Well, it certainly doesn't give you terribly transparent visibility about when they are going to spend and that's always a key question for us and again hence the reason for the caution that January, early weeks are not necessarily indicative on the plus or the minus side.

But the last thing on this topic, just the, as these contracts are renewed, you know, what kind of increases on average are you seeing?

It really is dependent on the -- you know, the department store or the department chain that we're talking about.

It includes not only rate increases, it also includes volume, it also includes value-added opportunities that we offer to them as well.

And, you know, of course there is a desire for us to constantly increase both volume and rates.

Okay.

Last thing and I apologize.

You may have mentioned this and I might have missed it.

The Boston Globe circ in terms of the period immediately following the September price increase, how did that go?

-- as far as increase in copies?

The impact on circulation from the price increase.

$1.5 million dollars between September and the end of the year.

And it's 2.4 million for full year for 2004.

Okay.

And how about the actual circulation number?

I don't have that specifically.

In the fourth quarter, Peter?

Yes.

That's what I was thinking of, yes.

In terms of the year-to-year.

Sequential or year-to-year.

For the New England newspaper group what we saw in the fourth quarter was that weekday was down about 2.6 percent, Sunday was off .9 percent.

Right.

Yeah.

Okay.

Thanks.

We go next to Christa Sober with Thomas Weisel Partners.

Hi, couple of questions.

Given first that a lot of your competitors combine the print and online I was wondering when you look at your specific categories if there are any meaningful changes to them when you infuse the online numbers or if you have looked at them that way.

The second question really goes to Martin specifically.

I was wondering if you have seen a pricing increase on CPMs for advertising I know we've seen that in some of our other online properties.

The final question is what's your fixed versus floating debt right now?

Thanks.

Why don't I take the pricing question first.

The [inaudible] CPM pricing at www.nytco.com has been fairly flat over the last year.

Now, there are different components of that.

Rich Media which accounts for a minority of the spend, obviously, had a rapid escalation in 2002, and this year, as advertisers -- more and more advertisers start to use Rich Media, the prices came down.

So you have to look to some extent at the mix of media at the website.

On the other hand, actually run a site banners is up a little bit this year.

So when you mix them all out, they are pretty flat for the year.

Of course our volume is tremendously increased as is our inventory so that's where all the games are coming on the advertising side.

If you look at specialty products like surround sessions and half-page ad those CPMs are up significantly.

So you know it's really a mix -- a mix of advertising types and a very, very dynamic market place at this -- at this juncture.

On the question of the capital composition.

We're in sort of the 35 to 38 percent variable, and the balance being fixed in the mid-60s.

Beginning in February, we will be reporting, as we noted, print and online revenues together.

Many of the categories that are strong for the New York Times are also strong for our online partners as well.

This certainly includes many of the uploads in the classified category, but it also includes many of the national categories that are strong in the paper that are also strong on www.nytco.com and Boston.com.

This certainly would have a lot to do with the verticals that Martin and his group have built out in regards to travel and the entertainment categories.

But I think in February, we will get a much better -- much better clarity in regards to what those numbers really would be.

I think you'll find that in the aggregate, that the overall advertising revenue increases that we show would be impacted between a half a percent and one percent higher, and obviously that is different depending on the category.

So there's not a huge impact, but -- but it's significant enough, and that's why we felt that reporting it out so that you could see the impact, and in effect, we could also get the credit for categories like help wanted and others.

So beginning in February, with the January line is released and revenue released, we'll have more breakout on that for you.

One quick follow-up if I may on the help wanted side.

I know you guys gave December and fourth quarter help wanted figures.

I was just wondering if you have those for the November and October months?

Yeah, we do.

So we can see the progression.

Yep.

October at the Times was down 12.5.

November it was down 17.8.

At the New England newspaper group October was down 6.4, and November was down 6.5.

Thanks.

We go next to Fred Searby with J.P. Morgan.

Thank you.

Most of my questions have been asked, but I'll throw out one.

What's the outlook for preprints given that you're expecting news print prices to move up and it probably is- it's been an area of growth, obviously and some question of that's moving out of ROP because of news print prices and with news print prices coming back, how much growth do you expect in 2004?

We are expecting growth, really in all of our newspaper groups, the Times, the "Globe" and the regionals.

Particularly in the Globe and regionals .

Even though the news print price may be escalating to a certain degree, the advertisers that have used preprints have been really quite pleased, primarily because of the targeting opportunities they have with preprint insertions.

So in light of that I think you may see a little bit more of a mix in combination ROP and preprints, but I really do think and my colleagues at the Globe and regionals really do feel that the preprints will show growth in 2004.

There tends to be some substition of paging when the prices go up so the revenue numbers will still be relatively healthy.

They may slow because the numbers were, or were pretty robust the last couple of years but we are still looking for reasonable growth in preprints.

Okay thank you. .

I want to quickly re-emphasize the point we made before which is while help wanted is a very important category for us, and we think we can benefit from that on the upside in the upcoming year, it's about 8 percent of the total ad revenue composition of the company, or the entire newspaper group, and the latter statement, the entire newspaper group.

So it's not a huge, as huge a revenue factor as it once was.

It's less than 50 percent.

And today it's, you know, roughly half of -- only half of what the entertainment category is.

And in line -- roughly in line with some of the other categories that have grown.

Transportation, telecommunications, live entertainment, so it's important to us, but it's not as it was in the old days when you'd look at it and say gee, there goes a third or more of the business in terms of what the results were.

We go next to Douglas Arthur with Morgan Stanley.

Yeah, two questions.

Len, can you ponder a guess on your, if you expensed options what the impact would be on '04?

And then, you gave a -- and '03.

You gave a fair amount of detail on the cost breakdown.

I didn't see nonnews print costs trends in the Q4 in the press release.

Thanks.

We released in our 10K what the impact would be if we were to expense options, in last year's 10K.

I believe it was roughly $80 million for the year.

I don't have the exact number in front of me.

That sounds like a ballpark number.

Pretax.

Yeah, pretax.

And, of course, as you know we reduced the option grant this year by 40 percent across the board.

And, Doug, would you repeat the other part of your question?

I was just trying to get a sense of nonnews print cost trends in the quarter.

It was a little over 2 percent.

About 2 to 2.2 percent in the quarter.

Okay, great.

Thank you.

We go next to Stephen Barlow with Prudential.

Thanks.

Len, can you give me an outlook on free cash flow for 2004 and possibly CapEx for 2005.

And the last one is if you took out Des Moines in January pacings, where would you have been?

Or where are you?

Do you want the short answer for the first two questions, Steve?

I'll get as long an answer as I can get from you.

We won't -- we don't talk about CapEx in 2005.

That's not something we do.

And in terms of our cash flows for the year, we're not giving a forecast.

We've given you our best guidance on depreciation and amortization, and in terms of where revenues and costs would be.

You'll have to do the math at this point.

I don't have the detail on Des Moines, but we can get back to you with that.

Okay, and is this then peak CapEx in 2004?

No.

As we have said, you know, you know we have been delaying our building expenditures over the last couple of years and we intend to see some build up.

We'll talk more about that as the year progresses and we get firmer estimates and board approval for our building going forward, and have better guidance for you during the course of the year.

Okay.

We go next to John (Cornricht) with Sandler.

Two questions.

In general, what were your ad rate increases in some of your major categories, just generally speaking?

Secondly more widely, if you look at your ad trends, you see October and November were barely up, and then December was up four and a quarter percent, and then you go out of your way on Page 1 of the press release to tell us that you're off to a somewhat slow start.

So I look at the whole picture, rather than being optimistic I would almost think this was almost a holiday blip you had in December surrounded on either side by continued slow business.

Why the optimism?

Well, if I were a clairvoyant, I could answer that question with great -- with great precision, but, of course, I'm not.

We are looking at the overall economic trends.

We are looking at the advertising that we did in December.

We are looking at the conversations we are having with our advertisers.

We are looking at the implementation of our sound business plan, and -- and we are making our projectoions for the future.

We're not trying to sound optimistic, pessimistic, we're just trying to sound realistic.

And the -- like man once said the future is not susceptible of definitive prediction.

And we also said in our press release that we feel very well positioned, given the national strategy of the New York Times, given the solid multi platform strategy we have with our local properties, we feel very well positioned to take advantage of an upturn in the economy.

Certainly that's what we saw in December, but I can't predict, nor can you, what will happen in Syria, or in north Korea.

You know, tell me what's going to happen with the job picture in six months and I can give you more precision.

So we're looking at all the factors.

And if we sound optimistic, it's because we believe very strongly in our business.

If we sound optimistic, it's because we believe that the national newspaper advertising trend that started oh at least five years ago, and which was interrupted by the recession, that that is beginning to pick up momentum again.

And we also believe that as one of the few very high penetration media forms, and in our case certainly that's gaining readership or audience as opposed to some of the mass media forms like broadcasts that are losing their audience, that we stand in very good shape in the future to benefit from the overall economy and from the national advertising trends.

So maybe that's just the difference between us and you.

We're not trying to be optimistic, simply realistic.

I think also to be a little more [idaudible] , this is a very volatile business and if you look at performance month-to-month over the last few years, you will see the numbers bouncing around fairly significantly.

And so when you think about the full year, you have to take into account what the economic environment looks like and what your advertisers are telling you.

So to go whack to what Russ said at the beginning of this call, historically January is a tough month in terms of trying to predict what's going to happen.

And historically, frankly, December has been an unusually difficult month.

And so December had an unusual pattern compared to historical trends, and so it's very hard to make a firm determination on any given month.

What we have to do is have some sense of what the year looks like it might be unfolding given economic conditions.

In some ways it's easier to think about what the year might look like than it is what any given month might look like.

So if December was up 4.5 percent we shouldn't necessarily view that as a launch pad for, you know, thinking that your projections of mid-single digit may be low and the same token January if it's up one or two percent we shouldn't read anything into that either.

It's correct to say that, but again, you can't make -- you know, simplistic, I'm not trying to be pejorative, but you can't make, you know, simplistic statements with regard to any of these things.

So, for example, the December number becomes a hell of a lot more impressive if you look at the high teen comparison that it was going against the prior year.

So yeah, we're saying that you shouldn't -- you shouldn't take January or December as indicative of a prediction of what's going to happen 12 months from now.

But, you know, if we're trying to give you the impression take we see an improving economic trend, and we see a business plan that allows us to take advantage of that, you know, that's what we are convinced of.

And of --

I've got the rates for you.

The the Times it's an average of 5.8, national has gone up 6.2 percent classified has gone up 4.5 percent and retail's gone up 5.7 percent and the Globe their national has gone up between 4 and 6 percent depending on the category.

Same holds true of classified.

Retail went up 5 percent in September of '03 and their recruitment goes up in April of this year.

Thank you.

That's great.

You're welcome.

Once again, if you would like to ask a question today press the star key followed by the digit one.

We go to Skip (Barrons) with North American Management.

Listening to all the discussion about classified and now looking at the December report where classified's down 17 percent for the New York Times, I'm wondering is this a black hole or do you think you've hit bottom?

I think that we are close to bottom.

I think it's quite hard to predict whether or not this is the bottom or not.

Again, I think it holds, you know, true in regard to what the recovery, particularly in the recruitment category will hold for us.

But from a standpoint of automotive and real estate, and our recruitment, for that matter, I know that with our brick and click activities, we feel as though we are making good headway in regard to making sure that people come to both the newspaper and our online -- and our website in order to -- to market their products.

And we're also looking at the Globe at a positive performance in December.

So --

Right.

-- we certainly hope we are at the bottom.

I'm going to finish up with a Globe question.

Will the Democratic Convention be notable in the results come 2003?

Both the Republican and the Democratic Convention holds opportunity for the Times and the Globe to garner incremental revenue.

We are already out very, very actively selling a section that while appear daily in both markets.

Many of the things that we've done here in New York in prior conventions we are doing again with certainly the informata of our new news room -- our own news room and the same holds true in Boston.

Many advertisers are also interested also in the national news report in light of our political coverage and they're also online activities that maybe Martin would like to talk about in regard to the political campaigns that are ongoing right now.

Right.

I mean the web has become an incredibly important source of information for people online, and in particular, given the Boston.com and nytimes.com share so many best practices at this stage, I think you can look forward to a lot of collaboration of product development between the two sites.

And of coourse as Janet said between the newspaper and the website.

I think we actually have a Dodger in the paper coming out in the next week --

a couple weeks.

We ought to see a lot of promotion for this starting soon.

All right.

Good luck.

Thanks.

Operator we have time for one more question.

We go next to Edward Atorino with Blaylock and partners.

Sir, your line is open.

hello?

Hello? .

Yes, sir your line is open.

Hi, Ed Atorino.

Hello?

We're here.

Does the help wanted sections borrow from regular help wanted?

Do you mean the Super Sunday and the big help?

Yeah does it sort of suck up business that might go to other weekends?

No, not at all.

Okay.

In fact it's incremental and it's sold that way in many instances.

Thank you.

Okay.

At this time I would like to turn the call back over to management for additional or closing comments.

Thank you all for joining us on our conference call today.

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

That concludes today's conference call.

Thank you for your participation.

You may now disconnect.