New York Times Co (NYT) 2004 Q1 法說會逐字稿

Good day, everyone and welcome to The New York Times quarter one 2004 earnings conference call.

Today's call is being recorded.

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

If you'd like to ask a question, you may do so by pressing the star key followed by the digit 1 on your touchtone telephone.

If you're using a speakephone, please make sure your mute function is turned off to allow your signal to reach our equipment.

And now for opening remarks and introductions, I'd like to turn the conference over to Miss Catherine Mathis.

Please go ahead.

Thank you and good morning, everyone.

Welcome to our first quarter earnings conference call.

We have several members of our senior management team here today to discuss our results with you.

Including Russ Lewis, our President and CEO, Janet Robinson, our recently-named Chief Operating Officer, Len Forman, our Chief Financial Officer.

Scott Heekin-Canedy, formally the Senior Vice President of Circulation for the New York Times newspaper and in February, Scott was named President and General Manager of the New York Times newspaper.

Also with us are Martin Nisenholtz, the CEO of New York Times Digital, Jim Lessersohn, our Vice President of Finance and Corporate Development, Stu Stoller, our Corporate Controller and Tony Benten, our Treasurer.

Our discussion today will include forward-looking statements.

Our actual results may differ from those predicted and some of the factors which may cause results to differ are listed in our publicly-filed documents, including our 2003 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 webcast and an archive of it will be available on our web site, which is www.NYTCO.com.

And an audio replay will also be available.

We will also post a transcript on our web site, as well.

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

Thanks very much, Catherine.

Good morning, everyone.

As most of you are aware, in February, as Catherine mentioned, Janet was promoted to the position of Chief Operating Officer of the New York Times Company.

And upon my retirement later this year, Janet will become our company's Chief Executive Officer.

That will mark the conclusion of what we believe will be a seamless senior management transition.

In that connection, it's no accident that Janet is well-known to all of you in the financial community.

Because we've long known that Janet would be my eventual successor, she's been actively involved in our Investor Relations efforts for several years now.

For the same reason, Janet's operating responsibilities have been steadily expanded over time so that she'd be ready to take over as CEO without our company missing a beat.

Also, as part of this well-planned transition, Len was promoted to executive Vice President and he's added several corporate staff functions to his CFO portfolio.

In addition, Janet and Len have been working hand in glove for the past year, again, to make certain that our business leadership transition goes smoothly.

One mark of a well-run company is its ability to create and successfully implement its management succession plan.

Given Janet's track record of accomplishment and proven leadership skills and the strong team that surrounds her, I think you'll agree that our succession planning efforts will serve our shareholders very well.

But now let's get to the business at hand.

Janet, and then Len, will give you a brief update on our business and then we will turn it over for your questions.

Janet?

Thank you, Russ and while you're not leaving us until the end of the year, we do want to take this opportunity to say that you have been an extraordinary leader of the New York Times Company.

You've spearheaded the development and implementation of our company's business framework and our strategy, which is to operate the leading news and advertising media in the national, global knowledge audience market served by The Times and in each of the local markets we serve.

We will continue to successfully execute this strategy in the years ahead, which we believe will result in strong earnings growth and, inturn, a higher price for our stocks.

I know that those listening in today certainly appreciate the fact that since you became president in 1996, our stock price has tripled.

For all you've done, thank you.

We believe great journalism is great business and the quality of our coverage was demonstrated last week when The Times won the Pulitzer prize in the most prestigious category, public service, for work done by David Barstow and Lowell Bergman that examined death and injury among American workers.

This is the third consecutive year that a New York Times Company newspaper has won the public service award.

This particular prize is especially noteworthy because it is the first time a Pulitzer submission for work in both print and broadcast has won.

We believe this multimedia approach will continue to serve us well.

Turning now to our business accomplishments, our first quarter ended on a decidedly positive note driven by solid advertising revenue gains across all of our segments.

Earnings of 38 cents per share would have been on par with last year's first quarter EPS of 45 cents had it not been for the net benefit in 2003 from the three items noted in our press release.

Despite a slow start, the company's advertising revenues grew 3% in the quarter and were up nearly 9% in March.

The Times registered strong gains in telecommunications, banking, automotive, transportation and department store advertising in the first quarter while technology advertising declined and the entertainment category was adversely affected by the change in the timing of the Oscars.

Color remains a very good story at The Times newspaper with first quarter revenues up 35%.

Color ad revenues made up 24% of its total advertising revenue in the first quarter compared to 19% just a year ago.

At The Globe, telecommunications, financial services, automotive and travel advertising improved significantly in the quarter while department stores, entertainment and technology declined.

The Globe, like all of our properties, continues to find additional revenue strains through innovative new products, such as its relaunched Sunday magazine, which has proven highly successful with both readers and advertisers.

With more service features, more varied content and an increased number of articles, reader response has been very positive and advertisers have voted with their dollars resulting in a 135% increase in ad revenues for the magazine in March.

As you know, we now combine our newspaper and digital revenues in the classified categories in our monthly ad revenue releases.

For the quarter, total help wanted revenues were up 5.5%, reflecting gains at all of our newspaper groups in February and March.

We expect this trend to continue in April.

Real estate advertising declined 5% in the first quarter after two-plus years of sizzling growth while classified automotive advertising climbed 12%.

The International Herald Tribune made significant strides in the quarter, introducing a roster of new features and columns and adding editorial color for the first time in the IHT's 117 year history.

In the recently-released Asian Business Reader Survey, which is used by advertisers to determine spending allocations, the IHT showed the largest percentage growth in both readership and coverage of any regional or international title measured in the survey, including the Asian "Wall Street Journal", "The Financial Times", "USA Today", "Newsweek" and "Time Magazine".

Given these results, we believe that the IHT will also do well in the European business survey, which will be released in the fall.

Moving to circulation, revenue was on par with last year but trends within the newspaper group varied.

Circulation revenue at the Times Newspaper Group was down 2% compared to last year when the start of the Iraqi War stimulated copy growth.

Circulation revenue for the New England Newspaper group rose 6% as a result of both copy gains and the effective price increases instituted in 2003.

No price increases are scheduled for either The Times or The Globe in 2004.

But as we've said before, we expect both the times and The Globe to have positive results for the six-month period ending March 31 and for the year, which we believe will result in overall circulation revenue gains in the low single digits.

Other revenues for the newspaper group jumped 8% as a result of new revenue initiatives across all of our properties.

While we don't expect growth in other revenues to be as dramatic for the balance of the year, we are continuing to look for new revenue strains to improve results.

The Times highly successful Arts and Leisure Weekend and the first-ever Travel Show brought in a total of almost 5 million in revenue in the first quarter.

At the New England Newspaper Group, Globe specialty products, which provides advertisers with direct marketing services in the Boston metropolitan area, drove the 9% growth in other revenues.

And our regional newspapers increased other revenues by 27% from outside commercial printing and database marketing.

Our broadcast properties also achieved improved results, spurred by increased political advertising, 2.4 million in the first quarter of 2004 compared with just $100,000 in the same quarter last year.

Currently, pacings in April are up 10%.

And once again, our digital businesses reached new first quarter records with total revenues up more than 30%, advertising revenues up 44% and operating profit more than doubling.

It's strong performance resulted in a record high operating margin of nearly 33%.

We are very pleased by the strong advertising revenue at our digital properties, especially in the entertainment category, where new verticals are propelling growth.

Looking ahead, we are encouraged by what we see in the advertising market.

At present, 44 films are scheduled for release in the second quarter, up from 29 in the second quarter of last year.

Automotive advertising is expected to remain strong, particularly with the record number of new vehicle launches scheduled for the balance of the year.

We were very pleased with the results of the times special advertising section on the New York International Auto Show which appeared on April 7th.

We believe help wanted advertising will continue to improve, although we expect some month-to-month volatility.

The technology advertising is projected to improve in the second half, lifted by a robust consumer electronics segment.

At the time, we are undertaking a comprehensive regimen of editorial innovation that we believe will prove popular with readers and advertisers alike.

We are planning to relaunch our Sunday money and business section on April 18th and in early June, our enhanced real estate section will debut.

In the second half of the year, we plan to revitalize our book review, our daily and Sunday culture report and our travel section.

Both the times and The Globe expect to benefit from political conventions that will be held in New York and Boston this summer.

And during '04, our regional newspapers expect to add four new and profitable magazines.

We anticipate a total of 31 issues in nine markets, compared with nine issues in five markets last year.

In summary, we continue to look for ways to grow beyond our core by extending our brands geographically and across multiple media, all the while remaining committed to maintaining our strict financial discipline.

Now let me turn the call over to Len.

Thanks, Janet.

Throughout the quarter, we continued to keep a tight reign on expenses.

Total costs in the quarter rose 4.7%.

Excluding the one-time reimbursement of printing plant remediation expenses and the charges associated with the closing of a small job fair business last year, total costs and expenses in the quarter increased 3.3%.

This was mainly because of higher costs associated with the company's investments in the New York Times national expansion and the international herald Tribune, increased compensation costs and higher newsprint expense.

Over the years we have learned that investing in quality journalism and brand building leads to greater profits and that's exactly what we're doing at both the times and the IHT.

With regard to employees, the number of full-time equivalent employees was on par with the same period last year and we expect that to continue as we remain focused on limiting expense growth.

Newsprint expense rose 6.6% in the quarter due to an 8.2% increase, primarily from higher prices, partially offset by a 1.6% decrease from lower consumption.

As you know, the newsprint producers announced a price increase, effective February 1.

This increase appears to be following the same pattern as the last three newsprint increases and is expected to be implemented over a number of months and settle at less than the announced amount.

Capital spending in the quarter totaled 24.3 million including 5.6 million for our new headquarters.

Our development partner, Forest City Ratner, is close to securing financing and groundbreaking is expected after financing is completed.

We anticipate occupying the new building in 2007.

Depreciation and amortization was 36.9 million in the quarter, down slightly from 37.5 million in the same period last year.

Looking at 2004, our earnings guidance remains unchanged.

Earnings comparisons are easier for the balance of the year than they were in the first quarter and we are encouraged by recent improvements in the advertising market.

We will continue to be disciplined on containing costs and we plan to provide updated guidance at mid-year media review in June.

With that we'd be happy to answer your questions.

Robert, if you'd like to open the session for Q&A, please?

Absolutely.

Again, for the participants that may just be joining us,that was star 1 if you would like to ask a question.

I'd like to remind everybody that if you're using a speakerphone, please make sure your mute function is turned off to allow that signal to reach our equipment.

We will go to our first question, which comes from Edward Atorina with Fulcrum.

Good morning.

I'm never first.

The press release talked about encouraging April trends.

Could you maybe give us some dimensions as to what April looks like?

And also, is there any way to sort of quantify what the year-to-year comparison, could you normalize March in any way, shape or form?

If you know what I mean.

It's very difficult to normalize March.

March was very strange last year, needless to say, because of the War in Iraq, the beginning of that and certainly in regard to SARS.

There was an effect in regard to international advertising, as well.

Looking out in regard to what we saw in March and what we see continuing in April, there are categories that are particularly strong performers.

Telecom is doing very nicely, not only in the wireless area, but also in the promotion that we see from AT&T corporate and Verizon in regard to their local and long distance budget.

We're also seeing a lot of handset manufacturers doing a lot of branding campaigns, as well, in the times.

And we're also seeing much more corporate spending on the horizon in regard to networking opportunities with CapEx expenditures loosening up a little bit in the second quarter and beyond.

Many firms are coming to us for proposals.

Transportation is strong with airlines, tourism, cruise lines, rental cars and hotels are starting to come back quite nicely.

Banking is doing well with many of the banks, in fact, coming back with larger schedules, Wachovia, Fleet, Chase, City Corp..

Financial services is also showing some growth, Swab and Fidelity.

Automotive, not only domestic automotive manufacturers, but we're also getting some very nice lift in the foreign manufacturers, as well.

We're also seeing a very nice lift on the department store side.

Early in the quarter, as I said to you, there were many commitments that were being fulfilled, contractual commitments, but we've seen that continue to grow as the quarter has gone on and with all of the news that I'm sure you saw last week, the retail sector, particularly department stores, is seeing some lift.

Not only in regard to their need for branding some of the newer brands that are included in their lineup in-store, but also in regard to the return to career dressing that seems to be boding very well for us, particularly in the luxury goods segment,

We are also going to benefit from a store opening of Bloomingdale's in Soho in the April time frame.

And as as you know, help wanted with print and online is starting to pick up nicely, both at The Times and at The Globe, as noted.

On the weaker side, technology, as I think we've said before there are branding campaigns that have been pushed later in the year that have affected us negatively in the first half of the year, but we think that that will improve in the second half and we're starting to see a nice lift in regard to the consumer electronic segment.

Entertainment has been soft in the first quarter, but that's starting to build back, as well.

The timing of the Oscars has been well documented, the effect that that's had on us and on The Globe, as well.

We're starting to see many more releases, particularly in the second quarter.

There are 15 more wide releases in the second quarter, which would bode well and the product is much stronger during this period of time.

There also was effect in regard to the Passion of Christ film, really pushing other films out of the market earlier than expected.

Residential real estate, inventory is the issue there where what is on the market is selling very quickly.

So, consequently there isn't a large need for advertising.

Live entertainment with some of the product out there not doing as well, that has negatively affected us as well.

There is more product coming in the second quarter, which we think will show some signs of growth for us, as well, and advocacy.

We had a prewar blitz last year.

This year not as certainly as strong as we had had in 2003, but during the campaign season, we expect that to grow quite nicely.

In fact, we have had not only a carry ad in paper, but we've also had a carry ad online just within the last few weeks.

Great rundown.

Could you see continued double-digit growth in national?

I think it's very hard to predict.

I think we all know that the visibility has been very difficult for us to predict, particularly on the national side, but I think that there is certainly cautious optimism in regard to our growth, really, in classified retail and national.

Janet, why don't we kick it over to Martin just for a few words on how April is looking on the digital side and then maybe come back to you for the broadcast pacings.

Well, if you've been watching some of our pure play peers on the digital side, you know that the strength in digital advertising is very good.

Yes.

We had a very strong first quarter, as I think Janet outlined, with 44% overall advertising growth rates.

Actually 54% on the display side.

Wow.

Which is an extraordinary number.

And the marketplace continues to grow.

The traditional Fortune 500 advertisers continue to recognize that the Internet is a place where millions of consumers can be found and so you're seeing across-the-board strengths and growth in the category.

With respect to nytimes.com, we remain the largest newspaper web site in the world.

That strength gives us a considerable ability to catch many of these dollars that are now flowing our way.

Some are actually speculating that we're in an inflection point in the marketplace as broadcast dollars are also coming on stream with increased use of broadband.

So, we're feeling pretty good about April and the entire second quarter.

On the broadcast side, they had a very strong March, they were up about 12% the first quarter.

They were up about close to 9%.

Second quarter right now is currently pacing about 10.8%.

Categories that are doing well for our broadcast station include automotive which is very strong for them.

But they're seeing growth in telecom, financial services, package goods, furniture and growth re-storage, as well.

Needless to say, the political arena is going to be a very strong showing for them.

They have already started to see very nice growth in the first quarter, which bodes well for what they plan on seeing in the months to come.

They also will have Olympic dollars.

As I think you know, we have two NBC stations, that has already started to come in quite nicely, as well.

Thanks, great rundown.

And with CS First Boston, we will move now to William Drewry.

Hi, thanks.

Three questions.

First off, on the profit side with digital, it looked like the incremental margin revenue to profit was 80 to 90%.

Just wondering if that's a kind of incremental profit margin you can maintain going forward.

Also wondering, related question on the newspaper side.

As you continue to see, potentially, this pickup on the newspaper, advertising versus mid-single digit guidance for the rest of the year.

If you're beating expectations on the top line, will you see the flow through above your prior guidance to the bottom line?

And I was just wondering, third, full-year outlook on the IHT, if you've given any specific guidance, if you could update that as well, thanks.

Okay.

I will start with the Internet side.

As I think Russ and all of us have said over the months, we take the Internet sector very seriously and we intend to build a business that has terrific margins at scale.

Having said that, in order to invest in what I cautiously referred to as an inflection point before, we have a robust product development agenda on tap, including new product development in broadband, in search, and as Janet eluded to earlier, in some of the vertical areas.

So, there's a lot to do but the market is growing and we look forward to growing with it.

Bill, this is Len.

I'll handle your second question.

We really haven't changed our guidance on the revenue side to the year.

One month doesn't make a trend.

While we're optimistic, we still believe, at least at the current point, that our guidance, as we gave back in December and reiterated last month, is still relevant.

To the extent that we obviously do better because the economy does better, sure, we expect to see it flow to operating profits, but it's way too early to adjust the guidance for you yet.

With regard to the IHT, we don't give guidance out separately with the IHT, but suffice it to say, we're on our plan internally and if you have seen the IHT lately, you would have seen some of the great things that have happened to the paper editorial with color and we're very optimistic about that prognosis of the newspaper going forward.

One of the things that we're very proud of is that much of the talent that you see being added to the IHT are very strong brand names for The Times.

Floyd Norris, of course, being one.

But from a standpoint of the reception that we are getting with the readership of the IHT, we are very encouraged and the results of the ABRS and the EBRS, ABRS, of course, being the one that I noted, is very encouraging in regard to the growth of the IHT and the visibility it will have in the advertising community.

One important note is that we have already sold a million dollars of advertising in combination with the New York Times.

Last year we sold $2 million for the entire year in combination.

This year we've sold $1 million in combination just within the first quarter.

So, I think the combination sale is beginning to work very nicely for us and we hope that that continues certainly as the year goes on.

Great.

Thank you.

As a reminder that is star 1 if you would like to ask a question.

We will go now to Lauren Fine with Merrill Lynch.

Yeah, Len, I'm wondering if you could review the cash flows in the quarter.

You were able to reduce debt from year-end more than we had expected and just wondering if you could help us understand that change?

Yeah, Lauren, it's primarily on the working capital, a receivable collections have come in much faster and really no other major change there.

Okay, and also on the share authorization, you're almost completed.

Should we expect to see at the next board meeting a proposal to increase the authorization?

We're going to go back to our board as we have typically done as we've rundown the share repurchase dollars and ask for further authorization.

Great, thank you.

And we'll go now to Toby Summer with SunTrust, Robinson Humphrey.

I was wondering if you could drill down, perhaps, among your smaller papers and compare how they've done in help wanted, recent trends, compared to the New York Times group and the New England group?

In the regional sector, some of the same categories seem to be doing well.

Telecom, in particular, home furnishing stores, food, grocery stores are doing well.

Help wanted, real estate and automotive are all doing well with the regional group.

Their preprint is also strong but it was extremely strong in 2003.

So, that is a little bit weaker.

Department stores is a little bit weaker.

Drugstores, as well.

And discount chains, as well.

But in regard to the help wanted numbers, let me just get that for you.

In January they were up 7%.

In February they were up 5%.

And in March they were up 13%.

So, for the quarter they were up 8.7.

So, we're starting to see a nice comeback in regard to the recruitment numbers in our regionals as well as what we're seeing at New England and certainly at The Times, as well.

Okay.

And one other question.

You mentioned that you weren't planning any price increases at The Times or Globe in '04.

Do you have visibility yet in what you're anticipating for '05 for The Times and The Globe?

No, we really don't.

We don't make those decisions until much later in the year.

When I was referring to those price increases, of course, that was on the circulation side.

Sure.

And one last question.

If you could comment what the acquisition climate looks like right now?

Well, there's not a whole lot of deal activity going on at the moment.

That's reflected by the number of proposals we get from investment bankers.

But as you know, at least for the New York Times, we're on strategy with regard to where we are and we continue to look for internal growth and brand extensions and we have not been very active in any of the major acquisitions that have come along over the last couple of years.

And certainly the regulatory climate is a major factor in what we might do going forward.

Thank you very much.

Moving on, we will hear now from Paul Ginocchio with Deutsche Bank.

Hi, just one quick question, can you just talk about the difference between department stores in New York and Boston?

Is that just sort of upper end versus mid market?

That's the difference?

Sure.

What we are seeing particularly in New York with the luxury end, which is predominantly Burged Up, Goodman and Sacks, we are seeing a very strong showing from them in regard to return to the paper and larger unit sizes.

We're also seeing that with some of the mid-range stores, as well, Bloomingdale's and Lord and Taylor, as well.

We are hearing fairly encouraging news from them in regard to how well they are doing.

As I said earlier, they are seeing a very strong return to high-end clothing, they're seeing a strong return to career clothing, as well, which will force them to do more advertising or, not force them, but encourage them to do more advertising.

Many of them are experimenting with television, with spot television, with mixed results.

Macy's, in particular, has done so in Boston.

They are doing a bit more in New York but the results have been mixed and they're still under advisement in regard to how much they are going to allocate to print and to broadcast.

But we are hearing very positive things both at The Times and in Boston.

Macy's and the Federated folks overall did take away quite a few print dollars in Boston last year to test this concept of broadcast.

But as I said, they were mixed results and our folks in Boston are doing a very fine job of really pulling together a very strong packages that include database marketing that allows them to really look at utilizing The Globe and their online efforts, as well in Boston, to their advantage.

So, the real difference is that there's not as many of the luxury stores in Boston relative to New York.

Well, that is true, but what we are finding with The Globe magazine and what we are finding with the page 2, 3 placement in The Globe, similar to what we have at The Times, that we instituted at The Globe just a few years back, is that we are able to put together packages where many of the smaller boutiques that are there, the Channels, the Burberry's of the world are utilizing The Globe in a very similar fashion to the way in which they utilize The Times.

With the relaunch of their magazine, as well, what we're seeing is that they are looking at The Globe magazine in a very different light than they did before, primarily because of the editorial product being enhanced by a magazine editor.

We recruited a magazine editor from Boston Magazine and he has done a wonderful job in really upscaling the look and the content of The Globe magazine, which we think will bode well for the growth of the luxury market at The Globe, as well.

All right, thanks.

Our next question comes from Kevin Gruneich with Bear Stearns and Company.

Thanks.

In Q1, much like Q4 of '03, we see newsprint pricing for NYT coming in a little bit lighter than what we're seeing in the rest of the industry.

I was wondering if you could comment on that difference and whether that bodes well to bring down the guidance of low-teens increase in newsprint cost that you're still guiding to this year.

And finally, if in April you're paying any of the February $50 per metric ton price increase?

Then if I could follow on.

Well, Kevin, we don't comment on our individual pricing simply because of our contracts, but if we're any different, it's probably just more than than likely timing differences plus inventory differences.

We're not seeing anything different from what I said in my opening remarks out there and we think the price will settle short of the $50 increase when it does finally settle and we expect to be paying something short of that in the marketplace.

Has any of it settled yet?

No, it's moving around.

I mean if you look at the supply/demand balances, the major newsprint suppliers are pretty much trying to stick to the full $50.

They've taken a lot of capacity out of the marketplace and they're actually pretty tight.

The smaller suppliers are negotiating but right now it's a moving target.

Got it.

And in terms of circulation, you typically provide quarterly volume data.

I was wondering, you mentioned that copies were up at the New England Newspaper Group.

I was wondering if you could talk about it for the three-newspaper segments.

Do you want --

Circ volume versus a year ago?

Kevin, this is Scott.

At The Times, we're down slightly on daily versus first quarter last year, about 11,000 copies.

And we're up slightly on Sunday by just over 1,000 copies.

And in New England on daily we're up about 17,000 copies and Sunday 4,000 copies.

On the regionals, we're up about 7,000 copies and down about 2,000 copies.

And just to reiterate, we will be plus at both the Globe and The Times in the six-month ABC period ended in March and our forecasts for the September ABC period also calls for us to be plus in Boston and New York.

The slight decrease that we see on the daily in New York in this first quarter we attribute almost entirely to single copy sales going up against the very large sale last year first quarter when the run up to the war and then the eventual start of it happened.

We still think our guidance, given out earlier on circulation revenue of low single digits is an accurate forecast for the year.

Great.

Thank you.

As another general reminder, that is star 1 if you would like to ask a question and from JP Morgan, we'll go to Fred Searby.

Thank you.

It's Frederick Searby from JP Morgan.

A couple of quick questions.

One is, it sounds like on technology you see this more as a timing issue, the weakness that you pointed to and it is somewhat surprising and so can you give us a sense for the year how much you think the technology category should be up for you?

And then secondly just more macro and kind of big picture to some of the department stores obviously last year took some dollars out of print and into TV and experimented and we heard a lot about that.

And then on the other hand we've heard sort of a cross current where some of the consumer products companies have actually begun to dabble a little bit with newspapers.

And can you give us a sense of how many of your advertisers are really saying there's a possibility with DVR and some of the other pressures on TV, actually re-allocating some money into print?

And just if you can give us a some sense of could political be material or meaningful for you this year?

Let me take the technology question first and then I will talk about the nontraditional newspaper advertisers coming our way.

What we did see last year were very large branding campaigns from Microsoft and IBM very early in the year.

We also saw Hewlett-Packard branding campaign that, indeed, was repeated this year during the first quarter going into the second quarter.

Those larger campaigns have not been canceled, they have been postponed.

And we are seeing that in the second half of the year, those campaigns will probably be coming back in in some respect, maybe in total, but we're also seeing quite a climb in regard to the consumer electronic segment.

When, indeed, there are so many new opportunities for technological advancement, it's very important for branding to take place.

They utilize the time, you saw that, in fact, in the paper today with Dell.

It's very important for them to be using an opinion leader newspaper and certainly The Times qualifies for that.

I think we will see steady improvement as the year goes on.

Many of our large technology advertisers have asked for a number of proposals during a course of just the last few weeks and, again, many of the stronghold advertisers such as IBM, Microsoft and Hewlett-Packard, having, indeed, given us some visibility in regard to what we can expect as the year goes on.

In regard to what we are definitely seeing, what we are seeing is nontraditional advertisers taking advantage of newspapers.

Many of them are a bit disillusioned in what they're seeing in regard to broadcast television, not only in regard to cost, the fervor centered around up front and certainly the loss of a great part of their audience.

They're looking at other opportunities.

That certainly gives way to cable growth, that certainly gives way to growth on the Internet, as well.

This fragmentation also can benefit a very old and traditional medium.

I said at a recent conference that the newspapers, I think, are and should be classified as age-defying because we are constantly bringing new ways for people to use the newspapers in regard to not only the way they're using it from a creative perspective but how we are going back and providing them with custom research, creative use of space, we're really selling more on readership than we are on just copy growth.

What we're doing in regard to the promotional aspect and what we're doing in regard to custom research.

When, indeed, we are, as we always are, audited as carefully as ABC audits the newspaper division, we put ourselves in an advantageous place, when, indeed, we're being compared to numbers in other mediums that may be more questionable and I think that what they are seeing with broadcast television is the reason for them to wonder whether or not it's really worth the dollars.

When we are looking at readership, as well, which many of you may be well aware of, that newspapers are moving very much towards readership numbers as opposed to just penetration numbers in the way they sell to agencies.

What we're finding is that we are starting to position ourselves more and more as a mass medium that is extremely competitive with the broadcast medium that we have been competing against, perhaps with our hands tied behind our backs for a few years.

You're seeing that growth across all newspapers, not just the national newspapers and that is, again, primarily because we're selling readership as opposed to just penetration numbers.

Fred, the media just picked up on the story, but its really has been something that's been a long time in coming.

Over the years, obviously, the issues related to broadcasting have taken their toll but the newspaper industry, specifically, has worked very hard to try to make newspapers generally an easier buy around the country.

And so what you're now seeing is some of those efforts beginning to bear fruit and you're seeing sort of the general mass marketers coming into newspapers in ways they perhaps haven't done in the past.

All right, thank you.

Up next is Doug Arthur with Morgan Stanley.

Yes, three questions.

Just sort of briefly on national, a lot of people have observed or have said that the national expansion of the New York Times, particularly on the circulation side, has kind of hit a brick wall and that you've sort of done what you can do, is that a fair assessment or not?

That's the first question.

Second question is you talked a lot about the weakness in entertainment in the first part of this year.

Now that has not been matched by comments everywhere in media.

Is there some change in the sort of intensity of advertising around releases, ergo, if something is not an instant hit, are you finding advertisers cutting and running much quicker than they did in the past, in part because of the DVD impacts.

That's question two.

And then finally, can you just sort of broadly define tech and telecom as a percent of total advertising for the New York Times newspaper?

Thanks.

This is Scott.

Doug, I'll take the first question on national expansion.

We look at our circulation expansion and three or four broad buckets of growth.

New markets, we're up to 266 home delivery markets now and we're going to keep on going.

So, what we call opportunistic expansion, where we can stretch our availability within existing zip codes or partially rather zip codes and that's been a major source of growth for us over the last few years and it will continue to be for the next few years.

As you probably know, a major part of our expansion capability in the last few years has come through the addition of print sites and we have become a lot smarter from that experience in writing contracts with printers and distributors.

And we think we've come up with a formula that will allow us to continue to add print sites in the next few years, at a little to no net cost.

And that will further our ability to open new markets, to continue with this opportunistic expansion and then additionally to help us deepen our penetration within all of those existing markets.

So, we're quite confident that the national expansion will keep on rolling.

This is Len.

I just would add to what Scott just said, that the major opportunity for us in the national expansion is the continued rollout of opening zip codes up for home delivery and we have somewhere between 70,000 and 80,000 orders that are not capable of being delivered because we simply don't have those zip codes opened up.

So, when you look at the number of markets that we have, as Scott indicated, the number of markets may be reaching sort of a level of which you won't see much more growth, but the zip code penetration within the markets has a long way to run yet.

And it really is not a linear process.

It really is a function of how quickly we want to expand circulation, with regard to how quickly we can monetize it on the advertising side.

So, as you see, advertising come back, I think you will see us begin to push a little harder on the circulation pedal.

On the percentages of technology and telecom.

Technology is 6% of our total revenues and telecom is 4%, Doug.

In regard to the question in regard to entertainment, people definitely pull away from wide releases when, indeed, they feel as though they have intense competition.

It happens more often than not during the summer months, particularly intro into the summer, where people may open earlier in May as opposed to Memorial Day weekend.

But it has happened pretty much more often within the last two years than ever before.

The Passion of the Christ mention that I made earlier was real.

It was very successful right out of the gate.

A lot of people did try to compete early on.

Many of them did not do well and then it, indeed, pulled out of the market and will wait, of course, for the DVDs to be released.

That is a very real phenomenon now.

What you also see, I think, is fluctuation in regard to quality of product.

I think that we've seen that really within the last two years.

Last summer was a very big sequel summer that did not perform as well as perhaps expectations would have led people to believe.

This summer we are finding that there is a strong increase in the number of wide releases.

Many of them are planned and many of them are, from The Times perspective, very much in keeping with the kind of quality films that we, indeed, enjoy a great deal of advertising support from.

Yes, there are sequels, but from a standpoint of the level of sophistication of these sequels it seems as though it will bode well for what we will see in regard to the summer preview and even going into the fall.

If you look at the quality of wide releases that are coming up in the fall and the holiday movie preview, we feel that we will see some nice growth in the entertainment numbers.

That's a great rundown.

I just kind of echoing Bill Drewry's inquiry.

Based on what you're talking about in terms of the number of releases, based on what you're talking about in terms of these tech campaigns getting pushed into the second half and based on help wanted, your ad revenue guidance seems very, very cautious.

Well, we're cautious people these days and we've had reason to be over the last couple of years.

We're not going to declare victory prematurely.

Obviously the trends are better than they've been in a long time but we're not going to get ahead of ourselves and just emphasize one point made earlier, our focus on financial discipline, on the expense side, is going to remain very tight-fisted.

Obviously we had some one-time adjustments, if you will, from the first quarter of last year that made our expense comparisons more difficult in the first quarter, but just because advertising seems to be coming back nicely doesn't mean we're going to abandon that expense discipline and to Bill's question before, if we hold tight on expenses and we do get additional dollars on the top line, we certainly hope many of those will flow through to the bottom line, perhaps not entirely as much as Martin had them flow through on the top line to the bottom line, but we will be happy in June if we're able to revise our guidance upward.

Yeah, and I'm sorry to ask another question here, but Len, non newsprint expenses in the quarter adjusted for last year's one-time items?

About 3%, a little over 3%.

Thank you.

We'll go now to Peter Appert with Goldman Sachs.

Question for Janet.

It looks like the circulation revenue performance in the first quarter was a little bit softer than what we saw in the fourth.

Should we interpret that to be that the pace of discounting activity perhaps has picked up here?

And then broadly more beyond that, could you just talk sort of strategically about how you think about circulation discounting?

Sure.

I'm going have Scott answer that for you.

Thanks.

Let me take your question about the first quarter head-on and then put it in a context.

Our circulation revenue results in the first quarter reflect a number of factors, as Janet mentioned, with the copy comparisons to the Iraq War last year, perhaps being the most important.

We're confident in our ability to achieve volume and revenue growth over the long-term just as we have in the past.

But quarterly fluctuations are not unexpected in light of our many factors, the many factors affecting circulation.

Among these are the management considerations we have been trying to balance and driving toward long-term goals, external considerations include the ebb and flow of news events as well as general market conditions.

And in a big picture, the revenue comparisons come on the heels of 5 years of revenue growth totaling $145 million.

That's a 33% increase over that timespan and this growth was driven by significant newsstand and subscription price increases as well as volume growth related to major news events such as 9/11, the Afghanistan War, the Iraq War and all of this coming on top of our ongoing expansion and marking programs.

If I can add a little bit of that context, our strategy and marketing efforts will return us to growth, I believe, as we continue to expand nationally and implement an array of initiatives that will help us to stabilize and grow our circulation in the New York marketplace.

You've heard all of these before, but let me review some of them.

In the metropolitan area our Next Gen programs have dramatically increased our school and college circulation, cultivating the all important next generation of readers.

Our media relations, community relations and targeted marketing efforts are having positive effect in multi-cultural segments.

We've strengthened our distribution and availability through secondary wholesalers as well as capture new customers through our PM hawking.

And as you've heard Janet report just a few minutes ago, we planned a series of section enhancements that will further strengthen our value to new and existing customers.

In the national arena, we're also experiencing great success in our Next Gen efforts.

Our market expansion continues.

As I explained a few minutes ago, we have a number of things going for us.

We're now in 266 markets.

And in the future, you will be hearing from us a little bit more about this print site model that I eluded to.

A contractor model that we've developed that will allow us to add these print sites at little to no additional cost.

At the same time we continue to improve our channel distribution, opening up new outlets and new and existing territories.

We have renewed and strengthened our relationship with Starbucks, promising continuing availability and growth for years to come.

And we continue to develop new partnerships such as the one you will be hearing more about in the future, with Staples.

All in all, our bottom line is that growth is our circulation gain and we expect to continue to deliver it over the long-term.

Does that say, Scott, then, that you turned the discounting needle or dial up and down quarter-to-quarter depending on where you want to be circulation-wise short-term?

Yes.

Balancing that with an array of many considerations, including retention.

Okay, so in the first quarter, it's safe to assume you were more pro active on the circulation discounting side?

I'm sorry, could you --

Well, your answer is excellent and very comprehensive, but I'm not sure it really answered the question of whether the pace of circulation discounting has picked up in '04 versus '03?

I would say no.

Okay.

So, the volume declines are the reason for the circulation revenue decline?

Primarily.

Okay.

Len, maybe this is for you, then.

Understanding the profitability of the digital business, is there any meaningful allocation of editorial cost in the digital business when you're computing these segment operating results?

Yeah, I mean we have internal shadow pricing that goes on and licensing arrangements between digital and newspaper.

They don't change from quarter-to-quarter or year-to-year, necessarily, so what you see when you see the increasing profitability and revenues are really being driven primarily by increased revenues against a fixed cost base, which hasn't changed that much.

Well, the license fee does increase, as revenues increase.

The good news is that we have a licensed formula, which, in effect, charges NYCD for editorial content from The Times.

That formula has not changed so that the increase to profitability is very, very encouraging and real to us.

But, having said all that, clearly our game plan and our interest is to maximize profitability down at the bottom line of The New York Times Companies, so we don't sit here agonizing over the license fee down to the last percentage.

We leave the formula alone and we all go pedal to the metal to sell ads, either print, digital or together.

I guess the question, Russ, would be if the digital business model is more profitable than the traditional print model, I know this is somewhat unfair, should you be incentivising the sales force more directly to try to migrate the business to electronic more quickly?

No, not at all.

Digital is still a very small component and will remain a small component of the overall business.

The drivers in our profitability is our newspaper profit.

Uh-huh.

And it's a different business.

We would love to see a digital grow and to see scale and we hope to see scale, but it's a different business theater and it's sold differently and where we do have an alignment, we have a brick and clicks sales effort, which is quite, quite robust, but it is a different business, just the way broadcast is different from newspapers.

Okay.

Peter, it's important to note in regard to how we compensate, a very long time ago we felt it was important for us to drive revenues in whatever unit they would come.

And, in fact, the people at The Times and digital are compensated on selling into the newspaper and into our web site.

So, there is a very strong encouragement on our part to bring revenues in and be agnostic in regard to where they are.

Now, it's very important to note that we have, I think, become one of the best in class in regard to selling print and online.

Not just in our classified categories, but in our display categories.

Certainly we can see that with the entertainment success that we have both at The Times and on our web site.

You're going to continue to see that foster as months and the years go on, primarily because we think it is a distinct advantage.

Right.

Thank you.

We will hear now from John Janedis with Banc of America Securities.

Hi, can you give a little more detail on what you're seeing in real estate classifieds?

You had a sequential improvement from February despite a much more difficult comp.

Secondly, can you also tell us what's driving the strength in auto classified?

And what kind of flow through you're seeing into April?

Thanks.

In regard to real estate, as I said earlier, it really is an inventory problem.

As soon as things come on the New York market, and we're seeing this a little bit in Boston, as well, to a lesser extent, because of low interest rates and low volume, we are seeing things move off the market very, very quickly.

We think that that, unfortunately, will continue for a bit, but we are doing everything we can to make sure that people utilize The Times and our web site and The Globe and Boston.com to counteract what we are seeing in regard to the softness in the real estate sector.

What you are going to see in June, the June time frame, is a revamped section in the "New York Times" in the real estate area.

We have worked, and this is, I think, quite revolutionary, for the first time with both the print and digital at the table in regard to what things should be done in regard to not only the website but also in regard to what should be done in paper in regard to an enhancement of our content as far as real estate.

We think that will have a very positive effect going forward in regard to where we are with that particular category, particularly as we go into the fall, which we think we will see a pickup.

Martin, you may want to jump in on --

Yeah, just to remind you all that we have a very strong real estate product in the New York marketplace.

There is no MLF in New York, unlike the other parts of the country, and so we have aggravated over 90% of the inventory at nytimes.com through broker fees.

That results in excellent growth for us.

On the digital side in Q1, we did a 52% increase to almost 1.9 million and that brings the total to 2.8 million, up 27%.

So, the digital part of the real estate business continues to grow and I think The Times is almost unique in this respect as a newspaper and web site combination.

Two other things that I would mention in regard to the real estate question is that we are about to launch a revolutionary print product called Boston.com Apartment in print.

Which is a very interesting way, I think, for us to utilize our brand name and the digital arena in a print format.

Because of the youth migration in Boston, certainly in the academic community up there, we feel Apartment really skews to a much younger set of potential renters.

So, indeed, Apartments is Boston.com apartments in a print format, we think, is very advantageous, again, both for our web site and for our newspaper.

In regard to the regionals, we are continuing to see an uptick in real estate, March, for example, was up 8.6%.

So, we were pleased with what we were seeing in the regional performance as far as real estate.

We are particularly pleased with what we see with our Florida properties, Sarasota, in particular.

And the second question was regarding automotive?

Yes.

In regard to automotive, you may want step in here, too, Martin,in regard to the web site.

What we are seeing is consistent improvement, particularly at The Times.

We're looking at not only strong -- [ technical difficulties, please stand by ]

Well, Martin,why don't you go ahead and answer that automotive question anyway.

And while you do I'll put another 50 cents in the phone.

Is anyone there?

Robert?

Yes, you are live to your audience.

I was just commenting on the digital business automotive classified.

So, Boston.com, one of the most robust markets, cars.com over 300 dealers on line, recently launched nytimes.com in partnership with Edmund, and both of these products are kicking in very well.

The digital revenue growth in the first quarter was 63% and we look forward to a lot more, particularly in New York, that's a new product.

Are there any other questions at this time?

We'll move now to Prudential Securities and hear from Steven Barlow.

I will make it quick here.

In the press release you mentioned, Len or Scott, additional costs on the national rollout.

Didn't know whether there was anything sort of unusual in that that you wanted to highlight that in the press release?

And secondly, on the department stores, how are they doing on a regional basis?

We heard about New York and Boston.

I'll just touch on the first question, Steve.

That's just our normal investment in national expansion.

Nothing unusual, we were simply trying to denote where our cost increases were coming from.

As far as the regionals are concerned, there is some softness with some specific department stores, Dillards, of course, would come to mind.

But their preprint business overall is up and they are looking at a second quarter that should show some signs of improvement.

Dillards has been difficult for a lot of the smaller newspapers, not only ours.

But from a standpoint of what they are expecting going forward, they think that they can predict that they should see some improvement.

But it's been very, very hard to see the visibility in regard to the regional department stores as opposed to what we see at The Times and The Globe.

Thanks.

Mr Barlow, was there anything further?

Nope.

We'll move on to Christa Sober with Thomas Weisel Partners.

Hi.

One quick question, then I have a follow-up.

First, entertainment advertising, how would you respond to the notion that there is a secular trend toward entertainment advertising going online?

We're hearing from the studios that Yahoo is now become sort of a must-advertise location for entertainment advertising.

I'm not sure if you're seeing any of that shift on the digital side and then I know that entertainment has been about 15% of your ad revenues and I was just wondering if you could kind of categorize that among national studio advertising versus more regional or local movie theater advertising?

And then I have a follow-up.

The New York Times is in a very unique position in regard to the entertainment category, Christa.

Right now it's 16%, in fact, of our total ad revenue, up a percentage point.

And even though the first quarter was lighter than what we have experienced recently and as I said that had an awful lot to do with the Oscar timing, we are predicting that we will see growth as the year goes on.

We are in a very unique position, I think, in the studio category because of our culture report and the stature that our culture report does have.

Not only with the studios themselves, but also with the celebrities that are included, of course, in the advertising program.

We are in a very, very good position, also, to have a very fine website that has done wonderful work in regard to the build-out of the vertical.

And Martin will tell you that the two of us have made many a joint call on many of the studio heads to really hitch business in regard to both print and online because of the brand superiority of the New York Times in this particular category.

That said, will there be other newspapers that perhaps will not get as much entertainment advertising as some migrates to print?

That may be the case, but from a standpoint of the brands that we represent, the investment that we make in our culture report, whether it be at The Times or The Globe or our regionals, we think we'll bode well for what we can garner both in print and online.

Martin, you may want to jump in on that.

I'd love for you to look at the movie section of nytimes.com because I think it's absolutely not only competitive with Yahoo's movie section, but, in fact, because it offers The Times content, the reviews, it's better.

We have created, I think, a state-of-the-art section.

It has all the functionality of any native Internet website out there, including not only the content but the ability to purchase tickets, show times, all the filmographies and that has resulted in dramatic growth at nytimes.com movies over the last year.

We've seen over 2 million unique visitors per month in both February, which we expected because of the Oscars, and then in March, which was also great.

So, we're very excited about continuing to build out this section and that has resulted in very, very robust studio advertising growth in the first quarter, over 200%.

So, we are a player in the filmed entertainment category online.

Great and then in terms of my followups, I was just wondering if you are comfortable yet with second quarter First Call consensus of 50 cents?

And then, do you have a time frame for getting IHT to profitability?

Or is that still TBD?

We're not going to really discuss anything other than the guidance we've already given, Christa, going forward.

We'll update in June in terms of where we are.

In terms of the time frame for the profitability at IHT, we believe that the long-term on the memos are quite, quite good for the IHT and we expect to bring it to profitability.

But we haven't released any public statements on when we think that will happen.

As you know, the IHT has, in the past, made a little money, lost a little money, it's never been significant in terms of its profitability in terms of the overall scope of the company.

So, we don't expect it to be a huge problem for us, nor do we expect it to contribute a huge amount.

It's just a very important segment of our brand extension in a variety of directions.

The IHT is just one of those expansions.

Great, thank you.

Robert, we have time for one more question if there is one.

There is and that will come from Brian Shipman with UBS.

Thanks, since you now combine print and digital, I'm focusing here on help wanted, could you elaborate on how much of the help wanted growth in the last couple of months has been driven by your print products?

And also,a bit of a followup.

Are you feeling any pressure at all to be a part of any larger national platform, such as career builder for recruitment advertising online?

Thanks.

In regard to help wanted online in the first quarter, for example, 37% was online.

In the month of March, it was 47% alone online.

So, there is definitely a very strong growth pattern in regard to online advertising and help wanted.

That said, there is also an uptick on the print side, as well, both at The Globe and at New York Times.

And with respect to the national platform question?

This is Len.

I'll take that.

I don't think we feel any pressure at all to be part of a national platform.

We've always believed in the (inaudible) that the preponderance of recruitment advertising is a local business and we think we're well-positioned in our markets, particularly in Boston and New York, where being part of a national platform would probably add to our cost base without any significant revenue upside.

I'd also point out that nytimes.com is a national platform and a very strong one.

Not to mention "The New York Times."

Thanks, Russ.

Sure!

Thank you all for joining us on our conference call.

If there are any other questions, please phone me later.

Thank you, ladies and gentlemen.

That does conclude today's teleconference.

We do ask that you enjoy the rest of your day and thank you for your participation.

You may now disconnect your lines.