New York Times Co (NYT) 2006 Q4 法說會逐字稿

Good day and welcome to the New York Times Company fourth quarter 2006 earnings conference call.

Today's call is being recorded. [OPERATOR INSTRUCTIONS]

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

Please go ahead, ma'am.

Thank you.

And good morning, everyone.

Welcome to our earnings conference call.

We have members from our senior management team here to discuss our results with you.

And they include Janet Robinson, our President and CEO;

Jim Follo, our Senior Vice President and Chief Financial Officer;

Scott Heekin-Canedy, President and General Manager of the New York Times;

Martin Nisenholtz, Senior Vice President of Digital Operations;

Jim Lessersohn, Senior Vice President Corporate Development;

Stu Stoller, our Senior Vice President of Process Engineering;

George Barrios, Vice President and Treasurer; and Tony Benton, our Vice President, Corporate Controller.

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

Some of the factors that may cause them to differ are included in our 2005 10-K.

Our presentation today will include non-GAAP financial measures and we have provided reconciliations to the most comparable GAAP measures in our earnings and revenue press releases, which are available on our website, NYTCO.com.

This conference call is being webcast and an archive will also be available on our website, as will a transcript and a version that is downloadable to an MP3 player.

An audio replay will also be available and the directions for it are in our earnings press release.

With that, I am going to turn the call over to Janet Robinson.

Thank you, Catherine.

And good morning, everyone.

Before Jim and I delve into the details of the quarter, I first want to address the noncash charge included in our fourth quarter results.

It is related to the write-down of intangible assets at the New England Media Group which includes the Boston Globe, the Worcester Telegram and Gazette and their related properties.

As you may recall in our third quarter 10-Q filing, we said that we would be performing our annual impairment test on all of our intangible assets and a charge might be required.

We recently completed our testing which did result in a charge of 814 million, or approximately $5 per share after tax.

The charge was mainly the result of the recent operating performance of these assets, and current trends in the business.

Despite this charge, we continue to view these properties as important assets of our company and we remain acutely focused on improving their performance and value.

With this charge, we reported a net loss of $4.50 per share, compared with earnings per share of $0.43 in the fourth quarter of 2005.

Excluding this charge, our fourth quarter earnings would have been $0.61 per share, which was significantly above the consensus estimates provided by the Street, and 42% above the same quarter in 2005.

In the 14 years since 1993 when the Times Company acquired the Boston Globe, and the 7 years since 2000, when we purchased the Worcester Telegram and Gazette, we've seen ups and downs.

That regional economy has been especially hard hit over the last several years, exacerbating some of the challenging trends that have affected our entire industry.

Retail consolidation in the Boston area, specifically the loss of Filene's, the Globe's largest advertiser, as well as the telecommunications consolidation has had a particularly pronounced effect.

This year, there are new retail stores coming into the marketplace, which we believe will benefit the Globe's retail advertising.

We view our New England assets as important ones, and are committed to building on and extending their storied legacies, and to improving their financial performance.

While the charge was a necessary step, we believe that the talented employees and the initiatives we have put in place will result in better performance over time.

When we presented at the December media conferences, we said that in the fourth quarter, we continued to see slower ad revenue growth than we saw in the third.

In fact, the fourth quarter turned out better than we expected, because of higher-than-expected anticipated advertising revenues.

That said, the pressure is certainly not off.

Print advertising across the industry remains under pressure, as advertisers in important categories experience business difficulties of their own.

And as I noted, consolidations continue to affect us.

Increasingly, ad dollars are being allocated to the web and while we are capturing a sizable share of those dollars, the differential between print and online ad rates remains significant.

Over time, we are confident that this will change.

At this point, however, we are managing the transition, to an increasingly digital world, balancing product development, in both print and online, while maintaining stringent cost control.

It is challenging and there are no -- certainly no magic bullets as is evidenced when you look around our industry, but we have some notable successes through the year that I believe are worth recapping, as they are indicative of where we are headed and our commitment to move with urgency to improve our performance.

In 2006, as many of you have heard me say, we continue to develop new products online and in print, to build out key content areas.

We introduced exciting new magazines including play, key, and design New England.

We relaunched NYtimes.com with a host of new features and enhanced our digital offerings across the Company.

In all, new products and services generated substantial revenues, approximately 30 million, as well as additional earnings in 2006.

Our research and development group, in its first full year of operation, worked closely with our business group, to build revenues through new mobile products, at the Times, the Globe, and Gainesville, and a local search product at Boston.com, which is capturing fast-growing local online advertising.

This group has also been instrumental in the launch of the Times Reader, a new way to read the Times which takes advantage of Microsoft's new Vista operating system, to provide the look and feel of a newspaper with the functionality of the web.

We began rebalancing our portfolio of businesses with the sale of our interest in the Discovery Times Channel, and the pending sales of our Broadcast Media Group and our radio station, WQEW, for a total in excess of 700 million.

We've made several small acquisitions and investments in the digital space, including the purchase for 35 million of Baseline StudioSystems, the primary business to business supplier, a proprietary entertainment information to the film and television industries.

Cost control remained a priority.

Over the past two years, we have reduced costs and realized productivity gains of 120 million.

Last year, we announced the consolidation of our New York area printing facilities, and a web width reduction at the New York Times.

Across the Company, there continues to be a multitude of initiatives to reduce our cost structure, streamline our organization, and strengthen the effectiveness of our enterprise.

At the same time, we accomplished a great deal on the business side.

Our journalistic colleagues continue to demonstrate their unwaivering commitment to news coverage of the highest quality.

Their efforts were recognized with numerous awards, including three Pulitzer prizes.

Great journalism is at our core.

And always will be.

Before discussing our quarterly results, let me also address another matter included in our press release.

This morning, we announced a restatement of previously issued financial statements, primarily to reflect a change in accounting.

So two jointly trusteed plans, a pension plan, and a benefit plan, established under collective bargaining agreements between the Company and our guild at the Times.

While the restatement will not have a material effect on our previously reported operating results it will increase assets by approximately 30 million.

Liabilities by 100 million.

Net of deferred taxes.

And it will reduce stockholder's equity by approximately 70 million, as of December 25, 2005.

The issues that resulted in this restatement do not affect our funding obligations.

Turning to the fourth quarter, as you know, because of our fiscal calendar, both the fourth quarter and the year had an additional week.

Excluding the additional week, our print advertising revenues declined 7%, while our online revenues climbed 30%.

So that overall ad revenues for our news media group decreased 4.8% in the quarter.

The trend in the quarter was that October ad revenues at the news media group decreased 5.7%, November declined 5%, and December, excluding the additional week, was down 3.7%.

At the Times Media Group, ad revenues decreased 3.5% in the quarter, excluding the additional week, categories that performed well in the quarter included Advocacy, where campaigns from energy and oil companies, and philanthropic organizations caused advertising revenues to grow.

Pharmaceuticals where increased advertising for Advare, Nexium, and other drugs boosted revenues, and books which benefited from campaigns for popular new novels in the Daily Paper.

Entertainment advertising which trended down throughout the year decreased in the quarter but rose slightly in December.

Excluding the additional week.

Mainly because of increased spending from Warner Brothers and Paramount Pictures.

Three categories where we saw significant declines were automotive, mainly due to decreased advertising from domestic automakers, financial services, which had several credit card campaigns that were not repeated in 2006, and telecommunications, where last year's merger of AT&T and SBC increased advertising.

New products introduced at the Times helped improve the revenue picture.

This year, more are planned.

Including additional issues of Key and T-Beauty as well as special same issues and sections.

The New England Media Group had a difficult quarter as it continues to grapple with the soft economic climate and consolidation among major advertisers.

Fourth quarter advertising revenues, excluding the additional week, decreased 11.5%.

Filene's last advertised in March of 2006.

So we will continue to cycle those comparisons through this quarter.

After that point, the comparisons ease considerably.

In the national category, banking and finance, telecommunications, national automotive, and travel, remain soft.

As I said, several significant retailers have announced plans to enter or expand in the Boston market, which we believe will improve the Globe's advertising revenues.

New products benefited the Globe in the fourth quarter, and are expected to next year as well.

Design New England, a glossy oversized magazine focused on home and garden, launched in October, and will be published six times annually.

This year, the Globe plans to introduce other niche publications, and to significantly expand the number of special sections that appear in Boston Globe magazine, and in the newspaper.

At our Regional Media Group, fourth quarter advertising revenues excluding the extra week, decreased 1.4%, mainly due to softness in classified advertising.

Recruitment and automotive advertising were down significantly in the quarter.

Circulation revenues rose slightly in the quarter, excluding the extra week.

Mainly because of the home delivery and newsstand price increases we announced last fall for the New York Times.

Circulation revenues again excluding the additional week, declined at our New England and Regional Media Groups as a result of lower volumes.

Other revenues at the News Media Group showed strong growth in the quarter, driven by our focus on better utilizing our assets, and creating new products and revenue streams.

Excluding the additional week, they rose 10% at the Times Media Group, where the acquisition of Baseline StudioSystems contributed most of the growth, and 42% at the New England Media Group, and 10% at the regional media group, mainly due to increased commercial printing.

In its first full year as part of our company, About.com turned in an outstanding performance.

Total revenues grew 36% in the fourth quarter and an estimated 50% for the year.

Excluding the extra week.

For the year, its operating margin expanded to 38%, up from 27%, for the period in 2005, in which we owned it.

About.com's growth in both the quarter and the year is attributable to higher advertising rates as well as increased volume due in part to a greater number of sites under its umbrella.

Last year, we added 88 new guides.

Our total at year end was 587.

This year, we expect that number to increase to nearly 700.

In total, our digital businesses generated about 85 million, or 9% of the Company's revenues, in the fourth quarter and about 274 million, or 8% of the Company's revenues, in 2006.

This is up from 4% of the Company's revenues, in 2004, and 6% in 2005.

As of December, 2006, the Times Company was the ninth most visited parent company on the web in the United States.

With 44.2 million unique visitors according to Nielsen net ratings.

This year, we believe our revenues from Internet-related businesses will grow approximately 30% to more than 350 million, mainly from organic growth.

To date, in January, our fiscal month ends this coming Sunday.

Print advertising remains challenging, especially for classified advertising, and in categories such as telecommunications, and national automotive, where we are experiencing declines.

At our digital properties, we are experiencing healthy gains.

We are continuing to execute on our strategy of enhancing our properties with news products and services, developing key content verticals, both in print, and online, expanding our research and development capabilities, rebalancing our portfolio, and maintaining stringent cost controls.

Our goal is to grow our earnings and in turn our share price.

Before I turn the call over to Jim, I would like to say how pleased we are that he has joined the Times Company.

Some of you know him from his days at Martha Stewart Living Omnimedia.

Jim brings an abundance of skills and experience that are very valuable to us.

A strategic understanding of the issues we in the media business face, a strong focus on optimizing capital allocation, a very disciplined approach to cost management, and an overriding desire to enhance the value of our company to the benefit of all of our shareholders.

Jim?

Thanks, Janet.

I'm very happy to be here and look forward to meeting all of you over the course of the weeks and months.

During the fourth quarter, we continued to tightly manage expenses.

Total expense -- total costs rose 2.5%, excluding the extra week, total costs decreased 2.2% in the quarter.

There were several things that contributed to this, including lower staff reduction costs, and lower newsprint expense.

These were offset only partially by higher depreciation, through the accelerated depreciation of assets at Edison, New Jersey printing plant which I will discuss in a moment.

Buy ad expenses declined 76% in the quarter to 8.5 million from 35.4 million in the same period in 2005.

Newsprint expense decreased 1.6% in the fourth quarter, excluding the additional week, newsprint expense decreased 7.5% in the fourth quarter, with 13.1% of the decrease resulting from lower consumption, partially offset by 5.6% increase in higher prices.

Newsprint transaction prices are trending down, as is U.S. newsprint consumption.

Making it increasingly difficult for suppliers to maintain the supply/demand balance.

We expect newsprint prices will decline further in early 2007, as suppliers will not be able to take down -- take additional downtime quickly enough to bring the market into balance.

Over the past several years, we have taken a number of steps to decrease newsprint consumption, including shifting to lighter basis weight, eliminating the World Business section and the TV Book at the Times, and stock tables at both the times and the Globe.

In August, we plan to decrease the page size of the Times to the evolving industry standard, which will further reduce newsprint consumption and provide us with savings.

Depreciation and amortization in the quarter totaled 54.6 million, versus 35.4 million in the same period last year.

The reason for the significant increase was the 20.8 million in accelerated depreciation incurred as a result of our plan to consolidate our New York Metro area printing into our newest facility in College Point, Queens, and to close our older Edison, New Jersey facility.

This plant consolidation has significant savings associated with it.

Approximately 30 million per year, and lower expenses.

In addition, we expect to avoid the need for capital expenditures at the Edison plant of approximately $50 million over the next 10 years.

We project a very strong return in this project, which is expected to be completed by the end of the first quarter of 2008.

As a result of steps we have taken over the past two years, we have reduced costs and realized productivity savings.

This work continues.

Earlier this month, we announced that we plan to reduce the staff at the New England Media Group by approximately 125 positions, mostly through voluntary buyouts.

These buyouts are expected to be completed by the end of the first quarter.

Our Regional Media Group announced several cost reduction measures for 2007.

By the end of the year, all cash to order activities for the group including billing, credit collections, and other processes, will be merged into one central operation at Lakeland, Florida.

We are also planning to consolidate our printing plants in Hendersonville, and Spartanburg, by April 1.

Circulation administrative functions for the group will be consolidated and reengineered.

We anticipate that these initiatives will significantly increase efficiencies, improve customer service, and help us standardize common business processes across the regional media group.

Another initiative we have under way is outsourcing some functions mainly in the systems and financial areas.

Like many companies across the country, we plan to outsource several important functions to outside organizations, whose technological scale and extensive resources allow them to perform such tasks more efficiently.

We are looking at opportunities across the Company.

Capital spending in the fourth quarter totaled 119 million, including 69 million for our new headquarters.

For the year, capital expenditures that appear on our financial statements, were 358 million, including 192 million for our portion of the new building.

Our development partners portion of the capital expenditures was 55 million.

We expect to begin occupying our new headquarters in April, and to complete the move by July.

Both depreciation and amortization and interest expense will increase in the second half of the year, as a result of our new headquarters, as we indicated in our press release.

The completion of our new building, along with the planned sale of Broadcast Media Group, and the anticipated sale of WQEW, raises the question of what we will do with the proceeds.

Our current plan with respect to net proceeds from the sale of Broadcast Media Group is to repay debt.

Beyond that, we will remain very disciplined in our use of cash.

Our priorities continue to be to invest in high growth capital projects that will improve operations, increase revenues, and reduce costs such as our plant consolidation and web width reduction at the Times.

We also plan to continue to evaluate acquisitions and investments that are both financially and strategically attractive, as demonstrated by our acquisitions of About.com and Baseline.

We will consider debt reduction to allow for financing flexibility in the future, we will continue to provide our shareholders with a competitive dividend, and we will regularly evaluate repurchasing our stock.

And now we'd be happy to answer any questions you may have.

[OPERATOR INSTRUCTIONS] We will have our first question from John Janedis, Wachovia.

Good morning.

Janet, looking back to last year, you saw some pretty strong growth from the real estate category, and you're able to post positive growth at the Times, and as you think about this year, your comments about January, which sounds like it is not trending too well, are there any categories that you're feeling better about as you start the year?

I will have Scott give you an overview in regards to the Times.

And then I will jump in in regard to the New England Group, and the regionals as well.

John, let me address the real estate question first.

Real estate display is continuing to grow, and we expect to do so over the course of the year.

The [AGET] part of real estate is up against very significant comps and we are seeing declines in the AGET side of that category.

But we're seeing growth, some strength in January from live entertainment, Advocacy, American and international fashion, cosmetics, books, financial services, we're seeing significant challenges, as Janet has already indicated, in automotive, telecom, and the AGET categories, and we expect to see challenges in those categories over the course of the year.

But as we look out across the year, all of the things we've said in the past couple of years about limited visibility and significant volatility, we expect to continue to define the dynamics of this marketplace, but there are a broad array of categories where we expect to see positive trends, and again, the biggest challenge is coming in automotive, telecom, and AGET.

Studios, which was a very significant challenge for us last year, will -- we expect to see moderating -- moderation of that trend in 2007 and we're already seeing that in January.

We saw it in December of last year.

In regard to New England, in January, we're seeing some strong pharmaceutical activity, packaged goods, and in the media side of things, department stores, continue to remain a bit challenged, again as I noted, we are cycling still up against the Filene's business that ran in January last year, and real estate is soft, as is help wanted.

But there are some interesting conditions that seem to be noticeable in Boston that I think is important for us to share with you.

I noted that indeed a lot of new retailers are coming into the Boston Market, either people who have been there before, who are expanding their stores, or new entries, for example, there are two new lifestyle malls that have -- that one has opened already in Burlington in the fourth quarter of last year, and there was a new one opening in Dedham in fact in the second quarter of this year.

Nordstroms and Neiman Marcus are opening as well.

Neiman Marcus is opening in the second quarter, Nordstrom is opening in the fourth quarter.

L.L.

Bean is opening there as well.

So there are a number of new entries.

But in addition there is another opportunity for us to gain more revenue from the Barney's, the Akia's, and the Cohos who entered the market within the last year as well.

In addition we are starting to see banking competition heat up quite a bit in Boston.

The mid to small-sized banks are competing with the larger banks, and Citibank plans to open 30 new locations inside Massachusetts.

And they also have renamed the Wang Theater in Boston, which we think will also translate into revenues.

We are seeing also a lot of activity in the hotel category.

There seems to be competition heating up there in regards to Western Intercontinental, two new hotels, a renaming of the old Ritz in Boston to the Taj and the new Ritz is beginning to advertise more.

And we're also seeing increased activity in regard to airlines as well.

So there are conditions that seem to be trending in Boston that could be positive for us going forward.

In regard to -- and also in regard to online, there is strong activity in regard to real estate, as we translate much of the real estate business from print to online.

And as far as the regionals are concerned, in January, we're seeing some strong activity in regard to online and regard to retail ROP, and in regard to our community weekly newspapers.

Okay.

Great.

Thanks.

And just one quickie on the -- you talked about, Janet, the relative value of the unique user but as you look at it versus a print subscriber, how much has that changed over the past two or three years and maybe what round do you forecast a couple years out?

I think the Times and the Globe for that matter are fortunate to be able to be on the higher end of the digital rate structure.

But as you well know, there is a marked difference between a print subscriber or a print advertising rate and an online advertising rate.

But as we grow volume, on the digital side, we are continuing to see the opportunity, not only to gain in revenue, but also to see some very strong opportunities in regard to increasing the rate structure.

Martin, did you want to add anything?

No, I think that says it.

Maybe just, if you can get slightly more specific, if you think about it, maybe more broadly, Martin, even, and I'm making this up clearly, but if a unique was worth 1/15 of a print subscriber in '04 and is it worth 1/8, now going to 1/5 in '09 sort of thing.

Do you think about it that way?

I don't think we can suggest that.

I think what we've seen to your earlier point is increasing rates online, so to Janet's earlier point, we are seeing -- we expect to see over time the gap close.

But I don't think it has been possible to quantify it to that kind of detail yet.

The fact is, it has been trending up.

Rates have been up double digits for the last several years.

We expect them to be up again this year, at all of the properties.

So as that dynamic continue in the marketplace, as that rate trend continues, we expect the gap to close.

Okay.

Thank you very much.

We will have our next question from Steven Barlow, Prudential.

Thank you.

Could you talk about any discussions you've had internally with the various Yahoo! and Google deals that have been out there in terms of certainly help wanted, et cetera on the Yahoo! side and any remnant things with Google?

Let me -- it's Martin, let me start by saying that we have a very significant agreement with Google in place already.

We are one of their largest partners, and that agreement is expiring in the fall.

At the end of October.

So we are in negotiations now with a number of parties.

I wouldn't want to be specific as to exactly who, but I think you can probably imagine who that might be, to renegotiate that contract.

So we already have a very large relationship.

In addition, we, as you may know, are a participant in the Google print experiment, which uses remnant print inventory in their auction-based pricing mechanisms.

So we're also a partner with them there.

With respect to the Yahoo! agreement, with the seven smaller newspaper companies, we have had discussions with Yahoo!, as well as with others, and we're continuing to have those discussions both in relation to help wanted, and in relation to other potential partnerships.

It is also important to note, Steve, in regard to the Google print contract, that the New York Times is the only national newspaper in that beta test.

The Boston Globe is also part of that test as well.

Then Martin, on a follow-up side on the Yahoo! side, obviously you were probably approached at this point you basically have taken a pass?

No, we have -- at this point, we have not taken a pass.

We are still evaluating the various options on the table.

But what I'm trying to say to you is that with -- as the ninth largest property on the the Internet, we have a very different posture online than many of our peers, and therefore, the negotiation that might take place with these companies is much more substantive.

That's fair.

Switching to circulation for Scott, it is my understanding that on the credit card side of your monthly payers in the Times, that you've now gone to a pay in advance model versus a pay in arrears model.

I guess one, is that correct?

And two, how much of your monthly subscribers do use credit cards at this point in time?

And then maybe with Jim, what is sort of the financial effect versus just moving 13 months worth of revenue into 12 months of time period in '07?

We've not made any change in our credit card policy.

And most of the payments are made on a monthly basis.

There isn't an option to pay on some other term, three months or a year, and those are payments in advance.

The one thing, Steve, that you might want to be aware of is that right now at the Times, about 73% of the subscribers pay via credit card at the Times, and at the Globe, it is around 49%.

Thanks very much.

We will go next to Lisa Monaco, Morgan Stanley.

Hi, yes, Janet, if you could just provide us with a little bit more specifics in terms of the Times, the improvement in December, what specific category showed improvement?

And then more specifically in January in your comments there, are we to assume that trends are not as favorable at the flagship paper in January as they were in December?

And I just wanted to confirm that that is the case, and if so, if it is classified?

And then on New England, you cited several categories which are showing positive trends.

The fact is that the ad revenue is still down double digits, and realizing we will cycle through the Filene's in March, what -- how are you thinking about trends for the balance of the year, on the top line there, post the cycling through Filene's?

Thanks.

Let me take the Globe question first and then I will turn the Times question over to Scott for further amplification in regard to the January categories.

I didn't say that indeed the Globe advertising was moving in a positive trend.

I said conditions were such that we were expecting that indeed advertising has the opportunity to increase.

What I did say was that with all of the new retailers coming into the market, competition is heating up, they are entering into the market after the Filene's exit, that should give us a broader advertising base going forward.

The same holds true in regard to the banking industry.

When you did see the consolidation between Fleet and Bank of Boston into B of A, many of the smaller banks and the mid-sized banks retreated quite a bit.

Now, what you see is a stronger competitive opportunity that we think could bode well for us going forward.

In addition, we are seeing increased competition in regard to the hotel industry there, primarily because of two new hotels that have entered into the market, Western Waterfront and the Intercontinental, but also the Taj with the rename of the old Ritz, really providing full-page advertisements, for example, even with their renaming.

And as I noted, there is improvement in regard to the airline industry that is -- that has the ability to translate into better performance.

So I think what I'm saying, Lisa, is that there are elements that we're seeing in Boston that point to increased competition that could be beneficial in regard to the increase of the advertiser base.

That said, it is very clear that the pressure is still on in regard to advertising in the -- in New England, and that we still will see challenges in regard to the advertising climate there, but that we are going to do all we can with new product development, and with a very strong drive on revenue to improve our performance there.

In December, we saw some strength coming from the luxury goods categories, as we saw all year long.

Pharmaceuticals, which was a strong category for us last year finished very, very strong.

Advocacy, alcoholic beverages, books were all strong, transportation, which has been on a volatile track for the last couple of years, came in on the positive side.

The pressure on our results came from the categories that were challenging and troublesome for us all year.

With a couple of exceptions.

But the pressure came from automotive, technology, the AGET categories, telecom.

The exceptions were recruitment where we saw moderation of the trends that we have been seeing for the prior several months, and then studios was significantly moderated from the downward trend we had seen throughout the year.

Excluding the 53rd week, we are about even with the prior year, and then obviously adding in the 53rd week, which was the holiday week, added quite significantly to the overall results.

And we're seeing that kind of balance carrying over into January, strength coming from essentially the same categories that I cited, and the challenges from the ones I've already cited as challenging for us.

And can we assume that January, on an overall basis at the Times is similar to December?

Or slightly weaker?

Well, we're -- I should point out that we're up against quite different comps.

The fourth quarter of '05 saw some quite robust growth for the Times.

That was true in December as well as the entire quarter of '05.

So that comparison is quite different than our January comparison.

So January, all in, we would probably end up slightly down year-over-year.

Okay.

Thank you.

We will go next to William Bird, Citigroup.

Janet, I was just wondering if you could talk about how important acquisitions are as you look to repositioning the business, and what are your future goals for digital as a percent of revenues?

Thank you.

I have noted that indeed there has been a strong push in -- particularly in the last year, Bill, in regard to rebalancing the portfolio.

Our move on Discovery Times, our very attractive sale price of the Broadcast Group, and the pending sale, also of WQEW, provides us with about -- in excess of about 700 million.

With that money, we have outlined before that indeed we have five things that we're going to be looking at in disciplining ourselves, in regard to the use of that cash.

We are very focused on only high return capital projects.

We're making sure that that is an important part of our future.

Acquisitions and investments are important to us.

Certainly with the discipline and the success that we've had with the recent acquisitions, small and large, About certainly being a strong example, we feel that there are strategic acquisitions that we can make that will enhance our growth, particularly in the digital arena.

And we are proactive in looking at those.

We have an opportunity to reduce our debt.

We have an opportunity to provide shareholders with a competitive dividend.

And we have an opportunity to repurchase our stock.

The acquisition discipline that you have seen on this exhibit with About, not only in the way in which we have integrated it very successfully into our operations, but also how that acquisition has benefited our other digital site, is the kind of acquisitions we're going to be continuing to look at.

Making one plus one equal three.

Not only benefiting the site and being well run on its own, as About is, but also benefiting what we already own.

I also think from a standpoint of making sure that we pay attention to all other -- all of the other notations that I've mentioned, we're going to continue to make sure that we are evaluating those very carefully.

So with regard to your question on what percentage of our revenues we would expect to come from the digital area, as you know, we haven't given a forecast for 2007 for our total company revenues.

But what we have said is that we do expect our revenues from Internet-related businesses to grow approximately 30%, to about $350 million this year.

And as you know, in the fourth quarter, our digital revenues accounted for a little over 9% of our total company revenues.

So certainly, we would expect that we would do well in the digital area.

The fact, also, Bill, that we are the ninth largest parent now on the Internet is a very important factor in regard to the decided growth that you have seen us experience in our digital operations.

It is a very strong showing that we have 274 million in revenue this year, climbing again next year, to approximately 350, I think it shows that our company is making this transition very quickly, with certainly more growth to come going forward.

And just a follow-on, are there any new avenues for cost reengineering being evaluated?

Absolutely.

Hold on.

This is Jim.

I mean this is -- it is certainly an area of focus.

I think we have dedicated both internal and external resources.

While this has been ongoing, and I think the Company has done a good job, we are confident that there is more to be done.

It is a focus of both mine and the management team and we're confident we can make some progress there.

One of the things that we did, as you know, Bill, last year, was with Jim's joining -- Jim's entry into our company, we restructured our financial department and many of our folks here have new positions.

And in light of that, our control -- he was our Controller, Stu Stoller, has taken on a new new position that is specifically focused on process reengineering.

Not only have we been able to secure about 120 million in the last two years in savings, we feel as though going forward, there will be an estimated 65 to 75 million more just in 2007, and we have every intention of hopefully building on that.

There is a decided effort internally across all of our units with Stu leading the charge to investigate even more activity in regard to comfort reduction, which certainly will include not only productivity and efficiency moves but also looking at outsourcing and offshoring.

Great.

Thank you.

You're welcome.

We will go next to Lauren Fine, Merrill Lynch.

Thank you.

Just a few quick ones.

I'm wondering on the news media segment, if you could tell us in the fourth quarter what the cost performance was excluding the extra week and the staff reduction charges?

Secondly, I'm wondering if you could give us an indication of what kind of a tax rate you expect for 2007.

And then I have a couple of quick follow-ups.

The tax rate is going to be a little hard to predict.

As you know, there are new accounting rules that are going to impact that.

We think the rate will likely go a little bit higher.

We haven't finished our analysis.

FIN 48 is somewhat complicated.

And I will be working through that over the next several months.

And then the cost performance for news media?

Cost performance for news media, let me pull that out and I will get right back to you.

What we can tell you, Lauren, is that excluding the extra week in '04, the total cost and expenses were down 2.2%, and we can get the news media for you, but as you know, that makes up most of the -- there was actually 2.3%, I'm sorry, excluding the reductions in staff, and the extra week, for the news media group.

But that's total company, correct?

Excluding the extra week, it was down 2.3%, due to the lower staff reduction, for the news media group.

Okay.

And then I'm wondering, could you tell of your online revenues, what percent is classified and what the other major categories are at this point?

Yes, I can do that for you.

In 2006, we had a very diverse set of revenues, Lauren, about 45% of our revenues were from display, about 15% were CPC, about 24% were classified, 5% were from paid products including time select, a sliver, about a percent was from e-commerce, mostly at About.

We had about 8% coming from syndication, which is our business to business line.

And then for the period of the time we owned the business, about 1% from Baseline, and 1% from all others.

So the big base is still display at the Times Company.

With a relatively lower dependency on total -- on classified.

And that's as I'm sure you know in contrast to most of the other newspaper companies.

Great.

Thank you very much.

We will go next to Frederick Searby, JP Morgan.

Hi, thank you.

One question, I just, with real estate classifieds weakening, it is understandable given the tough comps around the country and you in the past have talked about the Goldilocks scenario and looking at all the inventory and the fact that New York has kind of held steady I'm just wondering why specifically X'ing out the New England properties and why New York would be weakening right now, thank you, and what the outlook is.

New York is not weakening as a marketplace.

The AGET portion of the business is up against those difficult comps.

We are continuing to see growth online, and as I said, earlier on, the display part of this business is expected to continue to grow at a nice pace.

And that's reflective of the continuing strength in the New York marketplace.

Their inventory is at an all-time high.

There is more inventory that is expected to come online.

Which all is supportive of the display outlook.

Okay.

Thank you.

We will go next to Craig Huber, Lehman Brothers.

Yes, good morning.

Thank you.

What was the percent change in your full-time equivalent employees adjusting for acquisitions and divestitures for 2006?

And what might that percent change be for 2007 that you're budgeting?

A follow-up as well.

Hold on one minute, Craig.

We will get that number for you.

Craig, we don't have that readily available, but what I can do is get back to you after the conference call.

I think at the end -- in our discussions at CF and UBS conferences, we expected that year-end would be down over 2004, around 6%.

That's from 2004, you said?

Yes.

From two years ago?

Yes.

And what is your plan for 2007, the FTEs?

We don't have an estimate at this point.

Okay.

And then also, you have roughly 45% of your circulation for your regionals in the Florida market.

Would you say your real estate pressure there is very similar to what Scripts was describing yesterday that's added significant pressure to that whole group on the ad revenue fund?

There is -- there certainly is real estate pressure in regard to our Florida properties, particularly Sarasota, but they are doing a lot of good work in regard to their weekly newspapers, and new product development, that we think can offset some of the losses that we may be seeing, or some of the declines that we may be seeing in the real estate market.

It is predominantly Sarasota that is feeling that weakness, rather than the other Florida properties.

If I could ask, how would you describe the other advertising categories for your Florida papers?

Well, retail, as I noted earlier, is showing signs of stronger ROP, I should say, classified is challenged, certainly AGET in regard to automotive, help wanted, and real estate.

They are seeing some national business coming in, in regard to home furnishings, and some of the categories that they have been able to capture in the local media, particularly in regard to their community newspapers, and their magazines.

We now have 13 magazines and we have 22 weekly newspapers, and they are adding many this year in regard to Citizen Journalism.

So the focus in regard to local local advertising at our Florida properties and really all of our regional properties, is really quite directed that we do think can reap some benefits for them.

And then lastly, if I could, over the years, Janet, including recently you have been adamant that your company doesn't want to sell the Boston Globe and I assume you have the same thoughts about your regional newspapers.

Is it possible, however, in the next few years that your thought could change on that just as it has obviously changed over the TV broadcasting.

Craig, as you know, we don't comment on acquisitions or divestitures, and it is really our job to constantly evaluate our portfolio, and I think what we have done certainly within the last year has sent a very clear message to all of you and certainly to our investor base that we are going to continue to make sure that we evaluate these properties correctly.

That said, we have every indication that the properties that we do own, the Times certainly, Boston, and the regionals, are all strong properties, have the ability to be even stronger going forward, and that we're taking the proper steps to constantly improve their performance.

I think if we continue on course, in regard to streamlining our costs, integrating the newspaper side, the print side, and the digital side, to capture even more efficiencies and certainly more online growth, we have the opportunity to have these properties continue to make a very strong contribution to the well-being of the Company.

Great.

Thank you.

You're welcome.

We will go next to Peter Appert, Goldman Sachs.

Good morning.

Janet, first, is it the -- is your expectation that the New York Times Company is going to actively oppose the merger of Abitibi and Bowater and do you have any thoughts on whether NAA might get involved in this?

It is not our place to -- I should say it isn't our intent to oppose the merger.

We certainly have been in touch with our contacts at Abitibi.

We feel that indeed there is -- it is not a surprise to see this merger happen, Peter.

I think that from a standpoint of what Jim said earlier in regard to newsprint pricing short term, we feel that is definitely the case, and I think from a standpoint going forward, we are going to closely monitor what the situation is with this merger.

I really could not comment in regard to the NAA.

I think that they certainly have always taken a proactive role in regard to monitoring anything that affects the industry.

I would suspect that they will closely monitor this as well.

Okay.

And then secondly, I just wanted to confirm that the write-off in Boston is specifically of the nonamortizable goodwill, and therefore, no earnings impact in terms of ongoing earnings impact from lower amortization expense associated with this write-off?

The substantial portion of the write-off was goodwill, which is nonamortizable.

There will be a small impact going forward, but it is fairly negligible.

It is about 3 million.

3 million--?

Per year.

In amortization expense benefits?

Yes, that's correct.

Great.

Thank you.

And then last thing, a follow-up for Martin on the prior questions, any -- you've been at the Google print deal now for a little while so anything you can share with us, in terms of the kind of revenue momentum you're getting out of that?

And then additionally, with regard to your earlier comments on exploration of deals with other Internet players, just any color you could offer on the kinds of deals you would like to do and what the structure and impact could be for New York Times Company?

The Google test, and it really is just that, it is a test, it is technically referred to as an ALSA, it involves 50 advertisers that we've agreed to test this with.

We've had a very good acceptance rate.

And it is a nice small revenue stream.

And it is about to be expanded to a larger test group and a full fledged data, so it is one step at a time, both Google and the New York Times are pleased with the results.

And these are all new advertisers, these are not current advertisers, so this is a whole new revenue stream for the papers, not only the New York Times, Peter, but also the Boston Globe.

Are we talking a million or more than a million a year of incremental revenues?

Is that the order of magnitude?

We wouldn't comment on that.

This is still a test and we would observe the appropriate secrecy, I guess, in regard to the test results.

Very discrete of you.

How about from Martin, just on any additional color on the DOCs thinking about or would like to do?

I don't think we can comment with additional color, simply because of our nondisclosures but I would only say that we're seeking to maximize the value back to the Times Company, and all of these -- all of these discussions, and they're fairly broad discussions.

Okay.

And what's the time frame?

Do you think you will get something done here in the first half of '07?

We would like to get something done as soon as possible.

But I can't tell you precisely when anything will close, because frankly, we don't have a date at this point.

Okay.

Thanks.

We will go next to Debra Schwartz, Credit Suisse.

Hi, great.

Thank you.

I was just wondering if you could give us some more color on what you're seeing in entertainment advertising, first, can you tell us what percent of ad revenue came from the entertainment category in 2006?

And second was the improvement you saw in December an improvement in print or are you starting to capture more of the studios online spending?

And then finally, can you just comment on the sustainability on the improvement that you saw in December?

Thanks.

In 2006, studio entertainment was about 11% of our core revenue base.

The strength we saw, the relative strength, I should say, we saw in December, was print, but we've been seeing healthy growth in the digital side of it, all through 2006.

And the sustainability is -- I would characterize it as a moderation of the trend we saw last year.

Again, there is significant volatility in this category, it is being helped, strengthened by the Oscar season, and the comps we're up against.

Just on entertainment, entertainment is the fourth largest category at NYtimes.com and it was up 66% last year online.

So it is not only is it a large category, but it was up dramatically.

Okay.

And then could you just tell us how much the category printout online was down in 2006?

How much it was down?

Yes, do you have that?

It was down into the significant double digits, 20% range.

Okay.

Thank you.

[OPERATOR INSTRUCTIONS] We will go next to Edward Atorino, Benchmark.

Hi, good morning.

Regarding acquisition -- I know you don't talk specifically, but with the sale of broadcasting, and maybe some real estate activity, you would have some available powder, so to speak, for acquisition, what would be your appetite to take on additional debt for the right kind of deal?

Well, as Janet mentioned, the fact that we will be reducing debt in the early part of the year, obviously it will give us some more flexibility, so that will give us some additional borrowing capacity.

So we look at that as a likely source of some acquisition capital.

The building obviously also provides us with a source of low cost borrowing as well.

So there is some capacity and we do look at that as a--.

And the other thing is, obviously, we will be completing our headquarter spending by mid year, and we will be completing the New York plant consolidation project in the early part of 2008.

So our capital expenditures are winding down to a much lower level, and that will give us additional flexibility.

Is there sort of a debt equity target you would sort of not want to go above or something like that?

I don't think we set a very specific target.

Obviously, we have been a solid investment grade rated company in our history.

We're building in balance sheet flexibility though to be able to do things that make sense strategic going forward.

Is investment grade sort of a critical variable for you?

It has been historically, yes.

Okay.

Thanks.

We will go next to Alexia Quadrani, Bear Stearns.

Thank you.

I have a question about About.com, you've had some very impressive growth again in the fourth quarter.

Could you give us any color on seasonality in this business to help us get a better sense of what growth we should expect in the first quarter?

And my second question is, at what point in the year in the newspaper side of the business, the print business, if it hasn't happened already yet, do you get an idea of any pushback on ad rate hikes or whether or not they have stuck to the fullest extent?

Thank you.

Let me start with about.

We have only actually operated the business for a full year.

I think the seasonality actually is very close to the other businesses that we operate online, so you see -- you see robust growth of course in the fourth quarter, somewhat less robust, but good growth in the second quarter, first quarter, tends to be a little bit lighter.

But with respect to the business itself, we expect to see page view growth continue to grow, although probably moderating somewhat, because of the -- again, we're cycling now through the Times ownership, we're no longer in the other companies ownership, and we -- as I said earlier, we will continue to see healthy growth rates on the rate side.

So the business will continue to grow robustly.

We have enough experience so far to be confident that we can realize our rates, and I would say by the end of March, we will have concluded any significant discussions that are still out there.

Thank you.

We will go next to [Hal Holden, Barclay's Capital].

My question has been answered.

Thank you.

[OPERATOR INSTRUCTIONS] We have a question from Steven Barlow, Prudential.

A follow-up here on the depreciation expense on Edison, as this catch-up goes.

How should we look at it for the next four quarters of '07?

It is about 11.5 a quarter.

Okay.

And that will end -- I guess it goes through the first quarter of '08?

Yes.

Thanks.

We will go next to Paul Ginocchio, Deutsche Bank.

Hi, thanks.

This is Matt Chesler for Paul.

One follow-up on the write-down up in New England.

Do you now have a tax asset of some sort that you can apply to future periods, either shield operating income or perhaps a gain on the TV sale?

No, the New England Media Group, the write-down there, it was a tax-free exchange when we acquired the Globe, so therefore we will not have any significant benefit there to apply against the broadcasting.

But is there a moderate benefit of some sort, you're saying?

I wouldn't even say moderate.

There is a small element of the write-down which will be deductible.

Right.

It is a fairly limited write-off.

Okay.

And remind me what the tax basis was, if you would, on the TV Group?

We didn't disclose it for the TV Group, but when we announce the closing of the transaction, we will provide some information at that point.

Okay.

Great.

Thank you very much.

You're welcome.

And at this time we have no further questions in the queue.

I will turn the conference back over to Ms. Mathis for any additional or closing remarks.

Thank you so much for joining us today.

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

Bye now.

That does conclude today's conference call.

You may disconnect at this time.

We do appreciate your participation.