New York Times Co (NYT) 2007 Q3 法說會逐字稿

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

Today's call is being recorded.

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

(OPERATOR INSTRUCTIONS)

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

Catherine Mathis.

Please go ahead, ma'am.

Thank you, and good morning, everyone.

Welcome to our third 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 have provided reconciliation to some of the most comparable GAAP measures in our earnings press release, which is available on www.nytco.com.

An archive of this call will be available on our Web site, 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 have reported third quarter earnings per share from continuing operations of $0.10, compared with $0.06 in the same period a year ago.

This year's third quarter included $0.05 per share of accelerated depreciation expense for assets at our Edison, New Jersey plant.

In last year's third quarter, we had a $0.03 loss on the sale of our stake in the Discovery Times Channel.

Excluding these two items, our third quarter EPS was $0.15, compared with $0.09 last year.

Operating profit before depreciation and amortization grew 46.4% to $79.9 million, compared with $54.6 million in the third quarter last year.

The headlines this quarter are improved national advertising, including robust growth in online advertising, gains in circulation revenues, and continued cost discipline.

Before we go into detail on the quarter, I would like to stand back and take a broader view of what we have accomplished as it relates to our strategy, which includes introducing new products both in print and online, building our innovation capability, and aggressively managing costs.

I will briefly review our recent accomplishments in each of these strategic areas.

The Times Company has powerful and trusted brands, whose relevance and superior quality through our educated and affluent audiences.

It is true in print, and it is true online.

As you have heard us say in the past, we are focused on introducing new products and services across platforms that preserve and enhance our brands and add to revenues.

On the print side, we introduced several new ad formats, such as the spadia, a wraparound ad that NBC used to debut its fall lineup.

In addition, we created new advertising offerings in video and in opinion and archive sections of nytimes.com.

New print publications at The Globe such as Fashion Boston and Design New England added to revenues during the quarter.

We had considerable success in building out nytimes.com's verticals in Health and Business.

We also introduced new e-mail products in movies, books and real estate and added several new areas of original web content.

Last month, nytimes.com launched a new branding campaign to increase the awareness of the tremendous depth and breadth of the site, which includes over 40 blogs and generates more than 100 video segments a month.

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

One area that consumers are increasingly turning to for news and information is mobile.

Our research and development group is working with all of our operating units to develop new mobile applications.

For example, in the third quarter, nytimes.com rolled out a new product that allows readers to send and receive real estate listings on their mobile devices.

Readers and advertisers have embraced this new application, with many of the major real estate firms buying listings.

Recently, Forrester Research ranked nytimes.com first among four major mobile news sites that it reviewed.

The Times' mobile Web site has been experiencing enormous growth in page views, more than doubling from the beginning of July to the end of September.

In addition to real estate listings in the third quarter, the Times rolled out mobile stock quotes and movie times.

New mobile applications are being also launched in Boston and at the regionals.

Another area of strategic focus is to increase our operational efficiency and to reduce costs.

This quarter, our operating costs, excluding depreciation and amortization, decreased 1.5%.

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

And as we said last quarter, we expect to reduce our year-end '07 cost base by about $230 million in 2008 and 2009, excluding the effects of inflation and certain 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 in our markets.

Turning now to the details of the quarter, ad revenues at the News Media Group decreased 1.4%.

Real estate advertising, our largest classified category, continued to be affected by the nationwide slowdown in the housing market.

Excluding the real estate category, ad revenues increased 1.4%.

At the Times Media Group, ad revenues increased 3.7% in the quarter, led by growth in national advertising.

September, as you saw from our revenue release, was particularly strong.

National print categories that performed well in the quarter included studio entertainment, which benefited from the success of the fall film preview and from the strong performance of a number of films, particularly in September.

International fashion, driven by continued strength throughout the quarter and by the T: Women's Fashion issue, which had the largest number of advertising pages of any New York Times magazine since 1984.

And corporate, which saw our increases from a variety of advertisers mainly in the energy and industrial material sectors.

The main national print categories where we saw declines were telecommunications, which was down, as wireless carriers reduced spending, technology products, which decreased mainly due to multipage campaigns from last year that did not repeat in the third quarter, and national automotive, down mainly because of less advertising from domestic auto makers, as they restructured their business and rethink their marketing plan.

Classified advertising decreased in all three major categories -- real estate, automotive and recruitment.

At the time, much of the decline was in residential real estate because of continued softness in the local and national housing market.

Retail advertising revenues were down mainly due to decreased advertising from national chain stores, home furnishings stores and department stores.

As I said earlier, new products and ad formats such as the spadia helped improve revenues in the quarter.

Advertisers have expressed strong interest in using these new ad formats.

For the remainder of the year, more new products are planned.

One area where we have had notable success is with the T Magazines, which focus on fashion, beauty, travel and home design.

We will continue to develop this franchise.

In early December, we plan to launch T Online, a new web offering.

We are in the process of selling this exciting new digital magazine to luxury advertisers.

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

Third quarter advertising revenues decreased 5.7% due to softness in the classified and retail categories.

Ad revenues in the national category continued to improve in the third quarter.

Strong national categories were banking -- which benefited from increased competition in the Boston marketplace -- studio entertainment, hospital and healthcare and telecommunications.

Soft categories were national automotive and travel.

Retail advertising declined in the quarter due to weakness in the food and drug, computer and office supply, and apparel categories.

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

As more stores enter the Boston marketplace in the fourth quarter and early 2008, we expect to benefit, but the environment does remain challenging.

Overall, classified advertising in New England was soft in all three major areas -- real estate, recruitment and automotive.

As in other United States cities, real estate advertising declined in Boston due to the soft housing market.

New products targeting luxury categories also helped the New England Media Group in the quarter, with both Design New England and Fashion Boston adding to revenues.

In the fourth quarter, Fashion Boston is scheduled to publish three issues.

And in November, the group plans to launch a new publication named Lola, which targets affluent households in the New England market.

This magazine will appear monthly next year and will cover local restaurants and shopping, as well as information on healthy living and relationships.

At the Regional Media Group, advertising revenues decreased 11.6%, mainly due to lower levels of classified advertising.

Real estate, recruitment and automotive advertising declined significantly.

Much of this was related to the downturn in the Florida and California housing market, which has affected not only real estate but recruitment and retail advertising, including the home improvement, home furnishing and financial categories.

About two-thirds of the ad revenues at the Regional Media Group came from newspapers in Florida and California.

In the third quarter of last year, real estate advertising rose 26.6% at our Regional Media Group.

And this past quarter, it fell 23.5%.

During the quarter, the Regional Media Group continued to build its online reach, with content improvement, user-generated content, and video.

Last month, the Gainesville Sun launched its continuous news operation, featuring a reconfigured newsroom able to deliver news and information to the Sun's redesigned Web site and print additions.

The new strategy combines the news desk, copy desk, and design desk operations into a single unit, producing both the print editions and delivering stories and videos to the web 24 hours a day seven days a week.

Other newspapers in the Regional Media Group are developing similar operations to grow their audiences.

During the quarter, we successfully completed the launch of our co-branded recruitment sites with Monster.com.

Print-up sales have increased, and sales of Monster products, especially the resume database, are off to a good start.

We have seen improvements in traffic and job searches, particularly at the Regional Media Group.

Total circulation revenues were up in the quarter mainly because of the higher prices for the New York Times.

The Times had price increases in the fourth quarter of last year and the third quarter this year.

The resulting copy losses were less than anticipated.

Overall, the Times and our other newspapers are executing a circulation strategy that rebalances the copy mix away from less profitable other paid circulations to highly profitable individually paid.

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

In September, we added another national print site for the Times in Salt Lake City, and we are seeing increased copy sales in that market.

Two more sites are scheduled for 2008.

We expect each of these new sites will reduce distribution and other costs and increase national circulation.

Other revenues at the News Media Group rose 10.8%, primarily as the result of a full quarter of rental income from space we leased out in our new headquarters.

In the fourth quarter, the New England Media Group began its multiyear contract with GateHouse Media to print two of its daily papers in the Boston market.

The group already prints several newspapers, including Metro Boston and the New York Daily News.

Our About Group, which includes About.com, ConsumerSearch.com, UCompareHealthcare.com and calorie-count.com, had another strong quarter.

Total revenues grew 34.9% to $24.7 million because of higher advertising rates and increased volume in both display and costs-per-click advertising and the acquisition of ConsumerSearch.com.

Excluding acquisitions that are not in the previous year's quarter, revenues grew 26%.

The About Group's operating profit decreased 2% to $6.3 million from $6.4 million.

During the quarter, the operating profit margin declined mainly because of investments we made in new business initiatives that are expected to contribute to future revenues, one-time restructuring costs for the About Group sales organization, and higher compensation and content costs.

Operating profit before depreciation and amortization rose 9.3% to $10.2 million.

In the fourth quarter, both the operating profit and margin are expected to increase above those of the third quarter mainly because of higher seasonal revenues and the absence of the one-time restructuring costs.

The development of content verticals across all of our Web sites has helped The Times Company become the tenth most visited parent company on the web in the United States, with 44.2 million unique visitors in September, up 12% from September of 2006.

Our reach represents nearly 28% of the online audience in the United States.

Last month, Nielsen//NetRatings again ranked nytimes.com the number one newspaper Web site, a position it has long held.

In total, our digital businesses grew 26.5% in the quarter and generated $79.7 million or approximately 11% of the company's revenues.

Revenue growth for our online properties has been higher than our peers.

It is mainly because of the differentiated content provided by the Times and the strong showing of About.com in search -- giving us a more diversified revenue base.

Approximately 46% of our digital revenue comes from display advertising, 23% from classified, 15% from search, and 16% from other sources such as our online archive.

While September was a strong month with advertising revenues up 5.5%, visibility on the fourth quarter remains limited.

To date in October, advertising is not as strong as it was in September although its performance -- it is performing better than the first half of the year.

We would be remiss if we did not note that our positive earnings news comes against a backdrop of several significant announcements made by our newspaper peers about their own plans to change their capital structure by separating out their newspaper assets.

Let me note that with our move to rebalance our portfolio, including the sale of our television stations and the acquisition of About.com, the Times Company has been ahead of the curve.

Our strategy has been to carefully focus on preserving and enhancing the value of our core newspaper brands at the same time that we position our company for a strong and vibrant future in an increasing digital world.

While results will vary from quarter to quarter, we believe that over the long-term, the strategy we are executing and our approach, careful and deliberate, respecting the essence of our brands and the value we place on quality journalism will increase shareholder value.

Now, let me turn the call over to Jim.

Thank you, Janet.

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

Operating costs, excluding depreciation and amortization, declined 1.5% primarily because of lower newsprint expense.

This is partially offset by higher professional fees primarily due to the costs associated with the company's new headquarters and expense-reduction initiatives.

Newsprint expense decreased 22.2%, with 13.4% of the decline resulting from lower newsprint prices and 8.8% resulting from decreased consumption.

During the third quarter the Times reduced its web width, and the Globe expects to do so this quarter, further decreasing our newsprint consumption.

Buyouts this is past quarter were below those of a year ago.

In the fourth quarter, however, we expect buyouts to be approximately $14 to $16 million, compared to $8.5 million in the same quarter last year.

This range can vary significantly based upon seniority and the timing of implementation.

Depreciation and amortization in the quarter totaled $51.8 million versus $36.7 million in the same period last year.

Part of the increase wasattributable to $6.7 million of depreciation expense associated with our new headquarters.

We've also had $11.7 million of accelerated depreciation of assets at our Edison, New Jersey printing plant, which is in the process of being closed.

These increases were partially offset by a decrease of $2.4 million for mail room equipment, which is now fully depreciated at our printing plant in College Point.

We expect the depreciation for our new building will be approximately $8 million per quarter, beginning the fourth quarter and going forward.

Our effective tax rate in the quarter increased to 39% from 32.8% in the same period last year when a favorable tax adjustment lowered our rate.

The company's tax rate for the fourth quarter is estimated to be 41%.

Moving to CapEx, spending in the third quarter totaled $71 million, including $18 million for our new headquarters.

We are now in our new building, and CapEx on it will almost be completed by the end of the year.

This is the first full quarter of interest expense in the building, as well as the first full quarter of rental income from the five floors [leased.] Next year, we expect CapEx to be significantly lower than this year, and we plan to provide a full year range in December.

The first quarter of 2008, we expect to spend approximately $21-$25 million for the consolidation of our New York area printing plant and $9-$10 million on a major upgrade of our advertising and circulation systems.

CapEx is projected to decline thereafter, and we believe our maintenance level of CapEx is well below $100 million.

In the fourth quarter of last year, we had an extra week that added $50.8 million in revenues, $36.8 million in costs, and $0.06 in earnings per share in the quarter.

More detail is provided in our earnings press release from the fourth quarter of 2006, which can be found on our corporate website, nytco.com.

When we release our fourth quarter results in early 2008, we will show comparisons to the prior year quarter, both with the additional week and without it.

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.

This year, we are exceeding our goal of reducing costs $65-$75 million, excluding inflation and buyouts.

As Janet mentioned, 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.

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

Some of the anticipated savings will come from initiatives we have mentioned, such as the consolidation of our New York area printing plan, 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'd be happy to answer your questions.

Thank you.

At this time, if you'd like to ask a question, you may do so by pressing the star key followed by the digit 1 on your touch-tone telephone.

Please make sure that your mute function is turned off to allow your signal to reach our equipment.

One again, ladies and gentlemen, that's star 1 for questions.

We'll pause for a moment to give everybody a chance to signal.

We'll go first to John Janedis with Wachovia.

Hi.

Thank you.

Good morning.

A couple of questions.

Fist, there has been clearly some talk in the press about foreclosures and economic weakness in the Boston area being ongoing.

When you look at business at the Globe, do you think we're past the bottom there now that the comps are gone, as you mentioned?

And, anecdotally, can you give us a sense of what advertisers are telling you there?

And then I have a quick follow-up.

There are some categories, John, that are performing nicely at the Globe, for example, motion pictures.

A lot of the national categories did well recently -- motion pictures.

The banking industry is really showing signs of strength.

Telecommunications, pharmaceutical, healthcare, those are all areas that we saw some very strong performance in the third quarter and even a little bit earlier in the year, as well.

Where we have seen the weakness is really in the classified categories -- help wanted, real estate and automotive.

In regard to retail -- as I noted, the retail sector, the food and drug and the computer and the apparel areas were softer in this quarter, but there are openings in the fourth quarter, and more importantly, the very beginning of next year, that will bring in larger advertisers.

Neiman Marcus and Nordstrom have already come in with their opening of the Natick Collection, but with several malls opening next year, there will be other entries into the market.

That still remains challenging right now, but the advertiser base increasing would give us an opportunity, we think, to see what we can do in regard to bringing more advertising in.

What we're hearing from advertisers is that they are appreciating the fact that they are able to buy both online and print from the Boston Globe and the Worcester Telegram & Gazette.

There is a full product offering.

They are also pleased to see new products being introduced in the market by the Globe, in particular in that retail category focusing on luxury goods in particular.

Okay.

And as a separate question -- it looks like some of the strength in entertainment has continued into October at the Times, and I am curious if this is a trend you expect to continue throughout the quarter given the release slate that you currently see?

Thank you.

You're right.

We're seeing some continuing strength in the studio category into October.

We had an exceptional September, but I want to remind you that we're up against extraordinarily easy comps in September/October from last year.

So, the strength, I would expect to moderate toward the latter half of the quarter.

And I will remind you again, as I remind myself every single day, we're in a tremendously volatile low-visibility environment.

The environment has not changed.

We've had some good results as you would expect in a volatile environment, as we have a great brand in the marketplace where we continue to bring excellent product to market and outstanding programs to our advertisers.

Thanks, Scott.

I'm sorry, gentlemen, one last question.

I know you referenced the Monster partnership, and I think -- did the Regionals start that partnership first and then it went to the Globe and the Times?

And if so, would you expect to start seeing a ramp at the other properties now in the fourth quarter?

They did start at the Regionals very early -- I should say, very early in the year, in the March/early April time frame, followed by Boston and then followed by New York.

So, I think we are hopeful that, indeed, we'll see some strengths increasing in both Boston and New York as the year progresses.

As I think I noted in my remarks, we have certainly seen very good signs from that partnership.

It is one that, indeed, we think will work very well for Monster and for the Times, as well.

Great.

Thank you very much.

We'll go next to Fred Searby with J.P.

Morgan.

Okay.

Fred's line has disconnected.

(OPERATOR INSTRUCTIONS)

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

Thank you.

A couple of questions -- the first, drilling down a bit more on the national category.

It sounds like it is fairly broad-based.

Or would you say that the bulk of the upside really came from the studio entertainment category?

And I appreciate that there are easier comps in September and October, but you also had some good growth in August.

Any reason why we, I guess, shouldn't see at least positive growth in national for the remainder of the year?

You're correct to observe we had good strength in October -- in August and especially into September.

The categories very specifically that drove that growth for the collection of luxury brand categories, as Janet already mentioned, American and international fashion, nice growth in packaged goods, corporate, hotels, studios, cosmetics, books, education, home furnishing manufacturers.

So, in that respect, it is pretty broad-based.

They're all showing growth in the quarter and especially in September.

The outlook for the rest of the year is continued strength for some of those categories.

The luxury brand, corporate, hotels, studio, home furnishing manufacturers, I would expect to see continuing growth.

The other categories will be flat to slightly down.

So, that's just a reminder that it is a tumultuous, volatile environment that we're in.

We've shown in the last couple months that we can leverage the strength of the brand in the packages we bring to market and we -- programs we developed with our advertising clients.

Just a little bit more in regard to Boston because their national grew nicely in the quarter, as well.

As I said, pharmaceuticals, telecom, healthcare and banking and studios were the major contributors there.

On the banking side, as we have noted before on our call, there is an increased competition in Boston in the banking community, with Citibank going into that market with a projected 30 openings.

There is an increased activity on their part, which has spurred many of the people in the area to do more, particularly B of A with their wealth management.

Some of the smaller banks have also done quite a bit more, Salem Five, Mellon, TD Banknorth, Brookline Savings.

That has helped quite a bit.

And on the telecom, Verizon and Comcast are in a heated competition in that marketplace, and that is spurring quite a bit of spending in the telecom area, as well.

In studio, to the point that Scott made earlier, there has been very good product in the stream thus far in the quarter, and their fall preview did very well for them, as well as the Times.

And then on the classified category, which has been such an area of weakness for a while, the other segment of it stands out as being such a positive growth driver there.

Could you just remind us the size, the relative size of the Other segment of classified?

And then my last question would just be on your decision to stop subscription pricing for TimesSelect, if you can give us an idea of the impact for that and maybe the reasoning behind that.

Sure.

Why don't I take TimesSelect first while we chase down the other question?

Yes.

The TimesSelect business was a good business.

It was a $10 million business.

We had several hundred thousand subscribers paying us, as well as several hundred thousand, 450,000-plus subscribers who [paid] for the Times bundle.

So, the program was a success based on the goal that we set out for it.

On the other hand, when we look at the growth in terms of search refers to nytimes.com now and the tremendous uptick through SEO, which is relatively recent for us - it's the past 18 to 24 months following our About acquisition.

And we also look at the growth of Internet advertisings, as Janet announced, yet another strong quarter.

Over the long-term, we expect to see the scale and inventory benefits that accrue to us through search in SEO significantly outweighing the revenue stream that we had developed in the pay tier.

So, in balance, what we're suggesting is that we fully expect to not only make up but surpass that revenue over time, as we grow inventory on the Web site and continue to see strong advertising growth.

And to your other question, Alexia, it is 4%.

Other represents 4% of the classified.

Thank you.

So, next, we go to Craig Huber with Lehman Brothers.

Yes.

Good morning.

Thank you.

A few things.

I know it is early, but can you speak a little bit about your plans for advertising rates across your major papers for the next -- I believe last year or early this year, you were basically flat with your ad rates on average at Boston Globe and up maybe, roughly, 2% at the Times.

Should we anticipate much difference in that trend here as we think out to next year?

Craig, we're in the process of looking at all of that right now.

It is a bit early for us to be doing that -- for us to be commenting on that.

We certainly are focused on making sure that the rates are in keeping with market.

Okay.

And then just elaborate a little bit further what you meant by your comments of the October trends of your newspaper, if you'll just go a little deeper on the categories, what the significant changes might be versus what you saw in September.

Well, October, we expect to see a growth.

We're seeing growth from the luxury brands categories, corporate hotels, studios, cosmetics, and home furnishing manufacturers, to name a new.

The categories that have been challenges for us throughout the year remain challenges in October.

Department stores, tech, telecom, the classified categories, media category, has been a challenge for us through most of the year, but we expect it to be flat in October.

And then lastly, if I could -- in your newspaper division, your non-newsprint cash costs, were they basically flat in the quarter year-over-year?

Non-newsprint cash costs were up 1%.

In the newspaper division?

Or overall?

I'm sorry.

That's companywide.

Let me get back to you on that.

Okay.

All right.

I'll wait for that.

Thank you.

We'll go next to Karl Choi with Merrill Lynch.

Hi.

Good morning.

A couple of questions.

The first one, just want to, again, clarify the October trends.

Are you saying that you expect continued growth in October but just lower growth compared to September or actually we may still see a decline in October?

And I have a follow-up.

It is still early, Karl, in regard to the month.

There certainly are a couple of weeks still left.

And from all reports, I think we've given you an overview in regard to the categories that we see some strength in and some, of course, that continue to be soft.

So, the volatility of the market in New York and Boston and even in our Regionals really it's very, very hard to predict, and we certainty wouldn't want to overpromise and underdeliver.

It is important to note that -- just to add a little bit to what Scott said earlier in regard to the categories at the Times that are performing well and those that are a bit more challenging.

At the Globe, we are continuing to see studio, banks and telecom perform quite well in October.

And the challenging categories up there continue to be apparel and footwear, home furnishings and real estate.

But again, it is just a bit early for us to be predicting what October would look like and what the quarter would look like certainly.

Just following up on the newsprint, the cash costs in the News Media Group is down 2/10%.

Is there a way to size some of the new products that you talked about earlier, the revenue impact, how much they contributed in the quarter to give us a sense of size?

That would be great.

It is really quite hard.

The fact that we are doing three Fashion Bostons and certainly introducing Lola, and we did six issues, in fact, of Design New England would underscore the fact that these are very successful, and we intend on them being very successful going forward.

They have produced a nice amount of new revenue.

A lot of new advertisers have entered into the Globe with those products.

So, we think that bodes well for good performance from them going forward.

In addition, at the IHT, which is something that I wanted to mention, we are introducing in December T: Style Magazine in the editions of the IHT.

That has done nicely for us.

We have a lot of luxury advertisers, who have embraced that buy, many of whom, of course, are strong advertisers with the New York Times, so they're understanding the strength of the T Franchise, both domestically and international, as well.

Last couple of questions.

Could you give us a preview of what the September ABC stats will be?

And lastly, is there a way to size the restructuring costs at About.com in the quarter?

As far as the ABC, there will be an Audience-FAX, which is a new measurement tool coming out, I believe, the very first part of November that will give you a very good read for all newspapers, not only in regard to the strict circulation number but also the full audience number, which takes into effect -- takes into account, rather, our online audiences, as well, which is definitely the way newspapers are selling to clients now.

So, I think it is early for us to be out with any information regarding ABC.

And About.com?

I am sorry.

With respect to About.com, let's just parse the expenses in the quarter, so that you fully understand what they were.

They really came in three segments.

The first segment was additional investments, in particular, we had some expenses associated with our launch in China.

The actual launch is taking place in a week or so, but the expenses associated with bringing up the team and actually the business in China were obviously taken in the quarter.

Second, we did have some one-time restructuring charges associated with sales development, developing our display sales operation.

And then third, we do have somewhat higher expenses, as a result mostly, of compensation.

We're in a war for talent, as you know.

The Internet companies across the board are competing ferociously now for technical talent and for sales talent, as well as increased payments to the guides as a result of increased page views.

That's sort of built into the variable cost structure that exists at About.

So, the expenses are cut in parts into those three buckets.

One of the buckets -- and they're roughly a third each.

And one of the buckets is a one-time expense.

So, we should see a little bit of margin compression going forward.

But as we said in our press release, it is a seasonal business, and we expect to see revenues increase in the fourth quarter, as well.

Great.

Thank you.

Sure.

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

Janet, can you give us any additional color on the retail category specifically?

I am seeing that the September number was a little bit of a step-down from what you had seen in July and August.

We've seen some softness in some of the categories that I noted, computer, food and drug, and a little bit in apparel and footwear in Boston, department stores, as well.

But as I've noted, some of the new entries into the market are just beginning to ramp up.

But it does remain a fairly challenging category really for all of our newspapers, the Times, as well.

And Scott can comment on this in regard to their work in the retail category.

But at the regionals, we are also seeing retail under quite a bit of pressure.

Much of that is also, unfortunately, Peter, related to the housing slowdown because of home furnishings and home improvement.

That is the category that is -- those two categories are directly affected by the retail softness.

We had -- at the Times, we had expected to see somewhat better results in September.

The weather seems to be affecting the way that retailers are spending, particularly at department stores.

And it's likely it is already continuing into October and likely going to affect the fourth quarter.

We had -- as I had commented on our July call, we had expectations for some of the previously scheduled Q2 spending to move into the fourth quarter, and so that's what we're looking at right now, with the question of the weather affecting how retailers are advertising.

Scott, do you get sufficient advance look from bookings to have a decent sense of how November and December are going to go?

And I ask because some of the retailers are making noise about store-traffic trends being weaker and therefore potentially being more conservative in spending plans.

The question is a visibility question, and we have some visibility, but advertisers, not just in the retail category but across the board, are very deliberate in the way they spend.

And they're looking for the greatest return on their advertising spend, and they make last-minute decisions, as they change their strategies or adjust to the marketplace.

That's especially true in retail.

The weather is a big factor, as I just mentioned, so that's the volatility side of the low visibility, highly volatile marketplace that we've been describing for a few years now.

Right.

Okay.

Fair enough.

Thank you.

And, Jim, may I ask you one question also, please?

Can you tell us what the FTEs, the year-to-year change was at the end of the third quarter versus a year ago?

And then, also, what should we be thinking about in '08 in terms of sort of some base-level of wage and benefit and inflation?

On the inflation side, I think somewhere in the 2.5%-3% range would be fair.

Our total FTEs in the third quarter relative to last year's third quarter was down 4.6%.

And the 2.5%-3% would include benefits costs.

That's a good range.

Thank you.

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

Thank you.

Just looking at September other revenues, does that include the full -- just for September, the full rental income plus the full revenue income from GateHouse?

If you said that before, I am sorry.

It does include the full rental income.

It does not include the GateHouse revenue.

And when will GateHouse fully come in?

When is the first full month of the revenue?

Should be in October.

October.

Great.

Thank you.

We'll go next to Fred Searby with J.P.

Morgan.

Yes.

Thank you.

A couple questions.

One, just, Janet, in your opening remarks, when you said that you've completed with the sale of the TV stations and the acquisition of About, it sounds like you're pretty categorically not going to look at any divestitures of meaningful size here.

I guess that's what you were saying somewhat poetically.

And then secondly, can you help me understand on About if we strip out the acquisition, just what the organic growth, and if we strip out the one-time items that you mentioned also related, what the operating income growth would have been?

Thanks.

I will take the first question, and then have I'll have Martin give you an overview in regard to the (inaudible) instruments.

I am simply noting, with the remarks earlier, that our divestiture of the Broadcast Group and Discovery Times was true to the statement that we have made all along.

One of our strategic initiatives has been to rebalance our portfolio to focus on enhancing the newspaper brands that we do have, migrating them online and investing in very strong digital properties, as evidenced by the very strong performance of our acquisition of About.

We constantly review our portfolio.

That is just good business.

We constantly, of course, set expectations for the properties' performance, and we will certainly continue to do that in the days to come.

But from a standpoint of our expectations, as far as current properties and certainly the performance of acquisitions, we have set clear expectations for the performance of all.

And on the About, the core growth rate for revenues was 26% excluding acquisitions.

And as I said, I think in an answer to a prior question, if you take the expense number and analyze it, about a third of it is the one-time costs.

The EBITDA contribution from those acquisitions is pretty close to the core margin rate, so it's not dilutive to the margin in any material way.

Okay.

Thank you.

We'll go next to [Catrian Sallen] with Citi.

Hi, there.

Thanks for taking my question.

There has been some discussion kind of in the industry recently about the divergence in unique visitors on some of the news webpages between the numbers that comScore gives and what Nielsen gives.

And some of your competitors have actually been claiming that their unique visitors are a lot higher than what we see from some of these consolidators.

And I am wondering what your opinion is on this, the reason being that a lot of people actually view news Web sites from work, where they might be blocked, their IP address might be blocked behind a firewall or something of that nature.

And I'm just wondering, are you seeing any of this?

And is there anything that you can do to communicate this aspect to advertisers and actually benefit from more of the unique visitors?

The answer is yes.

We have seen this for years.

It has been a problem for the industry for many years.

It has been a particular problem for, as you point out, news Web sites, and in particular, it has been a problem for the New York Times Web site because it not only skews heavily into work locations, it also skews heavily into educational and government institutions, which, of course, also have different URLs, so it is an industrywide problem.

The industry, as a whole, through the Internet Advertising Bureau, the IAB, is working with both Nielsen and comScore to address some of these problems, but it has been an intractable issue over a very long period of time.

And we are doing our best to address it, but these companies -- we obviously don't control these companies.

They're independent entities, and they're going to do what they do.

Having said that, we are bringing, as an industry, a great deal of pressure to bear in order to get these numbers to square more accurately with what we think we're generating in terms of usage.

Great.

And then just a follow-up also on the Internet aspect, can you talk a little about the go-to-market efforts here?

Primarily, are most of your internet advertisers also print advertisers?

So, is this an add-on sale?

Or do you see some unique different customers that are just advertising on the Internet for you?

By way of background, at the newspaper Web sites, about a year-and-a-half ago or maybe a little over a year-and-a-half ago, we fully integrated the digital sales forces and the print sales forces.

So, we went from a relatively small number of Internet sellers, maybe 40 or 50 sellers at the New York Times Web site and a much smaller number in Boston, to a significantly larger number of sellers across both channels, so print and digital.

And this had a couple of -- this had a couple of results.

One, it increased our penetration into clients and categories.

And, two, it allowed us to package more forcefully the offers that we were making in the marketplace.

And I think a couple of points here.

One, we were, I believe, the first significant newspaper company to take this action and among the first in the media industry in general.

And, secondly, I think, as you look at our display strain at the newspaper Web sites both in Boston and New York, Boston has had a fantastic year in display and so has New York.

I think part of the reason for this is that we have been able to go to clients, advertisers with these creative ideas.

And in some cases, obviously, we respond to the marketplace.

In some cases, they're packages of print and digital, and in other cases, they're digital-only advertisers.

A good example, I think, of a digital-only campaign that just ran was probably the American Express campaign on TimesSelect, which just ran it.

And, Chanel, you may have noticed if you have used the Times Web site, Chanel did a wonderful little campaign surrounding our flag on the home page, where they actually were advertising a watch, and the time actually changed as you went back to the Web site -- changed accurately with the time.

Tiffany & Co.

just launched its new Web site on our home page.

So, a variety of different campaigns are running back and forth.

Of course at About.com, it is a very, very different story.

They don't have a print product, so that's a native Internet sales force.

As I noted earlier, we've invested in the quarter to significantly bolster that sales force going forward in order to keep these (inaudible) 35% in the quarter.

So, we need to continue to keep these revenue growth rates up.

Google CPC stopped -- it's performing much better than it did earlier in the year, but display is now carrying an increasing burden, as well.

So, those are Internet-only packages.

Great.

Thank you.

And at this time, there are no further questions in the queue, Ms.

Mathis.

I would like to turn the conference back over to you.

Thank you very much for joining us today.

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

Bye now.

Thank you, ladies and gentlemen, for your participation.

This does conclude today's conference call.

And you may disconnect at any time.