New York Times Co (NYT) 2005 Q3 法說會逐字稿

Good day, everyone, and welcome to the New York Times quarter three, 2005 earnings conference call.

Today's call is being recorded.

A question-and-answer session will follow today's presentation. [OPERATOR INSTRUCTIONS]

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

Thank you and good morning everyone.

Welcome to our earnings conference call.

We have several members of our senior management team here today to discuss our results with you, including Janet Robinson, our CEO and President, Len Forman, our Executive Vice President and Chief Financial Officer, Scott Heekin-Canedy, President and General Manager of the New York Times, Martin Nisenholtz, our Chief Digital Officer, Jim Lessersohn, our Vice President of Finance and Corporate Development, Stu Stoller, our Vice President of Process Engineering and Corporate Controller, and Tony Benten, our Treasurer.

Our discussion today will include forward-looking statements, and our actual results may differ from those predicted.

The factors that may cause them to differ are outlined in our 2004 10-K.

This presentation will also include a non-GAAP financial measure, and we've provided a reconciliation to the most recently comparable GAAP measure in our earnings press release, which is available on our website, www.NYTco.com.

This conference call is being webcast, and an archive will be available on our website, as will a transcript.

An audio replay will also be available.

The directions for that are in our press release.

So with that, let me turn the call over to Janet Robinson.

Thank you, Catherine, and good morning, everyone.

Our third quarter earnings per share were $0.16, based on Generally Accepted Accounting Principles, compared with $0.33 in the same quarter last year.

The $0.16 is net of a charge of $0.05 per share for costs associated with our staff reduction, and $0.01per share of incremental costs, associated with the expensing of stock-based compensation, that we did not have in 2004.

We came in above the earnings range of $0.11 to $0.14 that we had provided last month.

While the advertising market remained challenging in the third quarter, our earnings were better than we expected, as revenue growth improved in late September.

This is particularly true with the New York Times Media Group.

Advertising revenues for our News Media group increased 1.7% in the third quarter.

Overall for the group, national and retail were on par with last year, while classified was up nearly 4%, with healthy gains in real estate and help wanted advertising, offsetting sluggishness in the automotive category.

At the New York Times Media Group, advertising revenues rose 2.9%.

We saw double-digit gains in several advertising categories, including financial services, with increased advertising from American Express and Ameriprise corporate, which saw increased advertising from Chevron and ExxonMobil, Banking, which benefited from campaigns from Citibank, Wells Fargo, and Independent Community Bank, and international fashion, which continued to grow in part due to the very successful key Sunday magazines, and Thursday style and Sunday style sections.

Weak categories were transportation and travel, where airlines and cruise lines reduced their spending.

Telecommunications, which had difficult comparisons because of the AT&T/Cingular merger, Advocacy, which benefited from the elections last year, and Studio Entertainment, which had a soft July and August, partially offset by a solid September.

Color made up 29% of The Times' advertising revenues, up from 26% in the same period last year.

We expect this to increase in the fourth quarter, as we have just completed the addition of 40% more color capacity.

This project came in several weeks earlier than anticipated, and well in advance of the holiday season.

Advertising revenues at the New England Media Group, reflected the continued weakness in the Boston economy and were down 2.8%.

Classified advertising in the group declined 4%, because of weak automotive and help wanted advertising.

Only partially offset by strong real estate advertising.

Retail advertising decreased 3%, due to softer department store and home related advertising.

The group's national advertising was flat in the quarter, with travel, telecommunications, and technology advertising staying soft, and the overall entertainment category showing gains.

We continue to be pleased with our investment in Metro Boston, a free daily newspaper that targets commuters.

It had its best month ever during the third quarter.

The number of display advertising placing ads in both the Globe and Metro is increasing.

And classified sales have gone extremely well.

In August, Metro, the Globe, and Boston.com introduced a new offering called Boston Uncovered, designed for college and graduate students.

It has proven to be attractive to readers and advertisers alike.

Our Regional Media Group showed the strongest advertising revenue growth of the three news media businesses, up 4.3%.

This is consistent with what we have seen throughout 2005, when properties in smaller markets have outperformed those in major metropolitan areas.

Once again the group successfully achieved its goal of deriving a third of its total revenue growth, through new product and services, such as commercial printing, database marketing, weeklys, magazines, and websites, this drove their revenues to increase 17% in the quarter.

The Company's overall circulation revenues decreased 1.2%.

We maintained flat circulation revenues at the New York Times Media Group and the Regional Media Group.

Circulation revenues declined about 6% at the New England Media Group, where volume was lower for both home delivery and single copy sales.

For the September ABC statement, the Times expects to show gains for both daily and Sunday circulation.

The Globe anticipates declines for both daily and Sunday, reflecting the home delivery and single copy decreases, as well as a conscious decision to reduce its other paid or bulk circulation.

We continue to make progress in expanding availability of the New York Times across the country.

Next month we plan to launch a new contract print site in Toronto.

Our first outside the United States.

In addition to the greater Toronto area, the new site will serve Buffalo, Rochester, and other areas in upstate New York.

In January, we expect to begin printing in Houston.

Our websites in the News Media group had very strong growth in the on-line advertising revenue, up 31% in the quarter.

Last month at NYtimes.com we launched TimesSelect, our new fee-based product, that includes our exclusive columnist and access to the Times archives, as well as other features.

Times subscribers receive TimesSelect free of charge, as part of the benefits of subscribing.

For others, there are both monthly and other packages available.

The preliminary response has been very good, well ahead of expectation, traffic remains strong.

As a matter of fact NYtimes.com had record page views in the month of September, as a result of Katrina, and improved search engine optimization.

We continue to be very pleased with the performance of About.com.

It recorded total revenues of 14.2 million in the quarter, with advertising revenues up an estimated 67% over the same period last year.

About.com's integration is progressing very well.

It has applied its expertise in search engine optimization to NYtimes.com and Boston.com, which has increased traffic at both sites.

Joint sales are currently underway with major advertisers, and we continue to pursue innovative ways of driving traffic between About.com and NYtimes.com.

With About.com, The Times company is now the 12th largest corporate on-line network, generating nearly 35 million unique visitors a month, and providing advertisers with a robust inventory, with which to market their products and services.

Turning to our Broadcast Media Group, revenues decreased only 5.4% in the quarter, despite significantly lower levels of political advertising.

In the third quarter, political advertising totaled 300,000, compared with 3.9 million in the same quarter of 2004.

Last year, we also benefited from 1.8 million of advertising related to the Olympics.

Before the end of the year, we expect to close on our acquisition of KAU-TV in Oklahoma City, which will create our first duopoly.

We believe that our ownership of both KFOR and KAUT, will enable us to achieve operating efficiencies and to offer advertisers more and varied ways to reach their audiences in this market.

In the fourth quarter, The Times will have two new issues of its Sunday T magazine.

The first appeared last Sunday and focused on beauty.

The other will debut in December, and is devoted to the holidays.

Tea design which came out on October 9th, was the largest Sunday supplemental magazine The Times has ever had.

The entertainment category is showing strength in October, and is expected to benefit from an increase in the number of wide-screen releases, 48 anticipated this quarter, compared with 28 in the fourth quarter a year ago.

In December, The Times will introduce a free pocket-sized magazine called 'OnMovies', which will be distributed to more than one million movie goers at Lowe's Cineplex theaters, and will generate incremental advertising dollars.

This month Boston will debut its enhanced classified auto section.

In addition ExploreNewEngland.com, a one-stop travel guide to the New England states, with content from the Globe, Boston.com, The Times, and About.com, launched this month, with a goal of becoming a go-to site for New England travel.

Our regional properties will launch another magazine this quarter, adding to their growing stable of other product and services.

On-line advertising remains strong with NYtimes.com and About.com showing particularly robust gains.

So far in October, pacings at our Broadcast Media Group are down in the high teens.

In the fourth quarter of last year, our Broadcast Group reported 9.5 million in political advertising, so the comparisons are quite challenging.

While the quarter is a difficult one and as advertising growth remains uneven, we believe the steps we are taking to strengthen our businesses position us well.

Going forward we will continue to develop innovative ways to reach our audiences, and serve our advertisers in print, on-line, and broadcast media.

At the same time, we will remain very disciplined in managing our costs.

And now I will turn the call over to Len.

Thanks, Janet.

Total costs increased 8.2% in the quarter.

A significant portion of the increase was due to three items.

Staff reduction expenses, costs related to About.com which we acquired in March, and stock-based compensation costs, which were less than in the previous two quarters, the cost of the valuation of our long-term incentive plan awards.

Excluding expenses related to the staff reductions, About.com and stock based compensation, total costs increased 4.6%, primarily because of higher distribution and outside printing expense, higher wages and benefits, and increased promotion expense.

Newsprint expense rose 3%, with 5.4% of the increase resulting from higher prices, partially offset by a 2.4% decrease from lower consumption.

This quarter, we plan to complete the conversion of all of our newspapers to a lighter weight newsprint, as part of our efforts to reduce newsprint cost.

In 2005, we expect to save approximately 1.6 million as a result of this step.

Going forward, annualized savings are expected to be 3.5 million to 4 million.

Excluding the staff reductions at About.com and stock-based compensation, cash costs rose 5% in the quarter.

As many of you know, late last year we embarked on a systematic review across the Company to determine ways in which we can operate more efficiently.

We're also eliminating activities that no longer support growth, in order to reallocate those resources to areas that do.

We reduced our staff by approximately 200 positions last summer, and in September we announced that we will cut an additional 500 positions over the next six to nine months.

These reductions were possible because of this productivity and efficiency initiative, as well as our ability to leverage the investments we've made in technology and shared resources.

Some of the recently announced job reductions will be accomplished through buy-outs, while others will be done through layoffs.

The Company estimates the total charge for the staff reduction will be 35 to 45 million, a portion of which will be recorded in the fourth quarter.

The amount of annualized savings in this reduction is in the same range as the charge.

Further, we plan to continue the process of critically examining all aspects of our business to improve the efficiency and productivity of our Company, in order to enhance profitability.

We are committed to reducing our cost base and ensuring that expense growth is below revenue growth.

In the fourth quarter, we plan to make a 45 to $50 million tax deductible contribution to our pension plan.

This is less than the contributions we made in each of the past three years, and we expect that going forward higher interest rates will reduce contribution needs.

Stock-based compensation in the fourth quarter will be higher than in previous quarters, because of the acceleration of expense for awards granted to retirement eligible employees in December.

Therefore, our guidance for the year of 28 to 34 million remains unchanged.

If we had expensed stock compensation two years ago, the cost would have been approximately $80 million.

We've been able to reduce stock-based compensation by more than 50%, by decreasing the number of option grants, and accelerating the vesting of underwater options, and modifying our compensation plan, and we'll continue to look for ways to further reduced stock-based compensation expense going forward.

Under GAAP, the total amount of capital expenditures for our new headquarters for both the Company and our development partner, must be included on a consolidated basis in our financial statements.

Therefore, our guidance on the quarterly numbers we provide for CapEx, now include both The Times and our development partner's expenditures.

For 2005 the total amount of CapEx we expect is 255 million to 285 million.

Of this range, 200 to 220 million is our responsibility, including 85 to 100 million for our new headquarters.

In the quarter, total Cap Expenditures were 63 million.

Of this amount, 46 million was the Company's responsibility, including 27.8 million for our portion of the cost for the new building.

Yea-to-date, total capital expenditures were 154 million.

Of this amount, 117 million was the Company's responsibility, with approximately 59 million for our portion of the cost of the new building.

In the fourth quarter we'll complete the amortization of the non-compete agreement associated with the sale five years ago of the Santa Barbara News Press.

Looking ahead, we plan to provide with you guidance on the quarter, before we present at the December conferences.

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

Thank you. [OPERATOR INSTRUCTIONS] We'll take our first question from William Drewry at CSFB.

Hi, thanks, it's Debra Schwartz on for Bill.

Wondering if you see any impact from the Weekend Journal, and if there's been any change since the Weekend Journal launched, versus the past few weeks.

This is Scott.

We have not seen an impact from the launch of the Journal's weekend edition.

Thanks.

Also could you just comment on rising fuel costs, and if you're seeing any impact on your cost line now, or heading into 2006?

it's too early to tell.

We expect to clearly have increased costs but it's not a huge component of our overall cost base, so we would expect it to be relatively small.

So far we've been able to absorb it.

Okay.

Great.

Thank you.

We'll go next to Brian Shipman at UBS.

Wondering if you guys could talk about your thoughts for how much higher newsprint costs could go, in light of the recent October 1st price hike?

Are you budgeting further price hikes in the early part of 2006?

A second question, you mentioned, Janet, at The Times you're expecting in the ABC audit both daily and Sunday to be up.

I was wondering if you could give us a break down between the DMA and national edition for both daily and Sunday.

Brian, it's Len.

You've got a very peculiar situation right now with the two-tier pricing system, as you know.

That's causing a little bit of confusion in the marketplace.

Folks who watch the industry, think that if the price and when the price hits currently 6.50 or so, it will probably stabilize.

Hard to know whether, indeed that will be the case because the suppliers have been very good at managing supply.

We don't expect the kind of escalation in'06 and '07, that we've seen in the last 12 to 18 months.

This is Scott.

We're -- we've filed the numbers with ABC, that show a small gains for the September ABC period, similar to the gains we've seen for the past three or four ABC reports.

And I have not seen the exact breakdown yet on the New York NDM market versus the rest of the country, but based on the trends,the split will be similar to what it has been for the past couple of years, with growth in the national market offsetting decline in the New York market.

Do you see anything on the horizon that would lead to you believe that the declines locally might abate any time soon?

The market fundamentals, which we've described in the past, are very strong, but we have a number of initiatives in place that are showing positive results.

First of all, we continue to expand our single copy availability and delivery through secondary wholesalers.

This has proved very helpful over the past couple of years.

We've been piloting earlier delivery in some areas of the New York marketplace, and we've seen very good results improving both acquisition rates, as well as retention rates, and we've for the past six months, we've had had had a fairly intensive marketing pilot on Long Island, which concentrates our tactical and strategic promotion efforts, as well as our direct marketing efforts and single copy availability, all with good results.

So we're in the process of rolling out those programs across the New York marketplace.

Bottom line is that we believe that we can have a positive impact on what those trends have been.

We're also continuing to see very good results in the next-gen markets, schools and colleges, growth in particular in the college-university marketplace.

Brian, it's Len.

Just one point on newsprint which I think is worth pointing out.

Even with the rapid escalation in prices, newsprint is about 10% or less of our cost, because we've done a pretty good job at figuring out how to reduce tonnage per copy.

So, you know, in the old days it used to be 18, 19% --

Can you talk about web width reductions?

Sure.

We've looked at web-width reduction.

We're continuing to study it.

Obviously with the Journal going to a lower web width, that eases our concerns on the competitive side.

We've got a bit of a challenge in doing it, because we've got multiple print sites across the country, but we think that in fact that there are benefits for us, because they are already at 50 web, in their own papers.

It is under study, though, Brian, at this juncture.

We'll take our next question from John Janedis at Banc of America Securities.

Good morning.

Can you talk about the marketplace publications?

How are you sell the advertising there, and what kind of advertiser overlaps and take rates are there from the Times, and then I have a follow-up?

We're having a very good experience.

It's about, I guess, in the marketplace about four months so far.

We up-sell classified ads into marketplace, and we've been placing display ads as well.

The display ads are advertisers who run in the Times as well, and this is incremental advertising.

Are you seeing many advertisers out there only going to the marketplace, and not to the Times?

You're not cannibalizing the Times to any extent, are you?

No this is an add-on.

It's a low-cost add on that works well for us, and improves the response rate to the ads that are placed overall.

Okay.

And Janet, can you clarify your comments for October?

I think in the release you suggested that business accelerated somewhat in late September, but October looks like September.

I don't want to split hairs, but does that mean that you've seen somewhat of a slowdown here in October, or are you just trying to be conservative?

No, what we did see is a slower start in September with the late Labor Day, but the last two weeks in September accelerated very nicely.

We are continuing to see that nice acceleration in the first two weeks of October with some of the categories performing very nicely for us, John.

All right, thank you.

You're welcome.

We'll go next to Michael Kupinski at A.G. Edwards.

Fourth quarter, I was just wondering if you can talk about how retail is looking heading into the holidays?

Also, if you can talk a little bit more about the national advertising category.

You mentioned entertainment being a little stronger.

Was wondering if you have any other particular categories that you might shed some light on.

Then finally I was wondering, the television revenues, I know it's a small component of the overall company, but the television revenues were actually a little bit better than what we thought.

Was just wondering if you can give us any outlook, in terms of what you're seeing in terms of pacings on television, even though you face a little bit of a difficult comp there as well?

The pacings in October are in the high single digits, but the fourth quarter is down rather, and the fourth quarter is probably down in the mid-single digits right now.

They are performing better even though they are up against those tough comps of political and Olympics.

Very aggressive pursuit of automotive business in particular.

It's helping them do better than we expected as well.

and your question on the fourth quarter was to the Times?

Yes.

Retail is looking strong, as it has been throughout the year.

The luxury high end of the market is expected at this stage to perform well through the fourth quarter, helped by the continuing strong performance of the magazine Thursday style section, the Sunday style section, as well as other products.

If I can put your question about studios in some context, year-to-date our overall advertising base, which, as you know, is a portfolio of almost three dozen categories, 60% of that base is growing at approximately 5%.

There have been three or four categories that have offset that growth.

We've talked about it all year long.

Technology, telecom, travel, the [aggat] categories, studios have been flat to slightly down year-to-date.

Janet talked about the release lineup for the fourth quarter which so far seams to be performing very strong.

We've learned over the last two years, that studios are very much have become week-to-week decision makers on their advertising.

Based on what we know about the releases for the fourth quarter, and the way those decisions have been made so far into October, we're expecting studios to be in the mid single-digit growth rate for the fourth quarter.

So in terms of that overall performance, that 60%/40% split that I described, I would expect the studio performance to favorably impact the overall performance.

Telecom, we're going to start to cycle past the AT&T Wireless comps that have been so difficult for us all year.

That will happen in the mid to late part of November.

Technology will continue to be very uneven, we think, into the end of the year, for all the reasons it's been uneven so far this year.

Travel, we're seeing some positive signs.

Hotels, which were down very dramatically in the first three or four months of the year, started to show some signs of growth through the summer, are going to perform very well for us, we think through the fourth quarter.

And the transportation part of the Travel category, is starting to show some signs of ameliorating declines, if not even a little bit of growth.

So there are -- the categories that have been offsetting the overall fundamental growth in our base advertising I think are going to swing toward the positive side for us in the fourth quarter.

Can you tell me if you can remind me what the entertainment category might be, in terms of total revenues in the third quarter for the Times?

I think it was like 15%.

Roughly 15% of our revenue base.

And that was in the third quarter as well?

That's the annual.

It skews a little bit to the fourth quarter because of the holiday season.

Okay.

Thank you.

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

Yes, good morning.

Could you please go through the percent changes for your seven largest advertising categories at your flagship paper in the third quarter?

And then the Worcester paper up by Boston, I've noticed for awhile you've been charging for Internet access to that newspaper up there.

Are you using that as a test market to see how well does it for the charge model versus the free model?

If it does well I would think you might roll it out to some other markets?

I'll have Scott give you the rundown in regard to the categories, and the performances on the percentage basis.

Could you repeat the second question, Craig?

We couldn't hear you.

I was just asking to get by your Worcester paper in Boston, you've been charging for awhile there for access to your newspaper website.

I was just wondering if you're using that as a test market to see if it really shuts down the eyeballs too much and offsets the advertising, or it's actually a good model going forward, and you might roll it out to some other markets, charging for Internet access?

This is Martin.

The answer to the question about Worcester is, no, this was not viewed as a test market.

It was simply a decision that was made locally for the publisher to do.

I mean, it's a small market, and they decided that they wanted to pursue that as a model.

I think the model that we're pursuing, and that is proving out to be a better test market is The Times select model.

As Janet said, it's early days, but our initial view on this is very, very positive.

We're seeing incredible conversion rates off of our free trial, very high, 90 plus percent conversion rates.

And we're also seeing terrific cooperation from our columnists including a new entry, Maureen Dowd will be doing a special e-mail.

So this kind of highly differentiated specialized-tiering approach is, I think the approach not only we'll be taking over the next several months and years, but we think that the newspaper industry in general will, as they did in our registration scheme, follow us in this regard as well.

Because I think we've hit on a model that is well-balanced to provide advertising revenue increases in the ways that we've seen them over the past several years, against a new very robust and diversified revenue stream on the pay side.

And there's also been very positive comments in regards to the packaging.

Not only are they getting unique content from the columnists, the access to the archives is also a very substantial part of this package that is greatly appreciated, by not only the people who are paying for this service, but also by the subscribers who are receiving it free as part of their package.

It's interesting to note in the days of TimesSelect, that last Wednesday, Maureen Dowd's column was the most e-mailed column on TimesSelect, which we were very pleased to see.

Back to Worcester for a second please, how would you categorize how the new model is working for paying for access to the newspaper website?

It's my understanding just a few thousand people have signed up for paying access to that site.

No.

Are you talking about Worcester or TimesSelect, Craig?

I'm talking about Worcester.

Yes, we haven't obviously released any numbers, but I think would you expect to see in a small newspaper market that has a full gate over its website, several thousand people signing up to pay.

I don't think that we would view the Worcester model as anything indicative for NYtimes.com or Boston.com.

I just want to add a point to Janet's point about the archives which I think is very important.

The usage patterns on the archives are such that we don't believe there will be any significant overlap or competition in our business-to-business market, which is a very important market for our digital business as well.

We syndicate our content to Lexis-Nexis, Factiva, ProQuest, and there was some concern from the community that this would begin to overlap, but we're not seeing that at all.

That's very good news for us.

We're seeing a distinct consumer usage pattern emerge, as opposed to a B-to-B pattern.

This is Scott.

I'll give you the third quarter performance for the top five categories.

Entertainment, studio entertainment, I've already addressed.

Down to, slightly down.

Telecom, down in double digits.

Life is flat to slightly up.

Transportation, down in double digits.

Real estate is growing, both parts of it, display and aggat.

Overall composite, in high single digits.

Help wanted, is both combined display and aggat is growing slightly.

Thank you.

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

On the Boston Globe, when do you circle against your efforts to reduce the other paid circulation, and if you could maybe give us some color on what you're doing to improve circulation growth there?

Still on that topic, do you think your ability to raise ad rates at the same levels last year will be impacted by the circulation declines at that paper?

We really started the look at paid, at bulk circulation early this year.

Very late fourth quarter last year, very early this year.

So it will be probably at the turn of the year that we will be cycling up against that.

The efforts are very pronounced in regard to increasing the footprint of the Boston Globe outside of Boston proper.

And we're seeing some very strong results in southern New England and western New England, in regard to that kind of effort as well.

There also was a strong promotion campaign that's going on, in regard to the increase of readership, both single copy and home delivery.

With the introduction of Sidekick, which has been a very interesting quick read that has spurred on single copy, we've seen some very nice results in circulation growth there as well.

In terms of your ability raise ad rates the same rates as this year given the circ decline, do you think that's going to be impacted at all?

We are always very cognizant of evaluating our increases appropriately, Alexia, and we -- with the Boston Globe in particular, feather in the increases during the course of the year.

For example, retail increases are at a different time than classified and national.

But we are going to be careful in regard to what those increases are going to be, and we are also going to make our advertisers well aware of the readership numbers that are extremely important, in regard to how people are evaluating newspapers now.

As I think you well know there is a very strong industry effort in place in regard to something that was announced just a few weeks ago, called [NAD base], which is being given to media buyers.

It really does show total readership of all newspapers in the Top 100 markets.

Certainly the Boston Globe benefits from that, in regards to the increased readership on readers per copy, as does the Times and every other newspaper in that marketplace.

Given the weakness in the stock price, do you think you're going to allocate more of your cash flow to share bay backs in the fourth quarter?

Our cash position is used for pretty much what we said all along for investment purposes, dividends, and stock repurchase.

We are cognizant of the opportunity, but we're also cognizant of the balancing that goes on with how we use our cash.

So we have stepped up our purchases to the extent that our purchases are greater than the amount of options that had been issued, which was our plan all along, so that we're seen a net reduction in stock out there, so you'll probably see that kind of pattern continuing.

Thank you.

We'll go next to Frederick Searby at JP Morgan.

Yes, thanks.

Couple questions.

One is if you could give us an update on the impact you see from Federated/May and the retail category, what your thoughts are heading into the fourth quarter and 2006, and just to clarify, what your expectations and our expectations should be for the November ABC on the circ side?

Thank you.

The impact of the Federated/May merger for the New York Times is overall positive.

The question mark that we're waiting to get an answer on, is the future of is Lord & Taylor, which could significantly change that outcome, but overall we're seeing increased spending, and the national presence of the Macy's chain of stores works very well in the New York Times.

We understand that they're shifting dollars from local television into newspapers, and we expect that to benefit us as well.

What we are seeing in Boston, Fred, in regards to the Globe is that we are not seeing the significant cutbacks in the fall from Filene's.

They had not materialized as we had thought they may.

That said, we will see certain reductions next year in 2006.

One of the interesting things is the fact that the Filene's location will be sold to a retailer we believe, which could provide us with upside, in regard to new to retail money coming into the marketplace.

In addition, we have seen three stores really increase their store coverage in that market.

[Akier] in that market now with one store, Cohoes is in that market with three new stores, and Modell's is in that market with 12 new stores, so we are seeing on the plus side new retailers entering the market, even though we are predicting that we will experience decline certainly with Filene's leaving the market in the new year.

As far as the ABC period for the Globe, we are going to see continued declines we believe in the September, we know in the ABC statement for both daily and Sunday.

It should be about 35,000 on the daily and about 50,000 on Sunday, and at The Times we are seeing increases both on daily and Sunday, the exact numbers.

The numbers we've filed with ABC show growth, daily growth of about 5,000 and Sunday growth of a little over 2,000.

Thank you.

We'll take our next question from Lauren Fine at Merrill Lynch.

Thank you.

Couple quick questions.

One, I'm wondering if you could help us understand the, first of all, just on a way I might understand it, what was the increase in wages and benefits year-over-year excluding the unusual items?

Secondly, could you discuss why you're willing to incur the higher distribution and printing costs?

Are you getting a good return on that national edition expansion?

Then if you could discuss what you think your pension expense could go up materially, or much at all in 2006?

The last question really is dependent on what happens overall with interest rates, but we don't expect it to the go up materially.

It's been, as you know the way pension works it's amortized over a period of a couple of years, and we've been seeing pension expense increases the last couple of years, because of the way it's feathered in, but we don't expect big, big numbers in pension expense.

Sort of where we are in the current year.

We've got a $45 to 55 million contribution which has a positive impact on expenses.

With regard to your circulation national expansion circulation question, in almost all cases we justified expansion through print side expansion and market zip code distribution expansion on a circulation/profitability basis alone, without even factoring in the leverage it gives us in the advertising side of the business.

We continue to have unmet demand throughout the country at any given time.

We have 40,000 to 50,000 subscription orders that we can't fulfill for distribution reasons.

So it continues to be a positive opportunity for us financially, and from an overall copy and advertising perspective.

I would remind you, I guess of the high price of the circulation, which enables us to make this justification on the circulation economics alone.

The profitability of those copies, Lauren, is a very important point to remember.

That's one of the tenants of the national expansion in regard to the growth and profitability of national copies.

Lauren, I think you also asked a question about wage increase.s They're up on an apples-to-apples basis about 3%.

Great.

Thank you.

One last question.

On the equity line, it feels like if the momentum continues that you could beat your guidance.

Could you just give us sense of what's going on there, or if things are exceeding your expectations?

Sure.

Part of that is seasonal.

We're doing well with [Nissin], but there clearly is no baseball play in the fourth quarter, and Discovery came in better than expected.

We're likely to be at the high end of the range, and it's possible we could beat it a bit, so we're certainly at the high end of the range based on performance over the last couple of months.

Great.

Thanks.

Our next question comes from Douglas Arthur at Morgan Stanley.

Yes, Len, I know you haven't finished your budget for '06 yet, but there's a lot of moving parts on the newspaper costs, which if you take out all the noise in the third quarter we're still quite high.

With the staff reductions, your comments on newsprint, any ballpark sense for what, kind of the non-newsprint cost trends could be in '06 at this point?

It's way too early to comment on '06, but we clearly as I said in may opening remarks, it's our intention to grow revenues greater than expenses.

That's our goal in '06, so we'll be looking to drive expense growth down.

But at the same time, Doug, we are getting benefits from both the staff reductions and the productivity estimates, productivity initiatives, and we will use some of those expenses to drive investments in products elsewhere.

So it would be easy to drive costs down to a much lower limit, but we're also looking to drive revenue growth over the long term, so it's balancing act.

Well, what inning -- I know you've given your release schedule on these new print sites, but what inning in the ramp-up of expenses related to new print sites are you in at this point going through '06 and '07, and the spike in promotion expenses, is that something that's likely to continue in '06?

Toronto is coming on in November, Houston in January.

So there will be the full-year effect of incremental costs associated with that.

And the promotion distribution expenses will probably continue to grow at a similar rate next year, but to Len's point, we're managing our overall expense picture to achieve the result that he's described.

We're taking 700 folks out of our staffing, which will have a very positive benefit on our overall cost this year, Doug.

As Scott said earlier too, Doug, on a continuing basis we constantly evaluate before putting a site on, in regard to the return that we will be getting on that, as we said, Toronto and Houston will have a full effect next year, but we are evaluating what we will roll out in 2006, in regard to other sites that will be added making sure, of course that strong ROI is there.

Okay.

Thanks.

We'll take our next question from Christa Quarles at Thomas Weisel Partners.

Two questions about ad rates.

First, wondering if could you highlight what the overall ad rate realization was for the New York Times, and what you expect perhaps for 2006?

And then on an ad rate question as it relates to About.com, I know the revenue there is split between CPM and search-based, A, can you give us that breakdown, and B, is a lot of the increase due to more aggressive maybe CPM increases, now that you have your hands on it?

Let me start with the balance.

Okay.

Just so we all understand the terms of our business model, it's basically somewhat like the newspaper business.

It's rate times volume, and volume has to do with number of unique times the visits times the pages per visit.

Those numbers, the good news is that all of those numbers are up at About.

Page views are up 21% September '04 to '05, unique visitors are up 31%, from 19.5 million to 25.5 million.

So the volume numbers at About are driving the business results in large part.

In addition to that, we knew when we bought the company, that the company was underleveraged with respect to rates.

And so we have pushed very hard on the rate side.

Our rates are up September over September 81%.

So we have increased rates, but we think there's more to do.

We're not done yet optimizing our rate structure at About.com.

We had a lot of leverage in the system, and we're pushing that leverage now, in order to get these increases.

So we're pushing both sides of the business model, volume and rate, to get the kind of number that you saw us report for the quarter. 67%, which is well above anything you've probably seen elsewhere.

How does that breakdown between search and CPM?

Is it mostly -- ?

We haven't broken it down to date, but, you know, let's just say that the model is very even.

In other words, we have a display line that is roughly equal to the CPC, or cost-per-click line.

We have smaller revenue streams in E-commerce and in other revenue, but the two drivers, are display advertising and CPC, and both of them are growing at significant rates.

So we're much more diversified in direct response for CPC advertising, than most other content sites, because of our strength in search and our targetability.

In other words, the About.com model is highly verticalized, so when consumers come to a page, they're typically interested very much in the context on that page, and therefore our response driven back to the advertising.

So the model is very robust on the direct response side, which, of course, is a very fast growing part of the Internet advertising business.

Without getting into the specifics of rate yield, we are very fully realizing our rate increases across all major categories, retail, national, classified, especially on color, which helps us in overall achieve that yield.

That's expected to continue based on your outlook at this point?

Into '06, we would have every expectation to continue to manage our business in that way.

Perfect.

Thanks.

We'll go next to Steven Barlow at Prudential Equity Group.

Thank you.

Len, what are your bonus accruals year-to-date this year versus last?

And Janet, can you talk a little bit about the International Herald Tribune?

Thank you.

Steve we don't go down that level on bonus accruals.

It's not the kind of detail that we give out, and it's -- we've clearly underperformed our own expectations, so we'll have some benefit on expenses going forward, but that's not something we generally go public with.

We are seeing some very nice pickup in the International Herald Tribune's advertising.

In fact, in the third quarter they were up 30% in regard to their ad revenue number.

Because of the investments that we've made, the improvement in the product over the last two years, they are beginning to see the kind of advertiser response that we had had expected, when indeed you invest in a strong product.

They're also monitoring their circulation very, very carefully to make sure that they monetize their investments in promotion.

So I think we're seeing some nice movement in regard to what the IHT can really contribute to the organization.

One clarification, bonuses and other points of compensation, Steve, are included in our wage numbers, and so we're in roughly 3% increase for the year, so all of that is embedded in there.

Okay.

And can those new plants that you've put on in Toronto and Houston, can they go down to the 48-inch web width?

I don't know the answer to that question.

I believe it's yes, but we can look into that and get back to you.

Thanks.

We'll take our next question from William Bird at Citigroup.

I was wondering if the color capacity came on late in the quarter, and would you expect this to have more impact in Q4, and also on cost was just wondering if you see any additional material structural cost reduction opportunities?

Thanks.

I'll take the latter question.

The short answer is yes.

As you know we appointed our corporate controller to head up a company-wide effort on process mapping, and that really is accelerating and building steam.

We estimated roughly in the 20 to $25 million range in savings this year.

We see that growing next year.

And we continue to see that grow out into the future, because it's the kind of effort where you have to continually go back at it every few years, and recycle as business changes.

So we've built this into our own structure of how we manage the business.

So we expect to see continued benefits of this going forward.

The incremental color capacity that we've been installing was scheduled to come on line in the first week of November, but it's going to start early as of Sunday night, the Sunday night for Monday newspaper will have this extra color capacity, and we've already been in the marketplace selling it.

Thank you.

We'll take our next question from Peter Appert at Goldman Sachs.

Couple questions for Martin.

The incremental traffic you're seeing at About, Martin, do you attribute that to the combination with NYT Digital, is there some cross-marketing, cross-promotion that's driving that?

Number two, can you talk a little bit more about what you've done with Indeed?

Is that going to be a platform for growth for New York Times Digital over the next couple of years?

Has that become a national help wanted offering, that could conceivably compete with Career Builder?

Okay, let me take the About question first.

The increases in traffic at About are largely driven at this stage by our expertise and continuing leverage of search engine optimization techniques.

For example, these techniques, as they are applying to Yahoo!, are now driving an additional 200,000 users a day over the results of last year.

So we are becoming better and better at indexing our content and making it available to users, through what is the primary gateway to Internet content these days, which is search.

So this is a competency that we now have not only at About, but that we are now exporting to the Times on the web and Boston.com, as well as our other properties.

I might add that, you know, although About's results sort of shine on their own, The Times on the web has also increased its traffic dramatically, as Janet alluded to in her report, we had a record month over 21.5 million unique users around the world at The Times on the web, just for the month of September.

That's a very large number for a news website.

So one of the reasons for the About acquisition was to take this capability that these guys, in our view, are the best in the world at, and extend it across our digital network, so that all of the properties benefit from this.

So the principal driver at About is SCO at this stage, but we also continue to see more and more content created.

We're creating 3,000 original content pieces a week at About.

This goes into a database of over 1.1 million articles.

We have the largest content trove on the web right now.

As that content gets added, mostly evergreen content, as it gets added to the archives, it gets indexed, so you continue to see better and better answers off of search, and more and more volume to the website.

That's again the business model that we acquired there.

The second question, I'm sorry.

About Indeed, whether you envision that as a platform to compete with Career Builder?

Just so everyone is clear, Indeed is a meta search engine.

In other words, it spiders all of the job listings on the Internet, and it produces results regardless of whether it's from a job board or a company website, and it provides a comprehensive view of the job market.

If you go to About.com and you look at the jobs and career tab, you will see that Indeed is the job site for About.

So the strategic synergy between About and Indeed is already clear.

We invested -- we own 14% of this company, we invested in it, now we're helping it grow through this incredible engine that we have at About.

We don't know what's going to happen to this meta search model.

Part of the reason we acquired equity in the company, and now sit on the Board, is to be -- is to learn, and be a part of what we believe to be a very important trend, not only for jobs listings, but for other aggat or classified, or listings in general.

So this trend is taking place across Internet in jobs, in real estate, et cetera, and we are participating in it actively now, and driving traffic to this, and looking at additional opportunities in meta search as well.

So we think it's an exciting trend, and we think that it could be a game changing trend over time.

Do you have an option to take your ownership stake higher?

No, we don't have an option to take the ownership stake higher, but we have certain -- yes, we can take that off line.

We can -- we obviously have language in the agreement that would allow us to negotiate in a favorable way, if we were to want to pursue a greater --

The size of the investment isn't what's critical here.

It's is first mover entry into this market, and having the ability to integrate with what we're doing, and have a seat on the Board, so that we can help drive the direction they go in.

That's really what's critical.

It's the learning, Peter.

I understand.

Thank you.

We'll go next to Edward Atorino at Benchmark.

Probably a tough question to answer, but in looking at the buyout schedule, I presume it's not going to be one-third, one-third, one-third, would it be a little front loaded?

Back loaded?

Any help there?

Way too early.

We said in our announcement would take place over six to nine months.

It's too early to make that call, in terms of how many people are going to take it right away but certainly within six months we would expect it to be done.

Thanks much.

We'll go back to Paul Ginocchio at Deutsche Bank.

Thank you.

Just a couple questions about Boston.

First, do you think the Boston Herald with new investors will be a tougher competitor?

There was a nice article in the Globe this morning about that chance.

Second, Boston help wanted looks pretty weak.

Can you just talk about what's going on print versus on-line, and the relative sizes of your print revenue versus your on-line revenue and the relative growth rates?

Finally in TimesSelect, Martin I think you're quoted somewhere on-line you're looking for 1.5 to 2 million subscribers.

I know you've significantly increased your web ad impressions to get there.

Just wondering how that's going.

Is that what's also driving the cost of your promotion?

Thanks.

Not sure where the 1.5 to 2 million came from.

I've never suggested anything along those lines.

What I have said is that over the very long term we expect this to be, you know, a significant revenue driver for us.

Maybe somebody extrapolated that number from those statements, but we've not put a number out there deliberately because it's still early, and would we've suggest is that it's ahead of plan and going well.

But we certainly have never said anything in that range.

With respect to the Boston help wanted --

we've got in the third quarter print was down in the low -- in the high single digits, and on-line was up in the low teens.

For the third quarter.

It was a softer third quarter.

They're expecting the fourth quarter to be stronger.

They are still very pleased, though, with what they are seeing with Boston work.

In regard to the Herald, I think that we always feel it's important to have a strong competitor in the markets, and we certainly want the Herald to have more investment and certainly to be -- to continue to be a strong competitor.

I'm going to ask Jim to give you a little bit more color on that.

Yes, the way we are looking at it, we just see it as more or less a continuation of the consolidation that's going on in the Boston market, and we ourselves have been very active in terms of making investments in Boston, adding new products in Boston.

That's simply to make sure that we remain as competitive as we need to be, to face however many competitors we see in Boston, however strong they become.

Great.

Let's just follow up on the print versus on-line and help wanted.

What's the relative size of the two revenue buckets?

We're just taking a look right now, Paul.

Obviously the classifieds in the print is much, much larger.

It's probably about four times as large as the on-line, in terms of dollars.

Great.

And number of web and ad impressions on line I think in September was significantly ahead.

I think you're one of the biggest web advertisers, particularly regarding TimesSelect, and print circulation for the New York Times.

Is that something that will be maintained?

Is that what's driving your increased promotion costs?

Thanks.

No.

Yes, we did buy a significant amount of impressions on-line in order to launch the product, and we'll continue to support the product, but I don't think that you would call that expenditure significant, no.

A lot of our promotions for TimesSelect, in fact, was done in paper, Paul, and on-line in regard to NYtimes.com to increase the visibility of what we're offering with that.

It's also important to note in regard to the competitive situation in Boston, Boston not only has done a wonderful job of really doing a great deal of redesign, new product development, they also have developed kind of a one-stop shopping mechanism for advertisers in Boston.

Because of Globe specialty products, because of the regional sections, because of the magazine, because of their pre-print targeted zip coding down to the zip code, they now have become really one-stop shopping mecca for many of the advertisers in there.

Those capabilities increased, capabilities have really increased, I think, over the -- particularly the past year, that we think we'll be a good strong move in the competitive environment.

We'll take our next question from Jeff [Sweat] at UBS.

Two questions.

One is the financial status on new building.

Two, a follow-up on a previous question asked, and that is how much of a pension cost increase could be comfortably absorbed at this point considering the difficult environment?

I'll take the pension question first.

Our big increase in pensions really occurred between '03 and '04.

We don't expect to have a significant increase in pension.

It's going to be certainly in the area where we could comfortably absorb it.

So that's not a major issue for us.

That's why we are putting in the 45 to 55 million, in order to get a benefit on the expense side.

Again, we're doing that to both maintain our 90% funding ratio, in order to avoid any insurance premiums, as well as take advantage of the expense benefit we get for doing that.

So pension, while cost increases are always something to be concerned about, pension expense is well within the realm of what we can do.

On the building, your question, what specifically are you looking for?

Just the status.

We are up on building.

We have steel going up, nothing is really changed in terms of our forecast with regard to building expense.

Occasionally, there might be some slippage into '06 from '05, just simply because of timing, but we still plan to be in the building in '07, and the bulk of our capital will be in '06 and early '07.

Great.

Thank you.

And for our next question we'll go back to John Janedis at Banc of America Securities.

Just a quick one.

Understanding that quality is an issue on the movie front, how much does the average wide-release movie spend at the Times verse a year or two ago?

We don't talk at that level of detail about the performance.

I was just reiterate what I said before, that in the last couple of years we've seen the studios manage their advertising more on a week-to-week basis, than we had previously seen, based on how the product performs in the marketplace.

And we try to develop -- we work very closely with them.

We have very good working relations with them, and we try to help them develop advertising approaches that best position their product in the marketplace.

For example, we are doing a lot of sneak preview placements with them, as well as out of environment placement of ads.

Those types of things I'm assuming they're at the standard type of rate card numbers?

They're not at a discount?

Not at a discount, correct.

Jennifer, are there any more questions?

It appears there are no further questions at this time.

So, Ms. Mathis, I'll turn conference back to you for any additional or closing remarks.

Thank you, everyone, for joining us today.

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

Bye now.

This does conclude today's conference.

We thank you for your participation.

You may disconnect at this time.