New York Times Co (NYT) 2004 Q3 法說會逐字稿

Good day everyone and welcome to the New York Times Company quarter three 2004 earnings conference call.

Today's call is being recorded.

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

At that time if you would like to ask a question you may do so by pressing star 1 on your telephone keypad.

Now for opening remarks and introductions, I would like to turn the conference over to Ms. Catherine Mathis.

Thank you very much and good morning everyone.

Welcome to our third quarter earnings conference call.

We have several members of our senior management team here today to talk about our results with you, and they include Russ Lewis, our President and CEO, Janet Robinson, Chief Operating Officer, Len Forman, Chief Financial Officer, Scott Heekin-Canedy, President and General Manager of the New York Times newspaper, Martin Nisenholtz, Chief Executive Officer 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 10-K.

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 the webcast will be available on our website which is www.nytco.com.

An audio replay as well will be available.

As many of you know, with our July revenue release, we began reporting advertising revenues for our newspaper and Broadcast Groups and their related print and digital businesses on a combined basis.

This is consistent with the Company's overall business strategy, which emphasizes a multiple media platform approach with both advertisers and audiences.

It's also consistent with the way a number of our peer companies now report advertising revenues.

This new approach is reflected in our financial statements for the first time this quarter, and to assist you with your earnings models, we have provided historical spreadsheets for 2003 and 2004 which can also be found on www.nytco.com.

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

Thanks very much, Catherine.

This morning we reported third quarter earnings of 33 cents per share which matched last year's third quarter results.

Ad revenues improved in the third quarter at roughly the same rate of growth we saw in the second quarter.

While expenses grew as a result of higher costs for newsprint and scheduled investments such as those at the Times and the IHT, we continued to exercise strong financial discipline, particularly during this period of inconsistent ad revenue.

Of course, our long-term earnings prospects are a function of our ability to grow revenues more aggressively in the next several years.

This morning we'll review some of the actions that we're undertaking to make that substantial revenue growth a reality.

For example, at the Times we will be adding eight new contract printing and distribution sites over the next two years, thereby increasing availability and timeliness.

We're increasing our color capacity at the Times by 40%, to better serve the growing demand from our advertisers for higher rate color ads.

At the Globe, we've just expanded our production capacity to accommodate continuing growth in part run advertising and pre prints, and at both the Times and the Globe, we are redesigning sections and improving content to benefit both readers and advertisers and the bottom line.

In a similar fashion at our websites, we're enhancing vertical sections and improving our continuous news operation to help us increase inventory, continue to grow ad revenues which have been increasing at a 30%-plus rate.

And, of course, as I mentioned, we remain focused on controlling costs, which Len will touch on in just a few minutes, but first let me turn the call over to Janet for more details on the quarter.

Janet.

Thank you, Russ.

Overall for the quarter, ad revenues rose 3.7% and consistent with what has been seen across the industry, small market papers outperformed those in large markets.

The Company's advertising revenues continue to exhibit uneven monthly patterns of 2.2% in July, 7.8% in August, and 2% in September.

Both national and retail advertising revenue improved at the Times media group in the third quarter, while classified advertising declined.

Scott will discuss his group's results in a few minutes.

At the New England media group, national ad revenue declined mainly because of decreased travel and movie advertising.

Retail advertising rose, helped by stronger department store, home related, computer office store and jewelry advertising, and classified advertising at the New England media group increased on gains and help wanted, automotive, and real estate.

The New England media group continues to benefit from the March relaunch of the Boston Globe Sunday magazine, and in early October the Globe successfully launched a revitalized Thursday calendar and Sunday business section.

And our regional media group, which includes four newspapers in Florida, national advertising rose sharply in the third quarter due to gains in insurance and other advertising resulting from the hurricanes.

Retail advertising benefited from stronger department store advertising and hurricane related ads, but the classified category, both automotive and real estate advertising, declined as a result of the storms.

To date in 2004, the regional media group has had the strongest ad revenue gains of the three entities, that are now part of our news media group, up 5.1%, in part due to the success it has enjoyed introducing magazines and weekly newspapers in its market.

Like our other properties it follows a multiplatform strategy to reach its readers and advertisers.

Shifting to the IHT, the advertising market in Europe remains challenging nonetheless the IHT continued to make progress on executing its long-term goals.

We have added new writers, increased the amount of content by approximately 10%, introduced color, and made changes that allow us to publish later breaking news.

The results show.

The latest European business reader survey, which is used by advertisers to determine placement, indicated that the IHT has increased business readership by 29% since 2002.

This was the largest increase of any international daily or weekly publication in the survey, and very similar to these results we saw earlier this year in the Asian business reader survey.

Turning to our digital properties, all of our websites, which include NYtimes.com, Boston.com, and those in our regional media group continue to show robust growth.

Advertising was up 32% in the quarter, due to strong display advertising and all classified advertising categories.

Within the last year we relaunched three major sections on NYtimes.com.

Travel, theater, and movies.

These redesigned sections offer streamlined navigation, user generated content and more multimedia features, and, of course, more revenue.

Additional enhancements are planned.

On the circulation front, revenue remained flat in the quarter with slight declines at the Times and the regionals.

While the New England media group grew in the mid single digits, mainly as a result of price increases instituted in 2003.

We continue to expect small volume gains in the ABC period ending September 30th at both the Times and the Globe.

Our Broadcast Media Group showed robust results with revenues up 9%, and operating profits up 24% in the quarter, mainly because of strong political advertising, coupled with growth in the auto and furniture categories.

Political advertising totaled $3.9 million in the quarter, compared with 1.6 million in the same quarter last year.

Olympic advertising amounted to approximately $2 million, similar to what we have seen in the past.

Pacing in -- pacings in October are currently up sharply and the fourth quarter is pacing at low double digits.

To date in October our news group is showing year-over-year growth in advertising revenues at a rate above that of September.

But clearly the advertising environment is uncertain and visibility is not what we would like it to be.

As Russ indicated, we will remain focused on increasing the availability and the color capacity of the Times, enhancing our content across all our properties, and continuing to expand and enrich our websites.

While the advertising market is challenging, we believe the investments we have made and will make in the future, will generate greater revenue and earnings for us going forward.

Now here's Scott to provide you with more detail on the Times performance in the quarter.

Thank you, Janet.

In the third quarter, the New York Times media group's advertising revenues increased 2.3%.

Strong categories included fashion, which benefited from the redesign of our special Sunday magazine sections, which have been rebranded as T style.

Auto, which grew as a result of increased national, regional, and local business.

Advocacy, which was helped by the Republican and Democratic conventions, and telecommunications which rose on increased advertising from the wireless providers.

As shown by the strength of our fashion advertising, the debut of T styles has gone exceedingly well, with strong improvements in ad paging and positive feedback from readers.

Just this month we unveiled our redesigned book review and arts and leisure sections.

Our readers and advertisers have responded very enthusiastically.

Weak categories included transportation, which has been hurt by the financial problems plaguing the airline industry and by the hurricanes, live entertainment, which reflects the lack of new offerings on Broadway, and real estate, which continues to be adversely affected by the lack of inventory in the New York market.

While real estate advertising at the Times media group continued in negative territory in the third quarter, it did show improvement from the rate of decline seen in the second quarter, in part due to the relaunch of the Sunday real estate section in June.

Color remains a very strong area, up 15% in the quarter.

It now makes up 26% of our advertising revenues, compared with 22% in the same period last year.

This is the primary reason for our investment in new color capacity.

Looking ahead, we expect advocacy advertising will remain strong through the elections, and we anticipate a good season for department store advertising.

Telecommunications is also expected to remain strong in the fourth quarter.

Conversely, banking advertising will be affected by the Bank of America merger with Fleet, and live entertainment will continue to reflect the limited number of Broadway openings.

I should also mention that timing differences will affect our October and November advertising revenues.

Last year, our holiday movie preview and special magazine section called Living appeared in October.

This year both will come out in November.

These shifts will hamper results in October, but benefit November's performance.

Let me turn for a moment to circulation.

The Times Star of Nature of Modern Life, competition from other media and the do-not-call legislation, will make the circulation environment continue to be challenging.

Nevertheless, we continue to make progress on increasing availability of the Times outs New York, and are working hard to stabilize our circulation in New York.

As we announced in June, we plan to add eight new print sites outside the New York metropolitan area.

With the first to come on stream later this month in Dayton, Ohio.

The last of the eight sites should be on stream by late 2006.

This will help reduce the number of orders that we've received that we cannot deliver because of logistical issues.

In the New York market, we are experimenting with innovative ways to increase circulation.

In July we introduced readers to the great summer read, a free book promotion in which we published a book in its entirety in seven daily installments, beginning on a Monday and ending on a Sunday.

BMW was the exclusive sponsor of the program, and it had a positive effect on newsstand sales in the metropolitan area.

We have also been expanding our schools and college programs.

I would also point out that the third quarter circulation revenue declined against the prior year, but in percentage terms the decline was less than half of what was experienced in the first half of 2004.

More over, circulation revenue and volume are tracking each other, which indicates to us a steadying rate mix.

Now I'll turn the call over to Len, who will provide you with an overview of our costs and what we're doing to contain and reduce them.

Thanks, Scott.

Let me highlight a couple of factors in our earnings and revenues, and go on to discuss our cost performance in the quarter.

Earnings per share in the quarter of 33 cents, benefited from a 1 cent share credit to an advertiser that wasn't used within the allotted time.

While ad revenues rose 3.7% as Janet mentioned, circulation revenues were on par with the level of last year, and other revenues declined in the quarter.

The overall level of other revenues was similar to the first and second quarters of 2004, but was lower compared to the same period last year, when we received an insurance settlement.

Total expenses grew 3.4% in the quarter, mainly as a result of higher costs from newsprint, and for the significant editorial enhancements we made at the time and the IHT.

Newsprint expenses rose 9.8% in the third quarter, 8.1% resulting from higher prices, and 1.7% stemming from increased consumption.

Excluding the cost of newsprint, costs rose a modest 2.8%.

Non newsprint cash costs in the quarter were up 3.3%.

The cost of the investments we made, we incurred higher outside printing costs as well as additional costs related to the design and development of these enhanced sections.

We believe these investments will appeal to our current readers while drawing new readers to the Times.

More over, as we do in every presidential election year, we incurred higher costs in the quarter to cover the campaigns.

Costs related to the hurricanes were not a significant factor in the quarter.

They came in less than we had expected, under a million dollars.

We will continue to be disciplined on expenses.

As Russ mentioned, we reached agreements with two of our unions, the guild at the Boston globe, and the pressmen at the New York Times.

The guild contract runs from 2001 to end of 2005.

Wage increases for the first four years total 7.5%, and for the fifth year increase slightly a little more than 2%.

The new agreement also provides significant new operating flexibility to the Globe.

The pressmen contract at the New York Times, represents a milestone in our labor relations.

The length of the contract, which extends through 2017, is unprecedented with an annual average rate increase of about 2.3%.

Over the life of this contract we will be able to reduce our staffing by nearly 50% with 37% occurring this year.

We will also increase our operational flexibility, resulting in enhanced quality and efficiency.

In recent years we have been able to lower the level of staffing in many production areas, mainly through improved technology.

We believe that going forward there will be more opportunities to achieve savings from reduced staffing.

Capital spending in the quarter totaled $47 million, including approximately $14 million for our new headquarters, which we expect to occupy in 2007.

In August we broke ground on our new building, and we are now marketing our current headquarters.

Turning to our joint ventures year to date net income from our joint ventures is $1.1 million.

Our guidance for the year, however, remains at breakeven to a loss of 5 million.

This is because of the seasonality associated with income from the Red Sox and New England sports ventures.

Because our shares have been trading at what we consider a very attractive price, we've stepped up share repurchase activity.

During the quarter we repurchased 3 million shares and $252 million remains on our authorization.

Year to date we've repurchased 5.6 million shares which is significantly higher than the 4.2 million repurchased in the same period last year, or the amount of shares we allocated for options at our employee stock purchase plan.

Between 1997 and 2003, we spent $2.5 billion to repurchase nearly 70 million shares.

At this point we are not providing additional earnings guidance but we will do so later in the quarter.

With that I will open the call to questions.

Thank you, sir.

Today's question-and-answer session will be conducted electronically.

At this time, if you do have a question you may signal by pressing the star key followed by the digit 1 on your touch-tone phone.

If you are using a speakerphone today, we ask that you make sure your mute function is turned off to allow your signal to reach our equipment.

Once again, star 1 for questions.

And we'll take our first question today from Fred Searby with JP Morgan.

Good morning.

Thank you very much.

I wondered if you could update us on what's happening in technology advertising, B to C and B to B?

You had talked about a fourth quarter or second-half snap-back, and we've had some mixed messages there.

Secondly, can you just -- your circ obviously has been a real strength, at least the national growth.

It appears to have petered out somewhat this year, and I'm wondering whether you think that really is driven by the do-not-call, or are there other factors at work, and what's going to change it next year so that you can get circ revenues growing again and not just volumes?

First, with regard to technology, we had a good third quarter.

We saw technology revenues increase in the high single digits.

We had a very good September in particular, and this was because of the mix of B to C and B to B advertising.

Going forward, we know that Hewlett Packard is adjusting its advertising plans and there are some more difficult comps in the fourth quarter, so there is some maybe returning volatility in the fourth quarter, but we're optimistic that we can balance the B to C and the B to B, and particularly going into the holiday season can benefit from the B to C advertising.

Martin, do you want to --.

Yes, on nytimes.com, two of the top five advertisers in the website are tech advertisers.

IBM, our top advertiser is up 56% quarter over quarter, and Samsung came from nothing to almost $650,000.

So two of the five advertisers are tech advertisers.

For the overall number, the quarter is up triple digits, up 146% in tech/telecom on nytimes.com.

Coming back to the circulation question, we're seeing a very challenging circulation environment this year.

I believe, from talking to other newspapers and seeing other results this is common to the industry.

Do-not-call regulations are a factor.

They're a factor less for us, we believe, than other segments of the business.

Although it's an escalating factor, when these regulations were introduced about a year ago, we were seeing about a quarter to a third of our lift depressed by the names that had signed up for the do-not-call.

That number, percentage, has been inching up, so now it's into the mid-40% range.

We're adjusting our marketing plans accordingly using other channels of marketing, and we believe that those will prove productive over time.

The challenging environment is also affecting single copy sales, making -- we think that's coming from the increased choices for news and information, media presentation in the marketplace, but we believe that we can adjust our marketing plans to achieve growth going forward, and, of course, we continue to increase our distribution capabilities, particularly outside of New York.

As mentioned, we're going to be adding eight new print sites over the coming few years, the first being Dayton, which will help to increase our circulation in the Cincinnati area.

You may have seen that we're up to 302 home delivery markets.

This is up over 50 since just a year ago.

Most of those markets are Sunday only markets, and in that one year, those 50 markets have added over 10,000 copies to our Sunday circulation.

We expect to be filing in the coming few days, our September ABC results with the Audit Bureau of circulation, that will show an increase in September for both daily and Sunday, and once approved by ABC and published, that publisher's statement would represent 11 out of the last 12 ABC periods being positive on the daily, and 10 out of the last 12 being positive on Sunday.

Education sales continue to be strong.

Our school and college circulation is up over 120,000.

That's easily more than double what it was in 1999, and continues to be one of the highest growth areas.

Okay.

Thank you very much.

We'll take our next question from Alexia Quadrani from Bear Stearns.

Good morning.

Do you have any indication what the pension contribution might be for this year?

Secondly do you have a number for year-over-year change in FTE's in the quarter?

Yeah, we're going to -- the final number, obviously, will depend on where we finish the year in terms of interest rates and stock performance, but it will be considerably less than it was a year ago, probably more than half of what it was a year ago, less than half of what it was a year ago, but that final number is still somewhat up in the air depending on where we finish the year.

We're actually not required to make any contributions this year, so any contribution we do make really is a function of just keeping the fund in good balance going forward.

With regard to FTEs quarter over the quarter, we're pretty much flat.

We've maintained that position for the last several years and not -- have not added to staffing in any significant amount.

Just a follow-up on IHT, it sounds like you've done a nice job increasing the readership there.

When will expect to see a significant pick up in the ad revenue from that property?

We are up in ad revenue year-over-year already, Alexia, and we're starting to see a very strong combination buy developing between the IHT and the New York Times.

We're well over 3 million now, which is about a 65% increase year-over-year.

We're going to be doing more of that going forward, because particularly in some specific categories, technology, luxury goods, we're starting to see people not only respond to the buy, but even request it.

Okay.

Thank you.

We'll go next to Lauren Fine with Merrill Lynch.

Thank you.

Couple of questions.

Just back on circulation, I think in your prepared remarks did you make a comment about competition, and I'm wondering if could you flesh that out.

Then I'm wondering if you expect some of the industry misstatement issues to affect any of your annual advertiser contracts as you go into negotiation, then I have a follow-up after that.

The play about competition is about competition across all media platforms and not newspapers.

Is that your question?

Yeah, didn't know if you were feeling specific competition from another national or a local or anything of that nature.

No.

The answer in the newspaper segment, no, we're not feeling any competition effects there.

It's the more competitive atmosphere of offerings across lab cable, magazines, television in general in this current environment.

The second question was the effect on our advertising negotiations.

We don't expect it, at this time we're just starting negotiations, and we don't expect it to be a factor.

The quality of our circulation is strong and sound.

Okay.

Thanks.

Then a couple of follow-ups.

On color today before you ad the additional capacity where are you relative to current capacity in terms of demand?

Are you selling out color?

Then I'm wondering if could you comment on the entertainment category, both in your third quarter and your outlook for the fourth quarter.

I know you mentioned live entertainment, but just total entertainment, movies, et cetera.

We're selling a lot of color.

There are days when we bump up against our capacity, so we end up talking to the advertisers and negotiating ways in which to move into days and sections and positions that keep them in the paper.

So we don't -- on whole we don't think we're turning business away, but the reason for the investment is we want to make sure we don't end up in that position.

Entertainment advertising, third quarter was -- revenue was up modestly.

We had nice gains in July and August but we lost momentum in September.

Heading into the fourth quarter, October will likely be down because of the switch on the holiday film preview that I spoke of, as well as a couple of other factors, but we believe we'll make that up in November, and then going into December, December is always the toughest month to forecast around the holiday season.

It's historically a volatile month, and Christmas falls on a Saturday, which makes it even more difficult to forecast this year.

But we expect to see what we've seen all year long, which is volatility in this category, as the studios manage their product.

We've benefited from that to the extent that they are spending more in terms of pre-release awareness and sneak previews, but then if a movie opens poorly, you've got a quite aggressive in pulling back on advertising support of that product.

Just to add one more thing, it's important to note that we are on the same time frame in regard to the Oscar releases as we were last year.

So the Oscar race really will start in that November/December time frame, as did it last year, which was contrary to the years before, which, of course, took place in the earlier part of the next year, in January.

Also affecting this year would be the product itself.

I think that it's very clear that many movies that have been in the theaters have come into the theaters and been leaving very quickly, primarily because of lack of box office.

Great.

One last quick question.

You've given guidance at full year '04 corporate expense should only be slightly above '03.

Based on where you are year to date would that suggest then the corporate will be down in the fourth quarter?

Our corporate expenses in the third quarter were impacted by higher legal and professional fees associated with 404 Sarbanes work and some other matters and costs associated with the Republican convention, as well as a management separation agreement.

We would expect to track, in the fourth quarter, our overall forecast for the year.

We'll take our next question from Craig Huber with Lehman Brothers.

Good morning.

Thank you.

Can you tell us please, if you were forced to have to expense options, what would be the percent impact on third quarter on EPS.

Then I have a follow-up.

Thanks.

Would you repeat the question.

If you were forced to expense options, what would the be the percent impact on your earnings per share in the third quarter?

Thanks.

Craig, we're going to check on that and have to get back with you on that.

We haven't computed it on a quarterly basis, Craig.

We know the impact on an annual base.

All right.

Then what would it be on an annual basis.

Then the other question -- well, I want to ask that first, please.

For the full year 2004 shall and if you read our 10-Q we accelerated the vesting options.

The total expense will be about 42 cents per share for the year.

So you can do the dilution.

It will be much less in 2005.

Okay.

Thank you.

Follow-on question.

When The Wall Street Journal launches their weekend edition in September of next year, I would just be curious to hear your thoughts on why that won't impact in the advertisement on the weekend for your flagship newspaper.

Thanks.

We're already well positioned on weekend with our Saturday/Sunday offering, which is very reflective of the breadth and diversity of our advertising category mix.

The Journal obviously is trying to diversify its advertising mix.

We're in strong position to maintain it and grow it.

You've seen us do it this year by investing in our sections, ranging from real estate to Sunday business to culture, book review, and the magazines.

I would also point out that over the timespan when the Journal introduced Weekend Journal and Personal Journal, we've been able to increase our share, our national share, by 11 points from 39% to 50%.

Thank you.

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

Hi.

You mentioned October trending better than September, and I'm wondering if you could put any quantification beyond that on it.

Is it as good as August?

And any insights as to categories that are driving the strength?

I don't think we want to put a number on it.

We're saying continuing strength from advocacy, we will all the way through the elections.

Department stores will continue to be a strong category for us.

Media and telecom as well.

We're seeing a lot of -- you're seeing a lot of advertising in healthcare, pharmaceuticals, in response to the Vioxx move, as well as incremental advertising surrounding the Vitorin launch and from Bristol-Myers Squibb for tour of hope, you saw the ad today.

Real estate displays continue to do very nicely for us, based on the relaunch in June, and the T style sections in general are showing great strength.

So far they're consistently showing ad page increase between 40 and 60%, and through the T style Living that will come out in November, collectively they're going to be adding over $4 million of revenue to our results this year.

Scott, you mentioned the -- on the classified side, the Labor Day shift had a specific impact on the results in September, you know, does that reverse fully in October?

Because the classified numbers seem particularly weak in relation to the industry and your September results, so I'm wondering if you can quantify the Labor Day impact, if that's possible.

The Labor Day impact affected August favorably and September negatively.

Right.

I'm not sure I want to quantify it.

No effect on October, to specifically answer your question.

October should look more like August from the perspective of classified revenues specifically?

I'm not sure I'd want to characterize that.

I did say, I believe, in my remarks that we're seeing slowing declines in real estate.

That's trend we expect to continue into the fourth quarter, but beyond that, I'm not sure I'd want to say.

Last thing, Len, I think this is for you, on the buyback front, I'm just hoping you could share with us maybe the big picture view of how you think about buybacks from the perspective of leverage or ratings levels that you're comfortable with.

Do you expect to use up the remaining authorization by year end, et cetera?

Peter, as you know, we've -- our cash is used for a number of things, dividend, stock repurchase, capital investment, and we're constantly balancing that against liquidity as we think about ratings.

We're clearly opportunistic beyond that which we were a year ago because of the attractiveness of the stock price, and as far as using up our remaining authorization, while we certainly have been aggressive, it's unlikely that we would be as aggressive to use up the $240 million we have left by year end.

But that's certainly a considerable amount of authorization, and it will carry us through a certainly strong part of 2005, and our debt ratings have not changed.

They remain quite strong and our goal is to keep them at the level they're at..

Thank you.

We'll take our next question from John Janedis, Bank of America Securities.

Hi.

Good morning.

Can you tell us what you're seeing from the Home Depot store openings, has your total spend changed much?

It seems like they've shifted some of their budget from pre-prints into ROP.

Then can you just give us some early color on the November holiday movie section and maybe if there's also a travel section?

Thanks.

The opening of the 23rd Street Home Depot location benefited us substantially in the month of September, both in ROP and pre-print.

With regard to the holiday preview section, we expect it to be strong this year.

I'm not sure I'd want to say beyond that.

Is there also a travel section in November as well?

A travel, I'm not sure I understand the question.

I think last year there was a sophisticated traveler section during the month.

Is there going to be some sort of one this year as well?

The last sophisticated traveler ran in September.

I don't believe there's another one before the end of the year.

Okay.

Thank you.

We'll go next to Paul Ginocchio, Deutsche Bank.

Hi.

Thank you.

Three questions.

I saw your JV's did quite well, I know you said it was spread across the three assets, maybe was it Discovery Times, or was it one in particular that was doing well?

Secondly, if did you sell the building would you think of paying down debt or maybe increasing the buy back?

Finally, as we look at your retail sales volume for the New York Times last couple of years it's sort of been down in the 5 to 8% level.

Think about the rate increases as sort of 6 to 7% in your losses of New York subscribers, do you think it's the retail decline in volume is more cyclical or structural because of increasing rates and fewer subscribers in New York City?

Thanks.

Hi, Paul.

This is Len.

I'll handle the first two questions.

We don't give details out on the break down of our JV line.

It's being driven in part by seasonality, but all of our properties are doing as planned or better than planned, so we're quite pleased with that.

With regard to the building, we have some conservative assumptions built into our estimates for what this building will garner on the market.

In our 10-K, where we have released the full cost of the estimates of our building, we've included the benefits of the sale of the building in that number.

We're hopeful we'll do better on that, and if we do, certainly it will be used in the four or five ways we use our cash.

The question about retail volume, I'd say over the last three or four years, in segment time period, the answer is probably a cyclical one.

The retail category is doing nicely for us this year, led by the department stores.

We're seeing excellent results from just about all of the department stores.

Some of the other retail categories, fashion and jewelry stores are doing well as well.

There's a lot more color advertising from the department stores.

We know that over the last couple of years that have experimented with television, but I wouldn't conclude, from the strength that we're seeing this year, that we're a strong fit in their advertising mix, and --.

Okay, great.

Thanks.

Maybe, does Russ want to comment on the Red Sox or any predictions?

Well, I was a little -- I was quiet there, as you know, and I can only say that the six and two-thirds innings last night that we endured was a nightmare, but the last few innings were more reflective of the future performance, and that will impact our financial performance, but I wouldn't take that to the bank. (Laughter)

We'll go next to Brian Shipman with UBS.

Thanks.

Good morning.

You mentioned increased competition impacted your circulation growth for the New York Times newspaper, how might the competitive landscape affect your ability to raise ad rates into 2005 as the budget process gets underway this year?

Second, with the plan to increase color capacity at the Times, what might the incremental impact be on capital spending in 2005?

Thanks.

As I mentioned a few minutes ago, we're going to be filing numbers with ABC that will show another -- ABC publisher statement of gains on both daily and Sunday, so we expect to go into rate discussions with advertisers in a good position.

I also would add that, you know, from a standpoint of competition we have done a very good job of selling in combination between print and digital.

So from the dollars that we are getting out of the market, I'm going to brand monikers of the New York Times, the Boston Globe, or the Sarasota Herald Tribune, that worked very, very much in our favor.

We are not just selling newspaper and print, as you well know we're selling across the mediums, to make sure we're taking the dollars into the Times Company and gaining share in regard to that.

Brian, this is Len on the your question on capital, that program to expand capacity is really a two year program, going from '04 into '05 and we'll be spending about the same in each year, so that there won't be an incremental impact from one year to the next.

It will be just part of our overall capital program, and we'll have more to say about in that terms of guidance at year end.

Thanks, Len.

We'll go next to Christa Sober with Thomas Weisel Partners.

Hi.

Just a couple of follow-ups.

On Peter's question about the classified, it seems like you're a little reticent to say that all this will be sustainable as you head towards tougher comps, particularly on the help wanted side.

Could you give an indication of where your expectations are, and then obviously on-line should be boosting those results, and if they're not, just be curious as to why.

Then if you could also remind us, as to the number of orders out there that are currently undeliverable, then if you've put any specific dollar amount on what the color and regional expansion, you know, that you expect to sort of incur for the next one to two years.

The classified, again, I'd suggest you look at August and September together, and if you do that, I don't think August represents -- there's not a change in trend in classified advertising.

The real-estate trend I've spoken to, help wanted, is reflective of the marketplace.

We're seeing some signs of the employment outlook in the marketplace, but I would continue to hesitate to say where it's going directionally.

On line is helping us in the classified categories.

Just a quick comment on the Boston works, which is our brand in Boston, we are competing very favorably against both Monster and Career builder in Boston, along a number of dimensions including brand awareness and actual usage.

In addition, digital sales in Boston are up 52% year-over-year, which is a pretty peppy number.

So we expect to see continuing robust growth in the on-line side of the business in help wanted.

And when you're looking at the New England media group and the regional media group in regard to their performance on the recruitment side in print as well, you're seeing some very robust growth in those two specific areas of our business as well.

And did you give an indication of what New York specifically, how they did in the help wanted side, maybe both on-line and off?

In digital sales in help wanted in New York we were up 41%.

So also very robust growth.

With regard to your question on the number of orders, Christa, the number of nonroutable orders remains at about 70,000, that's one of the reasons why we're going forward with the print side expansion that Scott had mentioned earlier.

Len, do you want to speak to the --.

Yeah, as you know, in our national strategy, we don't own the print side, other than those where we currently produce our papers in either Florida -- the Florida properties, and in effect, we're renting the equipment.

You'll begin to see those -- that impact on operating expense in 2006, but I'd hesitate to quantify that at this point.

It's not a huge number, but it's also not a capital number, it's part of our operating expense.

Just to add back on the help wanted question about New York, we saw a modest decline for the third quarter.

Gotcha.

Thank you.

We'll take our next question from William Drewry, CS First Boston.

Thanks.

One revenue and one cost-related question.

First on the revenue side, I just wanted to clarify, do you think that the retail strength that you're seeing will carry through the holiday season?

In other words, you can see this kind of growth, you know, for September through the fourth quarter, or somewhere thereabouts?

And on real-estate you said the losses are lessening.

Just wondering if there's a possibility you could get back to positive territory year-over-year growth at any time in Q4.

Then on the cost side, Len, just wondering, at this point, now, how many of your FTE's, what percentage are covered by union contracts, and, you know, for the union, for those union contracts, what would be the annual escalators that you're now running at going forward, for the next two to three years maybe?

Thanks.

The question about retail, we think there's an upside potential in the fourth quarter for our retail department stores in particular.

Particularly in the luxury category, based on conversations we've been having with our retailers, they've confirmed for us that there's a significant opportunistic potential.

Just to add a little bit in regard to Boston, Boston is also seeing some very nice growth, as are the regionals, in regards to department stores during the third quarter, and they expect that to continue during the fourth quarter as well.

With regard to the real estate, I'm not sure I'd want to call the turnaround in that market.

We've said all along that we think that interest rates will -- rising interest rates would eventually help the marketplace, but, as you know, there's -- it's still a hot market.

We haven't seen it yet, but we have seen the slowing decline.

Bill, on line, real estate in New York and nytimes.com is up 22%, and the numbers aren't tiny anymore.

We have a very strong position in real estate in Manhattan, as you know, and in Boston we're up 37%.

So the real estate business at both websites is very good, and we continue to stress the combo buys, and we'll get even better at that over time as advertisers seek both on-line and off-line solutions, print and digital together.

Bill, it's Len.

About half of our employees are covered by union contracts.

And while that number obviously will shrink over time, as we take the benefit of the current contracts, and on the wage increase side it's roughly in the 2 to 3% on an annual basis, some years closer to two, some years closer to three.

If memory serves me, there are no major contracts coming up with regard to wage reopeners in the next couple of years.

Just one follow-up, if I could, I don't remember if you said this in this your prepared remarks, but what would you think that benefit costs would be up over the next several quarters and into 2005, if you can.

No, I didn't say that.

What we have done is we have done a very good job at minimizing benefit costs, both in medical and retirement costs, so we're actually doing better than the overall rate of inflation in those costs, and we would expect to continue to do so going forward.

Thanks very much.

We'll go next to Douglas Arthur, Morgan Stanley.

Yeah.

Two big-picture questions.

We've seen much stronger growth in national advertising at some of the large metros around the country than at the Times, and I'm wondering if national advertisers are looking at your ad rates and choosing to allocate their national budgets at a more targeted way at major papers that you might compete against on a national basis, in the local markets, than opting for the Times platform.

Then a second question, in terms of circulation integrity, does owning your own system and trucks in the metropolitan area benefit you at all, versus others who don't, in terms of, you know, circulation control, or is it a nonfactor?

Thanks.

With regard to the national category performance relative to other newspapers I think our big picture answer is that our strength is in the breadth and the diversity of our category mix.

And we have -- that gives us a different exposure to specific segment categories than most other newspapers.

I'd also remind you that the competition for many of our key categories includes magazines and not just newspapers, and we talked in July about the first half performance being dominated by three categories.

Entertainment, technology, and real estate, which account for 20 to 25% of our overall advertising revenue.

Gives us a different exposure to what's going on in those segments than other newspapers, and I think that's what explains the differential performance you might be seeing with other metros.

I'd just add to that, that as part of that mix response, is the fact that we also have a much different exposure in the classified categories and large metros have felt the full brunt of that exposure through the economic downturn of the last couple of years and we have less so.

On the circulation integrity, owning and controlling the distribution certainly helps.

But also having the direct billing relationship I'd say it's perhaps even more important.

The majority of our circulation is home delivery subscription.

We have the direct billing relationship with the customer.

That means that the nature and the quality of the ABC audit is different for us than newspapers that don't have that relationship.

So in the -- when the ABC auditors come in, they go right into our systems and have access to those records, and that's part of their audit.

Going back to your distribution point, we own the wholesaler in the New York metropolitan area that distributes the Times, as well as many other newspapers and magazines.

Not only do we benefit from the management and control and the ethical standards that are established through the organization, but also that entity has direct billing relationships with the dealers, and so when ABC comes in to do the audit for the New York Times, they go right into our wholesalers records and include those data records as part of their audit.

Again, that's not the case for many other newspapers.

Thanks.

We'll take our next question from Steven Barlow with Prudential.

Thank you.

Len, you talked about a staff reduction in the New York pressmen.

Will there be a charge related to any of that in the fourth quarter, then how does that affect your wage number as we look to 2005?

Then secondly, in your release you talked about increased promotional expenses.

Wondering if you can quantify that, how it was different from maybe the second quarter or the third year a year ago.

On the first question about the truck, there will be a charge but that charge will be a function of how many people decide to leave, so it's really too early to make the call on that yet.

But we're hopeful actually that a large percentage of those eligible will take it, and the obvious benefits going forward are significant.

The second question.

Promotional expenses.

We don't get that granular with our dollar expenditures.

We are certainly increasing promotion with regard to circulation expense.

As you know, over the last few years we have cut back -- we have cut marketing and promotional costs dramatically, in response to a very soft advertising market, and part of the normal course of doing business is stepping up promotion and marketing expenses.

Nothing unusual in comparison to what we've done in the past practice, but perhaps a little higher than what you might have seen a year ago or two years ago because of the cut backs we made.

Then lastly, on the shares you're buying back, is the family selling any, or is this all the open market from the A shares?

It's all open market purchases on the A shares.

And so therefore, the family control actually is increasing as a small percentage each quarter?

It's been relatively flat, Steve.

At this point it's been stable over some period of time.

Thank you.

We'll go next to Edward Atorino with Fulcrum.

Hi, just looking at your guidance and looking at the results, interest expense is running way below your guidance.

Would you make a guess on what the joint venture might add in the fourth quarter or not add, both -- they're both way ahead of your forecast.

I think you're a little ahead of us in terms of a forecast.

Our guidance for the year is roughly 42 to 46 million on interest, and we're consistent with that.

You got 30 million for nine months.

Is there -- am I missing something?

No, our guidance is 42 to 46, and we're at approximately 31.

So I think we'll probably be within that range, Ed.

Okay.

Means you've got to have a big increase in the fourth quarter.

No, it would be about -- it's not significant.

Well to go from 30 to 46 --.

Well to go from 31 to 42 would be in line.

So if we increase it a little bit, you're right, it would be a little bit higher, but not significantly so.

Gotcha.

Joint venture?

You're ahead of the curve there, too.

That's seasonality, and we're pretty comfortable with our current guidance.

Thanks a lot.

Slash it down 5 million.

Thanks.

There appear to be no further questions at this time.

I'd like to turn the call back to Ms. Mathis for any additional or closing comments.

Just very quickly, this is Russ, I just want to mention that as one or two of you may remember, this is going to be my last earnings conference call, since I'm retiring at the end of the year.

The Company is in very capable, more capable hands with Janet and her colleagues, and I just wanted to say that I've enjoyed working with all of you in the investment community, and I'll see you around the ballpark.

Catherine?

Thank you all for joining us today.

If you have any other questions, please call me.

That does conclude today's conference.

Thank you for your participation.

You may disconnect at this time.