New York Times Co (NYT) 2007 Q2 法說會逐字稿

Good day and welcome to the New York Times second quarter 2007 earnings conference call.

[OPERATOR INSTRUCTIONS]

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

Catherine Mathis.

Please go ahead.

Thank you and good morning, everyone.

Welcome to our second quarter earnings conference call.

We have several members of our senior management team here today 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, and Martin Nisenholtz, Senior Vice President/ Digital Operations.

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 2006 10-K.

Our presentation will also include non-GAAP financial measures and we've provided reconciliations to the most comparable GAAP measures in our earnings press release which is available on www.nytco.com.

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

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

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

Thank you, Catherine and good morning, everyone.

Today, we reported second quarter earnings per share from continuing operations on a GAAP basis of $0.15 compared with $0.37 in the same period a year ago.

We had three special items in the quarter, A $0.29 loss on the sale of our New Jersey printing facility, a $0.15 gain on the sale of a radio station and $0.05 of accelerated depreciation expense.

In total, these special items reduced earnings by $0.19 per share.

Excluding the special items, we earned $0.34 per share from continuing operations compared with $0.37 in the second quarter last year.

In addition, we recorded a pretax gain of $191.2 million, 94.3 million after tax or $0.66 per share from the sale of our broadcast media group.

These amounts are reflected in discontinued operations.

Despite a 3.7% decline in revenues from continuing operations in the quarter, operating profit excluding depreciation and amortization and special items declined just 2.7% as we remained very disciplined on costs.

And while the advertising environment remains difficult, we continue to make progress, executing on our strategy of introducing new products both in print and online, building our innovation capability, aggressively managing costs and rebalancing our portfolio of businesses.

I will briefly review what we accomplished in each of these areas in the quarter.

First, developing innovative new products and services across platforms.

This quarter, we added an issue of T Beauty, an issue of Design New England, the Globe's high end magazine devoted to home and garden, and in May we introduced Fashion Boston, the Globe's new magazine which will appear monthly beginning in August.

These publications have demonstrated strong appeal for both readers and advertisers.

In the digital arena, there has been a tremendous amount of innovation and new product development.

We have continued to build out our travel, entertainment and real estate verticals.

At the same time, we have launched nytimes.com, our small business section and introduced new email products in movies, books and real estate and added several new areas of original web content including Bits, a new technology blog written by Times journalist Saul Hansell.

Our second strategic focus is to build a vibrant long-term innovation capability that helps us anticipate consumer preferences and creates ways to satisfy them.

Mobility is at the heart of the group's activities.

Our mobile website at the Times have been experiencing enormous growth with page views more than tripling in the quarter.

We expect growth to continue next quarter when research and development rolls out a mobile messaging platform for the Company.

All of our operating units are planning to launch innovative new mobile products, built off this new competency.

We have said in the past that one function of research and development is to serve as a conduit for attracting new digital talent and it certainly does.

Last month, employees from our research and development group and the Times competed in the prestigious Yahoo!

BBC Hack Day competition where talented engineers and others are given 24 hours to create a prototype of a novel and useful web application.

I am very pleased to tell you that the Times Company team took first place among 78 entries.

We plan to develop their exciting idea into a web application for launch early next year.

Our third area of strategic focus is continuing to rebalance our portfolio of properties as we allocate capital for the benefit of our shareholders.

We completed the sale of our television properties and a radio station in the quarter.

Over the course of the past year, we have sold assets generating proceeds of $700 million.

These asset sales and our strong cash flow gave us the confidence to raise our regular quarterly dividend 31%.

Where we have sold assets over the course of the past year, we have also made several small acquisitions and investments totaling about $70 million over the same period.

They are strong, strategic fits and financially prudent.

We expect that each of these will have an attractive ROI that is well above our cost of capital.

In the second quarter, we acquired ConsumerSearch.com, a leading online publisher that analyzes reviews of thousands of products.

It is a profitable, high margin business that greatly expands About's reach in numerous advertising categories and substantially enhances its library of content.

We will continue to be disciplined in evaluating acquisitions that have a strong, strategic rationale and can meet our financial targets.

Our fourth strategic focus is to increase our operational efficiency and reduce our costs.

This quarter, our operating costs excluding depreciation and amortization decreased nearly 4%.

As a matter of fact, for the past three quarters, we have achieved year over year cost reductions excluding the effect of an extra week in the fourth quarter of last year.

And as Jim will discuss in greater detail, we expect to reduce our year-end '07 cost base by about $230 million in 2008 and 2009 excluding the effective inflation and one-time costs.

About $130 million of these savings are expected in 2008.

This is an important part of our ongoing efforts to manage the business to match the changing dynamics of our markets.

Turning now to the details of the quarter, as you have heard from others in the industry, the print advertising environment remains very challenging.

Ad revenues at the News Media Group decreased 7% with almost 40% of the decline coming from real estate advertising.

At the Times Media Group, ad revenues decreased 5% in the quarter.

Print categories that performed well included financial services which saw increases from credit card, insurance, and mutual fund advertisers, cosmetics driven by very successful issues of T Beauty and T Living, and package goods, which benefited from new business from food and consumer product companies.

Print categories where we saw significant declines were residential real estate which decreased because of weakness in the local and national housing markets, telecommunications which was down as wireless carriers reduced spending and automotive down mainly due to less advertising from domestic automakers.

As I said earlier, new products introduced at the Times helped improve the revenue picture in the quarter, and the remainder of this year, more new products are planned including additional themed issues and sections.

The New England Media Group continues to grapple with a soft advertising climate.

Second quarter advertising revenues decreased 8%.

We have nearly cycled the difficult comparisons with Filene's.

In early September, the opening of a new mall in Natick will include Nordstrom's and Neiman Marcus.

These openings are expected to benefit the Globe as are easier comparisons in the second half of the year.

Ad revenues in the national category at the New England Media Group improved slightly in the second quarter.

Strong categories were pharmaceutical and packaged goods, media, and telecommunications.

Overall classified advertising in New England was soft in all three major areas.

Real estate, help wanted and automotive.

As in other U.S.

cities, real estate advertising declined in Boston due to the soft housing market.

New products also benefited the Globe in the second quarter.

As I said earlier, both Design New England and Fashion Boston added to revenues and additional issues of each are scheduled for the second half of 2007.

Later this year, Boston plans to launch a third publication targeting the affluent active lifestyle segment of the New England market.

At the regional, media group's second quarter advertising revenues decreased 12% mainly due to lower levels of classified advertising.

Recruitment, real estate and automotive advertising were down significantly.

Much of this was related to the downturn in the Florida and California housing markets.

Which has affected not only real estate but recruitment and retail advertising as well.

In the second quarter of last year, real estate advertising rose 46% at our Florida properties and this past quarter it fell 18%.

We continue to successfully expand our strategic alliance with Monster across all of our newspaper websites.

On June 11th, the Times and Monster successfully launched their cobranded site.

June was the first full month of the operations for the Globe's cobranded site and we have seen improvements in traffic and job searches.

The regional media group has 13 of its 15 cobranded Monster sites live and generating new revenue.

Total circulation revenues were down slightly in the quarter as a result of copy declines.

As we have said in the past, the Times, as well as our other newspapers, is executing a circulation strategy that rebalances the copy mix away from the less profitable other paid circulation to the highly profitable individually paid.

As we execute this shift, we do expect to see copy declines but by pursuing this strategy, we have realized and will continue to realize significant benefits to our expense performance.

This month, price increases began to go into effect for the Times home delivery and newsstand copies.

We project these increases will add $7 to $8 million in incremental revenues this year and $14 to $16 million on a full year basis.

The initial response from customers to the price increases has been encouraging.

Over the next 12 months, we plan to add three more national print sites.

Each of which we expect will reduce distribution and other costs and increase national circulation.

The first will be in Salt Lake City and is scheduled to open in September.

Other revenues at the news media group rose 2% in the quarter as a result of our focus on developing new products and revenue streams mainly due to our wholesale delivery operations and baseline studio systems which we acquired in August of 2006.

Our About group which includes About.com, ConsumerSearch.com, UCompareHealthCare.com and caloriecount.com had another strong quarter.

Total revenues grew 27% to $24.7 million and its operating profit before depreciation, amortization rose 16% to $11.9 million in the second quarter.

The About group's growth is attributable to higher advertising rates and increased volume in both display in costs per click advertising and the acquisition of consumer search.com.

Part of this growth was an increase in the number of guides providing content on a greater number of sites under the About.com's umbrella.

At the beginning of January, we had 587 guides.

Today we have 633 and by year end, we expect the number to be close to 700.

Like other Internet properties, About.com continues to develop its key verticals.

A good example is what it has done in health where it has become a major player.

In June, about's health channel which is the number two commercial health site behind Web MD saw traffic grow 60% and page views climbed 144%.

The acquisitions of CalorieCount.com and UCompareHealthcare.com which allows users to compare doctors, hospitals and nursing homes, have improved the user experience , driven traffic and added to revenues.

The development of content verticals such as health across all of our websites has helped the Times company become the 11th most visited parent company on the web in the United States, with $42.9 million unique visitors in June, up 14% from June of 2006.

This reach represents nearly 27% of the online audience in the United States.

Last month, Nielsen net ratings again ranked NYtimes.com the number one newspaper website, a position it has long held and Boston.com ranked number five.

In total, our digital businesses generated $80.9 million or more than 10% of the company's revenues in the second quarter.

To date in July, print advertising remains challenging, especially for banking, financial services and classified categories.

While we continue to see strong gains at our digital properties, in the month of July, we expect the rate of growth for online advertising at our News Media Group to be lower than we have seen so far this year.

This is partly because of two large campaigns that will not repeat at NYtimes.com.

Last July, Internet ad revenues at the News Media Group were up 27.5%, among the highest monthly increases we saw in 2006.

The comparisons ease for August and September.

Growth rates for these two months last year were in the mid to high teens.

While the advertising environment remains challenging, we're making the steady, solid progress on key steps that are transitioning our valuable national, and regional brands into sought after products in the digital age, and we continue to manage our business through this transition to maximize efficiency and returns on our investments for the benefit of our shareholders.

Now, let me turn the call over to

Thank you, Janet.

As Janet mentioned, we continue to tightly manage expenses in the second quarter.

Operating costs excluding depreciation and amortization declined 3.9% primarily because of lower newsprint, staff reduction and other costs.

Newsprint expense decreased 22.9% due to a combination of low prices and decreased consumption.

In August, the Times will reduce its web width and the Globe expects to complete its web width reduction in the fourth quarter further decreasing our newsprint consumption.

Depreciation and amortization in the quarter totaled $46.6 million versus $35.6 million in the same period last year.

The reason for the significant increase was a $13.1 million accelerate to depreciation we incurred as a result of our plant consolidation.

You'll recall that we plan to merge our New York metro area printing into our newest facility in College Point, Queens and to close our older Edison, New Jersey, facility.

Originally, we planned to sublet Edison to 2018, the term of our original lease.

We decided, however, that would be more financially prudent for us to buy the Edison facility, sell it and then lease it back for the short amount of time before the two plants are consolidated in it early 2008.

These actions relieve the Company of rental terms that were above the market as well as restoration obligations under the lease.

As a result of the purchase and sale, we had a pretax net loss of $68.2 million in the quarter.

The plant consolidation has significant savings associated with it approximately $30 million per year lower expenses.

In addition, we have avoided the need for capital expenditures at Edison of approximately $50 million over the next ten years.

We anticipate double digit return on this project which is expected to be completed in the second quarter of 2008.

Our tax rate in the quarter was 46% considerably above the 34.4 rate of the same period last year.

This was mainly because of the asset sales in the quarter.

Excluding unusual items during the year such as the tax adjustment we had in the first quarter and the recent asset sales, the Company's normalized income tax rate for 2007 is estimated to be 41%.

Moving to CapEx, spending in the second quarter totaled $106 million including $56 million for our new headquarters.

We have now moved into our new building although construction will not be completed until the second half of this year.

We have started to record depreciation and amortization and interest expense on the building and incurred one-time costs related to the move of $5.7 million in the second quarter.

In addition, we begin recording rental income late in the second quarter from the five floors we lease.

In closing, I would like to return to the topic of costs.

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

We continue to focus on this as demonstrated in the recent agreement we signed with the Boston Mailers Union which provides us with new and competitive rate structure, improvements in staffing levels and other productivity changes.

The net savings from this contract are projected to be approximately $2 million a year in each of the next four years, and serves as a model for how we'll work with our unions.

Recently, with the help of outside consultants, we completed a comprehensive review of our cost structure.

Even with the many steps we've already taken, we have identified additional areas for savings.

In 2007, we expect cost savings and productivity gains to total approximately 65 to $75 million, excluding the effects of inflation and certain one-time costs.

As a result of our recent review, we expect to decrease our cost base by approximately $230 million in 2008 and 2009 excluding the effects of inflation and one-time costs, as compared to our year-end 2007 cost base.

About $130 million of that amount is expected to be achieved in 2008.

Some of the anticipated savings will come from initiatives we have mentioned in the past such as the consolidation of our New York area printing plant, our web width reductions and the shift away from less profitable circulation.

But the majority of the savings are expected to come from newly identified initiatives that will involve standardizing, streamlining and consolidating processes and shifting staff to lower cost locations.

The areas that present the greatest opportunity are general administrative, production, technology, distribution, and circulation sales, and we continue to look for cost reduction and efficiency opportunities throughout the organization.

Our cost initiatives will be carefully managed so that they do not adversely affect the quality of our journalism, the smooth functioning of our operations or our ability to achieve our long-term goals.

Recognizing that the media marketplace is in the midst of a significant transition, we believe it is more important than ever to continue to exercise strong financial discipline as we execute our business strategy and allocate capital.

With that, we would be happy to answer any questions.

Thank you.

[OPERATOR INSTRUCTIONS] We will take our first question from John Janedis with Wachovia.

Hi.

Good morning.

Thank you.

With the addition of some of the recent.

online acquisitions, how can we think of margins there going forward and can you talk about stand alone growth at about relative to where we've seen it.

I know it has come down a bit.

But was it much different from the 24% you reported in June?

Thanks.

I would just -- on the margin side, I'll let Martin answer the others -- but on a margin side, the acquisition of Consumer Search was an acquisition of a profitable high-margin business and those margins approximate the margins of the About acquisitions so that will have little to no impact.

Some of the margin contraction we saw in the quarter was really related to investments in some ventures which has some costs ahead of some revenue opportunities we see there.

With respect to the revenue picture, I think what we saw in the second quarter was improvements in the CPC side.

We saw some volume issues in the first quarter which turned around in the second quarter and was, I think, pretty significant improvement there in stabilization.

Ok.

Sorry.

I'm sorry.

I was going to add the display piece remains strong through the year.

Ok.

Speaking of display, I know that you referenced a couple of campaigns that won't repeat online.

Is that a temporary thing?

Are you finding that some advertising is actually moving out of display?

It is a temporary thing.

Just July.

Ok.

And then just finally, I know it is early but can you talk about any anecdotal evidence that you're seeing increased job postings from employers rather than just the traffic at this point at the Globe or at the Times.

It is pretty early to talk about either one.

I mean we're only three weeks into the Times experience.

I think it is safe to say we have seen some improvement in Boston.

But I don't think -- I don't think I can say at this point that we've seen significant, new job postings.

That said, John, though, I think it is important that you know, to reiterate what we said about increase in traffic and increase in revenue and that is really across all three areas of the News Media Group, the regionals, Boston, and the Times.

It is very early.

Thank you so much.

We will take our next question from Lisa Monaco, Morgan Stanley.

Good morning.

Two questions.

One, Janet, if you could elaborate on the weakness seen in the retail category in June and then Jim, if you could give us an idea in terms of what one-time costs you expect to achieve this cost savings that you outlined.

I'll handle the Globe and regionals then I'll hand it over to Scott for the retail at the Times.

In regard to the Globe, we are continuing to cycle against filings which are difficult comparisons.

That is pretty much over in regard to July.

Going forward, we do have, as I noted in my remarks, some openings that we think will deliver some additional advertising.

Neiman Marcus and Nordstrom's opening in Natick are strong.

I said this at the beginning of the year that with strong store openings and mall openings in the latter part of the year, that we expected, after this difficult cycling comparison, to the Filene's comparisons, that we would see stronger opportunities for growth in the second half of the year.

There's also another mall opening in Foxboro that is a lifestyle mall.

It is called Patriot's Mall.

That, we think, will also deliver incremental revenues, as well.

In addition, as far as the regionals are concerned, they are seeing softness in the retail category.

A lot of that is directly related to the Florida properties which, of course, are directly related to the real estate downturn that we have been seeing.

Many of the retail categories have been adversely affected primarily because of that real estate design particularly home furnishings and the home stores.

Scott?

Yes, looking to department stores as maybe the signal indicator of what's going on in retail, we believe that the softness we have seen, especially in Q2 represents a shift in spending into the later part of the year, and that is consistent with all of our discussions with department stores.

We expect to get much of this back if not more in the back part of the year.

One time charges related to the cost savings, this would be principally buyouts.

We don't anticipate any material other one-time charges at this time.

Is there any way to quantify that, Jim?

No.

It's hard.

It's hard.

Because there's really a lot of variables that go into that calculation.

I wouldn't say it is a material part of our savings we expect to yield the extent of those savings in our results.

Ok.

Thank you.

We'll go next to Alexia Quadrani, Bear Stearns.

Thank you.

Just a follow-up on your comment about the retail environment.

You mentioned just now the pullback in the department store spending shifting to the back half of the year.

Should we assume then from that commentary that it is not a question of these dollars in department stores going to other media.

It is just really they're holding back on their marketing spend right now?

That is consistent with our discussions.

Lord & Taylor is under new ownership and it is repositioning its brand and will support it in the back half of the year and there are similar explanations for the other leading department stores.

And then shifting gears to the New England Media Group, you know, we did see some improvement or some stabilization earlier this year and it looks like it has taken another turn for the worse.

What really do you think caused that sort of second change [inaudible]?

Alexia, I think it is predominantly the classified categories that, you know, we're continuing to see softness.

Real estate, as you hear from everyone in our industry, is really having a major effect.

Boston is not escaping that.

Certainly help wanted and automotive as well.

But in the second half of the year, not only are we seeing the store openings that I noted before in regard to retail, you're also seeing banking, all of the effects I said earlier in the year in regard to increased competition in banking take effect as well.

For example, there will be a lot of Citibank activity in the second half of the year as they push their openings out and Bank of America is launching an affinity card that we know will have a great deal of effort put behind it.

And that competition is really heating up the activity with a lot of the other banks as well, Citizens, Sovereign.

So, we think that those two categories, in addition to another category which is telecom where we see a very heated competition bubbling up between Verizon and Comcast and branding continuing with AT&T and Cingular really adding to the opportunities in the second half.

It is predominantly a classified story in regard to those softness that we've seen in New England but there are some categories in the retail and national sector that we see as having opportunity for us in the second half.

Thank you.

Just one last question.

Just going back to an earlier question on the two large campaigns that don't seem to be with you in July.

Are those two large campaigns you find that those businesses are going to other sites or just being pulled for the month of July?

They were just -- they just didn't repeat.

They were special -- they were special last year.

They were launches last year.

They're not going to other sites, no.

You feel the outlook, I know you mentioned using comparisons but also the demand, you find the outlook on the interactive and August onward still being very strong?

Yes.

We expect to have a strong quarter.

Ok.

Thank you.

We'll take our next question from Fred Searby, J.P.

Morgan.

Yes.

Thank you.

I wondered if you could just tell us what of the $130 million in cost savings next year, that's a gross number, what the net income is that we should expect and also for the 230, what the net number will be?

Thank you.

Well, you know, we said that that would be -- that the gross number and the two offset for that would be whatever inflationary impacts are whatever the buyout costs would be.

We don't see offsets against that.

You know, you can make your judgment as to what the inflation impact is but again, we expect a significant net contribution to our profitability after both of those.

But at this point, buyout numbers would be very hard to predict.

You can, again, our cost structure non raw material cost structure is $2.5 billion [inaudible] to supply reasonable factors against that.

You can see that would be netting a significant portion of that [inaudible] in our bottom line.

Just one follow-up.

The New York real estate market has been anomalously strong and resilient.

I wondered on the real estate classifieds, you cited as an area of weakness.

I am sure it is outperforming the rest of the country but what is that trending down in June, if you could just break that out?

Thank you.

The real estate declines in the second quarter were in the mid teens.

Consistent with -- June was consistent with the overall trend in the quarter.

Little bit higher for print and in high single digit territory for the digital.

All right.

Thanks.

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

The regional group declines were slightly less in June than May.

Could we read anything into that?

Do you think we're through the worst.

Second, can we go back to the question of organic growth of June or the second quarter without the new acquisitions?

Thanks.

I think as far as the regionals are concerned, it is very, very hard to predict.

The classifieds continue to be under pressure and particularly in the real estate category, Sarasota is really the major issue for the real estate decline in the Florida market.

And as I noted earlier, that does affect, you know, some of the retail categories as well.

I think, you know, going forward, I think that, you know, once indeed we cycle through these real estates which -- real estate issues which I know you have focused on, Paul, I think there is an opportunity for us to see some incremental growth but I think it is very hard to predict what that opportunity will be until we see some relief of the pressure on the real estate side.

As far as contribution from acquisitions, the principal contributor through acquisitions would have been Consumer Search and that really contributed a few points to the revenue growth and also quite a few points to the operating profit growth as well.

Ok, great.

If I missed it, have you had comments from Macy's post CMO change and maybe they're reviewing how they need to work on their legacy May stores?

We're in constant communications with Macy's and we have an excellent relationship with them.

They view us and we view them as a strategic partner.

The CMO change has not really affected the way they spend with the New York Times.

The view in Boston?

In regard to Boston, the relationship is similar to how it is in New York.

There is a strong focus in regard to how they use the papers and how they will continue to use the papers both in regard to ROP and preprints.

Thank you.

We'll go next to Craig Huber, Lehman Brothers.

Yes, good morning.

Can we just focus for a minute on the July trend you're seeing so far across your three main groups?

Is there any significant change one way or the other versus what we saw in June?

I'll talk about Boston and the regionals.

As I noted earlier, Craig, there are some categories that we see competition heating up.

I noted that telecom with Verizon and Comcast and the branding programs with AT&T's Cingular are causing an -- we think we'll have an opportunity for us to show some incremental growth in that category.

Healthcare, because it has become mandatory July 1st in Massachusetts has also spurred activity in the healthcare area.

That provides us an opportunity, we believe.

The banking category as I noted earlier with competition heating up there.

There has also been quite a bit of activity already thus far this year in the hotel category with the Ritz-Carlton being renamed under the TAJ umbrella and new hotels opening Intercontinental and Liberty.

That provides us with some is opportunity going forward.

Now, that said -- and the retail category that I noted earlier with the store openings.

That said, we still are under pressure in regard to the classified side but those opportunities could provide us with additional opportunities for growth in the second half.

As far as regional categories, there is a lot of activity there in regard to the new products that they've introduced all of their magazines, all of their weekly newspapers, and a very heavy concentration on some of the categories that are showing growth.

There are areas of other retail group that are showing growth in real estate but you know, it is very select markets and the dependence or I should say the large percentage of growth of revenues, rather, that come out of our California and Florida properties which is really total revenue, about 65%, those properties, because they are experiencing softness on the real estate side, that will -- we know, will affect their performance going forward.

But as soon as we see some pressure of it being alleviated in the real estate side, we feel as though the regional group has opportunity to get back to where we would like it to be.

With regard to the Times, I wouldn't expect to see a change in the overall trend that we've seen year-to-date.

The challenging categories remain challenging categories for us in July and looking forward, tech telecom, real estate for reasons we've discussed already on this call, automotive which we've discussed quite a bit in the past.

The growth categories, the stronger categories, again, some familiar ones.

The luxury segment that we've talked about, the collection of those categories that target the same demographic of our audience and seem to move and sink International fashion, American fashion, cosmetics, fashion jewelry.

That's been a very strong category for us all year.

High single digits, low double digit growth.

We'll continue to see that growth in July and looking forward.

The travel category should be a good category for us in July.

Corporate, some growth in packaged goods and studios right now, it's very volatile category.

But as of now, it looks like it will be in the plus column for us in July.

If I could just get maybe like five or six numbers for you.

I'm curious -- the six largest advertisers for your flagship.

But what was the percent change in ad revenues there in the second quarter, if you could quantify that, please?

I think we'll have to get back to you on that with the specifics, Craig.

Ok.

If I could ask a more mundane question.

Excluding the two large one-time items in your division in the quarter, what was your non newsprint cash cost percent change and a separate question, what was the average price change for your newsprint and also consumption change?

Thanks.

Our total expenses companywide were down 3.9%.

About 3% of that was as a result of lower -- of lower raw material costs.

About half of that decline or about 1.5% would be rate and the other would be volume.

Maybe strip out the two one-time items and get down to pure non newsprint cash costs?

The one-time items we have in the quarter on a cash basis where we had buyout costs which had declined I think about $4 million or so and we had moot costs going the other way.

So, those two largely offset so, I think the 3.9% would be a good proxy.

Now, I would also say that About.com's costs were up fairly dramatically.

So, if you looked at the news group costs, they were down 4.5%, not 3.9%.

So, it was a fairly large increase in our costs to support the growth of revenues in some of our other new initiatives at about that drove costs higher.

Great.

Thank you.

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

Hi, thank you.

Two questions, please.

Janet, is it possible to quantify specifically the revenue benefit you see associated with the opening of the new retail locations in Boston, specifically does that get you to a positive comp in the retail category in the fourth quarter.

And then the second question, for Jim, this is a follow on I think to what Fred was asking earlier.

I just want to make sure we're on the same page here in terms of cost dynamic in '08.

Rough calculations imply, I think, that based on the $130 million cost savings, we'll give you a pass on the severance cost, you would be looking at total operating expenses down sort of 4% to 5% range.

Add a couple percent for inflation still implies total costs may be down a couple of percent next year.

Is that how you were thinking about it, Jim?

That's fair.

Ok.

Thank you.

As far as the retail -- let me just give you a little bit more color on that, Peter.

There had is quite a bit of activity -- there is quite a bit of activity going on in New England with in regard to the retail collection.

This Natick collection, that's the name of the mall opening in early September, advertising will probably start late August.

With Neiman Marcus and Nordstrom's both going in and this is the first Nordstrom's in the area.

So, it is a very, very big play for them.

With two major stores of their caliber in that mall, this is a lot of activity and I think a lot of opportunity for us in that area.

In addition, you know, with the other mall opening again in the third quarter in September, the Patriot Mall in Foxboro, that again offers some real opportunities.

There are a number of stores that are going in that area.

But then there is another phenomenon going on in regard to Bloomingdale's and Macy's.

Bloomingdale's has expanded its store in Chestnut Hill and it is very high market.

That has an opportunity.

It was only one store and now it really classifies almost as a two store property in that mall.

And Macy's certainly has quite a bit of activity with their advertising in Boston and will continue to as they've expanded their base there as well with the rename and Filene's Basement has opened in Boston which causes an opportunity for us to think about more incremental growth there.

I think you know, there is also -- you know, from a standpoint of other malls that have either upgraded or added stores.

L.L.

Bean has entered the market in a fairly big way.

That provides us with more opportunity, as well.

So, with all of that activity in place, we think that there is an opportunity, particularly with easier comps from the second half for us to see retail opportunity for growth.

To predict it is very difficult but because we're cycling off Filene's and because the comps are easier, we think there is opportunity for growth.

Great.

That's helpful.

Thank you.

We'll go next to Edward Atorino, Benchmark.

Two questions.

One, do you have any sort of advance commitments on some of these stores?

Number one.

And can you give us an update on your thinking regarding refinancing the building?

I know that's a speculation from time to time.

But if you were just -- if you would just update us on your thinking about that?

There are very large programs in -- in front of these advertisers as far as the store openings.

I believe that there are some bookings but I can't -- you know, I can't confirm that.

But from a standpoint of the programs that are in front of them, I know that they really are very expansive in regard to store opening opportunities.

With respect to the building, I really don't have an update to what we previously have said other than we continue to evaluate the building as a valuable asset.

And you know, we weigh factors such as market conditions and so on.

Thanks.

All right.

Thank you.

It appears we have no further questions at this time.

I would like to turn the conference back over to you, Catherine Mathis for any additional or closing remarks.

Thank you all for joining us.

If there are any additional questions, please give me a call.

Bye now.