New York Times Co (NYT) 2008 Q1 法說會逐字稿

Good day and welcome the The New York Times 2008 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 introduction I'd like to turn the call over to Ms.

Catherine Mathis.

Please go ahead.

Thank you and welcome to our first quarter earnings conference call.

We have several members of our senior management teams 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 2007 10-K.

Our presentation will also include non-GAAP financial measures and we have provided reconciliation to the most comparable GAAP measures in our earnings press release which is available on our corporate website, www.nytco.com.

An archive of this call will be available on our website as will a transcript and a version that is downloadable to an MP3 player.

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

Thank you Catherine and good morning, everyone.

Today we announced the results of a challenging quarter one that showed the effect of a weaker economy.

As we move ahead into a year that will post continued challenges for everyone in the media industry, we can assure you that no matter how the economy shapes up our drive and determination is to continue the hard work in which we've been engaged to transform the The New York Times Company.

We are guided by a strategy designed to the demands of the marketplace that has been reconfigured technologically, economically and geographically.

There are four key elements to our strategy introducing new products and services both in print and online, aggressively managing our cost, rebalancing our portfolio of businesses both by making acquisitions and by divesting properties that no longer meet their financial targets or fit strategically within the Times Company and building our digital research and development capability.

We undertake these actions with a goal of increasing the value of our Company for our shareholders.

Underlying our strategy and central to the mission of our Company is our quality journalism.

Last week our news organizations were recognized for their outstanding coverage with three Pulitzer Prize.

Two at the New York Times for investigative and explanatory features and one at the Boston Globe for criticism.

As a Company we have won more Pulitzers than any other news organizations we strive to be the leading source of great journalism that consumers can access wherever and whenever they want and even in some ways they may not have yet envisioned.

We do this in print and online, on mobile devices, in text, graphics, audio, video, and even live events.

Because of our high quality content, we have very powerful and trusted brands that attract educated, affluent and influential audience.

They are a true competitive advantage as we move into an increasingly digital world.

Turning now to the quarter, EPS from continuing operations was $0.00 per share compared with $0.14 in the first quarter of 2007.

In the first quarter we had a non-cash charge of $18.3 million or $0.07 per share for the write down of assets for a systems project.

To decrease capital spending the Company reduced the scope of a major advertising and circulation project which resulted in the write down of previously capitalized cost.

In addition, we had a favorable adjustment of $4.6 million or $0.03 per share.

In the same quarter last year, we had an unfavorable tax adjustment of $4.5 million or $0.03 per share.

Excluding the non-cash charge and the tax adjustments EPS from continuing operations was $0.04 in the first quarter of 2008 compared with $0.17 in the first quarter of 2007.

Operating profit before depreciation amortization and the non-cash charge was $66.4 million compared with $98.9 million in the first quarter last year.

Moving to revenues, total revenues for the Company declined 4.9% with ad revenues down 9.2%.

Circulation was up 1.9% and other revenues up 7.2%.

Ad revenues at the News Media Group decreased 10.6%.

Performance varied by category with national advertising down 3.8%, retail down 11.1%, and classified down 22.6%.

At the Times Media Group ad revenue decrease 6.9% in the quarter.

National print categories that performed well included financial services which benefited from bank advertising, directed at small businesses and retail customers and mutual funds spending.

Media, where cable and network television stations promoted new series and election coverage and international fashion which saw increased paging in the spring Tee men's fashion and which made spring Tee women's fashion a breaking issue.

Both issues had a significant number of new advertisers.

In total luxury print advertising which makes up about 11% of the Times Media Group add revenues increased in the low single digits.

The national print categories where we saw the largest decline were telecommunications as wireless carriers reduced advertising, transportation as international and domestic airlines cut back their spending due to a rise in fuel cost and national automotive which saw advertising decline from domestic car manufacturers.

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

Retail advertising revenues were down due to decreased advertising from department stores, home furnishing stores and mass market advertisers.

New products benefited us in the quarter, including a new section on wealth in The New York Times and a new magazine devoted to style from The International Herald Tribune.

The New England Media Group advertising revenues decreased 16.3%, ad revenues in the national category declined in the first quarter as a result of lower financial services, telecommunication, national automotive, and travel related advertising.

Retail advertising revenues decreased due to weakness in home improvement, computer office supply and home furnishing advertising.

Department and discount stores increased their advertising in the quarter.

Overall, classified advertising at the New England Media Group was soft in all three major areas recruitment, real estate, and automotive.

As in other U.S.

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

New products targeting luxury categories helped offset some of the ad renew declines in the quarter.

Among them, our Fashion Boston and a new publication called Lola, which covers local restaurants and shopping.

Both of these publications have attracted new national and local advertisers.

At the Regional Media Group advertising revenues decrease 17% mainly due to lower levels of classified advertising.

Real estate recruitment and automotive advertising declined significantly.

Much of the decline was related to the downturn in the Florida and California housing market which we began to see in the fourth quarter of 2006.

It has affected not only real estate but recruitment and retail advertising including the home improvement, home furnishings, and department stores categories.

About two-thirds of the ad revenues of the regional media group came from newspapers in Florida and California.

Total circulation revenues were up 1.9% in the quarter mainly because of higher home delivery and news stand prices.

The The New York Times increased its price in the third quarter of 2007 the globe increased its news stand price in February of 2008.

Overall the times and our other newspapers are executing a circulation strategy that rebalances the copy mix away from less profitable circulation.

As we execute this shift we are seeing copy declines, but by pursuing this strategy we have realized and will continue to realize significant benefit to our expense performance.

The number of people who subscribe to The New York Times for at least two years surpassed 800,000 for the first time in 2007.

That represents 90% of The Times subscriber base.

Similarly, The Boston Globe has a core group of approximately 340,000 readers or about 85% of their subscription base who has been subscribers for more than two years.

These metrics speak to our brand loyalty and the continued strength of the print medium.

In January The Times opened another national print site in Dallas and in March it began printing in Philadelphia.

We expect each of these sites will reduce distribution and other costs as well as improve circulation.

Other revenues at the news media group rose 6% as a result of rental income from space we leased out in our new headquarter and additional commercial printing revenue.

In the fourth quarter of 2007, 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.

At our digital operations our strategy is delivering strong revenue growth which we believe will be key to our success for many years to come.

In the Internet arena we are focusing on three key levers attracting more users, deepening their engagement and then monetizing their usage.

In total our digital businesses grew nearly 12% in the quarter and generated $82.9 million or 11% of the Company's revenues.

Internet advertising revenues increased 16% in the quarter.

The About Group had another strong quarter.

Total revenues grew 25% to $28.2 million because of increased cost per click advertising and the acquisitions of ConsumerSearch.com and UCompareHealthCare.

Excluding acquisitions revenues grew approximately 16%.

Operating profit before depreciation and amortization for the About Group rose 9.5% in the quarter to $12.6 million from 11.5 million.

The ongoing development of content verticals across all of our websites has helped The Times Company become the (inaudible) most visited parent company on the web in the United States with 50.4 million unique visitors up in March -- in March of approximately 16% from March of 2007.

Our reach represents nearly 23% of the online audience in the United States.

Last month Nielsen Online again ranked NYTimes.com the number one newspaper website a position it has long held.

At 18.9 million unique visitors in the United States NYTimes.com is nearly twice the size of the next newspaper website.

Like its print counterpart NYTimes.com excels at reaching several audiences highly converted by advertisers.

It's attracting a growing number of young people.

One in six college students visit our website and between March '07 and March '08 NYTimes.com added more than 1 million people, 18 to 34 years of age.

According to Dynamic Logic an independent research company advertising on NYTimes.com is over 30% more effective than the industry average in building purchase intent among top management including C level executives, EVPs and SVPs.

We believe the effectiveness of ads on NYTimes.com enables us to command higher rate for our display ads.

In this area no media company can afford to be an island and we are pursuing relationships with leading web and broadcast entities.

In November our Regional Media Group entered into a new agreement with Yahoo!

to provide advertising and services to that group's website and the website of the Worcester Telegram & Gazette, which is part of our New England Media Group.

At the beginning of this year CNBC and The New York Times entered into a digital content sharing agreement in the areas of business and technology including finance, economics, money management and personal finance.

And in February, four media companies including The Times Company created a new online sales organization called Quadrant One for premium advertisers seeking high quality local audiences and national reach.

The websites associated with the New England and Regional Media Groups are participating in this network.

We will continue to look for ways to work with other organizations that can strengthen our business.

Looking at the balance of 2008, we see continued challenges for print advertising in a faltering economy.

In April the rate of decline in advertising revenues is expected to be in the mid single digits.

This is an improvement from our March performance and is due mainly to shifts in the timing of Easter and in the publication of Key magazine.

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 increasingly 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 our expenses in the first quarter.

Operating cost excluding depreciation amortization declined eight-tenths of a percent because of lower newsprint, outside printing and distribution costs and benefit expense.

These were offset in part by increased stock-based compensation, buyouts, the effect of foreign currency translation because of the euro/dollar relationship and cost associated with our plant consolidation.

Stock-based compensation expense increased $6.2 million in the first quarter primarily because of the shift in the timing of the Company's annual equity awards.

Historically our equity grants were made in December of each year.

In early 2007, the Board elected to make annual equity award in February of each year beginning in February 2008 to better enable it to evaluate performance during the most recently completed fiscal year.

Buyout costs were also significantly higher in the first quarter of 2008 versus the same period last year.

$11.2 million versus $7.8 million, a swing of $3.4 million or $0.01 per share.

While foreign currency translation had a favorable effect on revenues, it increased expenses by $2.4 million in the quarter.

There were also approximately $4 million of nonrecurrent costs associated with the consolidation of our two New York area printing plants.

Newsprint expense decreased 23.4% with 17% of the decline resulting from decreased consumption and about 6.4% resulting from lower prices.

The Times reduced the web width of its printed pages in August and the Globe did so in the fourth quarter.

Further decreasing our newsprint consumption.

These initiatives along with changes at our regional newspapers are expected to result in newsprint savings of approximately $12 million on an annualized basis.

Beginning in the second quarter, we expect to see year-over-year increases in newsprint prices.

Excluding these various items, the equity grant buyouts, currency translation, consolidation expenses and news print price effect, our operating cost before depreciation and amortization decreased approximately 3% compared to the first quarter of 2007.

The revised upward estimate -- we revised our upward estimate from our income from joint ventures mainly because we expect better operating results at the paper mills in which we have interests.

Previously we had estimated 12 million to $16 million we now project 16 million to $20 million for the year.

Depreciation and amortization in the quarter totaled $41.9 million versus $44.4 million in the same period a year earlier.

The decrease was to lower accelerated depreciation for the consolidation of our New York area printing plants which we completed last month ahead of schedule.

Now that the plant consolidation project has been completed we do not expect any additional accelerated depreciation going forward.

We are executing well on our program to reduce our 2007 cost based by $230 million by 2009 excluding the effects of inflation, buyouts and one time costs.

Of this amount, we expect to achieve $130 million in savings this year.

As I mentioned we completed the plant -- the consolidation of our two New York area printing plants in the quarter which we estimate will save $30 million in annual operating costs.

At the same time we have been reducing expenses, we have also been investing in our digital businesses.

This is evident in the About Group where cost increased 31% to $18.6 million from $14.2 million as a result of the acquisition and investments in new revenue initiatives.

While this will initially result in lower operating margins, we believe it is critical to growing the About Groups business over the long term.

Similarly, we are also investing in digital operations of our other websites which we think is necessary to achieve our long-term growth objectives.

Moving to CapEx in the first -- our first quarter expenditures totaled $32.8 million.

As a result of the reduced scope of our major advertising circulation project.

For the full year we expect that our total capital expenditures will be 150 million to $165 million including approximately $42 million for the consolidation of our New York area plants and about $22 million for our new headquarters.

We lowered our guidance as a result of the scope of the systems project Janet mentioned.

As Janet said our income tax rate for the first quarter was affected by a favorable adjustment.

We expect our income tax rate to be between 40 and 43%.

However, there are many factors that can result in significant volatility quarter to quarter.

We are carefully executing and monitoring all expense initiatives and are on track to achieve these savings while continuing to explore opportunities to become more cost effective.

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

And with that I'd be happy to open it up for questions.

Thank you.

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

(OPERATOR INSTRUCTIONS) We'll go first to John Janedis with Wachovia.

Good morning.

Jim, can you give us a better idea on how the $130 million in savings will flow through -- throughout the year and have you identified now all the component and how much is recognized in 1Q?

Well, we did have several factors that I think distort a little bit the first quarter and I gave as much detail as I could.

I think those non-comparable factors were about $23 million in the quarter or incremental over the last year impacted our first quarter by about $16 million.

So we see many of those things specifically the stock compensation and the Edison consolidation will not obviously repeat in subsequent quarters.

We certainly will begin to see the effect of the Edison plant consolidation beginning really in the second quarter, in fact, the Edison consolidation is actually negative to us in the first quarter.

So we'll begin to see that more fully and that the benefits will ramp throughout the rest of the year.

We expect that some of the head count reduction programs that we have put in place recently will begin bearing fruit as we go through the second quarter but will be fully effective in the third quarter.

So as I've said, we are very much on track to get that 130 commitment, and we are executing well.

But clearly the plant consolidation headcount reduction will begin to pick up speed as we get deeper into the year.

So if I'm just thinking of modeling, would maybe three quarters of that being in the second half of the year?

Or can you comment on that?

We are going to continue to see good cost control in the second quarter but I certainly would be looking at third and fourth quarter as accelerating the pace of decline.

On a separate note, can you talk a bit more about March the New England Media Group relatively speaking the change from February was a bit more pronounced than either at The Times or at the Regional Media Group.

If we look behind the Easter impact, what are you seeing there in the market maybe ex classifieds?

We are seeing the financial advertising soften quite a bit, John.

In addition from a standpoint of the department stores, we did see growth in the first quarter in department stores but that is beginning to wane towards the March time frame.

Classifieds is really the major culprit however was real estate, help wanted, and automotive really having the largest impact on their performance.

It's clear in regard to Boston that there are very strong cyclical and secular forces in effect.

Not only is it a very weak economy nationally it's a very weak economy certainly in New England and the media fragmentation up there is really quite pronounced.

So that is affecting pretty much every category of business.

That said, there is progress that has been made in Boston particularly in regard to the cost reduction and the efficiency moves that we've made up there with the new management team that we put in a little over a year ago.

We are very much focused on improvement as you can well imagine in the months ahead.

One last housekeeping question.

The run rate on interest expense from 1Q is around $48 million or os.

Is there something I might be missing to get me to that 50 million to $60 million range?

The run rate for interest expense.

It was 11.7 for Q1 but I think you are talking maybe a 50 million to a $60 million range for the full year?

Let me come back to you on that.

Thank you very much for faking my question.

We'll go next to Barton Crockett JPMorgan.

I wanted to ask a little bit more about just the near term outlook on advertising.

If you average March and April you were down around 8% or so in terms of your outlook for April.

Is there anything you see in May and June that would suggest any type of variance from that two month average trend we've seen most recently in terms of comps or things that you see in the pipeline?

That's my first question.

This is Scott.

I'll start for the outlook from the Times and with my usual caution about very limited visibility and significant volatility.

Clearly the recession is having an impact on spending patterns.

There is significant differences from category to category as I hope you would expect.

I'm not sure that I can -- I've got good visibility into May and June at this point and I wouldn't give you any suggestion that you are going to see something significantly different from that March, April average.

Okay.

Then turning a little bit to the employee buyout cost that you guys had this quarter, can you give us a sense of what we should think about in terms of the balance of the year for spending on buyout cost?

Are we past the bulk of it, do you think, or are there some other lumps that we should look for?

I would say that the second quarter will also be heavy on buyouts, it's often difficult to predict with precision the exact dollar amounts, but the first and second quarter will clearly be the bulk of what we would expect to see, and I would -- and unfortunately I'm going to have to give a fairly large range here, but we are looking at for full year, somewhere in the 30 million, $35 million range.

That's a very fluid number.

You would expect to see most of that in the first half.

Then a final question here and then I'll step aside.

I just wanted to get your comments about one question that was raised by (inaudible) I guess, in this article and portfolio, where he was suggesting that under Murdoch, that the Journal is going to be trying to focus very much more on competing with The New York Times.

I was wondering if you are seeing that?

And any areas where you think you are bumping against them more in terms of editorial coverage, competition for advertisers, if you are seeing anything so far?

I think we've always competed with national newspapers, certainly USA Today and the Wall Street Journal.

We've competed with them for years and we will continue to.

I think that from a standpoint of the coverage, I think that it's clear that the Wall Street Journal is positioning itself quite differently in regard to its overall coverage broadening it very much into the international and political arena and with the launch of their magazine entering into broader lifestyle coverage.

That said, The New York Times has had broad coverage for 156 years and from that perspective we are far advanced in regard to the kind of journalism that we create and the kind of advertising that indeed we bring into our newspaper.

Okay.

Great.

I'll leave it there.

Thanks a lot.

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

Thank you.

Janet, just a follow-up on your comment earlier about The Boston Globe.

Should we expect slightly better performance in April off of The Globe or is it really your comments I guess slightly better performance in April and more really focus on New York Times when you mention the press release at companywide, the advertising trends are a little bit better?

And then also on the Globe, is the price of the Globe in February, could you let us know how significant that was and remind us what percentage of, I guess the single copy sales are.

In regard to the Globe in April, the Easter effect will help the Globe, needless to say it's helping all of our newspapers and I think from a standpoint of retail base up there, I think that will certainly help in regard to their April performance as opposed to their March performance.

They are going through, as I noted earlier many cyclical and secular changes up there and doing a very good job on the cost side which I think you'll begin to see certainly even more as Jim pointed out as the year progresses.

In regard to the price increase, it was a single copy increase in February.

They are, I think quite pleased with the response that they've seen.

The decline in single copy has not been as severe as they had predicted so I think from a standpoint of the overall move they felt as though this was a positive one in regard to circ revenue.

From a standpoint of the overall audience -- hold on in regard to the single copy.

I am just getting the number for you.

I actually have a question on the $130 million for Jim if I can go ahead with while you're looking that up?

It's 25% in regard to single copy.

75% home delivery on the daily and 25% in regard to single copy.

On Sunday it's 70/30.

Thank you.

Just on the $130 million in cost savings which you seem on track to complete this year, how much of that should we expect may be redeployed in initiatives at about on other areas?

Or is it all going to really flow through?

That number -- that number we will deliver ex inflation buyouts and while we are expecting to continue to invest and not just About and additional properties, that will not dilute that 130.

We are expecting to cover that 130 in our initiatives.

Okay.

Just one last one I'll sneak in.

Of the stock based comp expense that was $6.2 million in the quarter, can you let us know how much of that was that one-time-ish from the move from December to February?

Substantially all of it.

Okay.

Thank you.

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

Good morning.

Couple questions, first, a few weeks ago you announced that you were moving 8 to 9% of your editorial staff at your flagship newspaper.

I was wondering, middle last year when you put out that $230 million target to take out cost over the 2008, 2009 time period, was that in your original thinking?

Last July, that you were going to take out a roughly 8 to 9% editorial staff at this stage?

I'm not sure where you are getting 8 to 9%.

I think it was 100 on -- I'm not sure that's the right number.

What is the right number then?

Essentially it's in that number.

Was that -- I'm just curious, was that part of your original thinking last July when you put out this $130 million target for this year?

We certainly had anticipated reducing head counts across the organization to get to that number.

The editorial staff that seems very taboo, and rightly so, your guys' flagship paper?

That is not additive to the 230.

Okay.

My other big question here is you guys recently added two more people to your Board of Directors and I was just wondering given the short time frame is there -- did anything come out of that, in your discussions in terms of any enhancements, or anything that is illuminating to your operation here that is being brought to the party here to help out your operations here, from those two added people to your Board of Directors?

From a standpoint of what you have certainly read and reported on, Craig, The Times negotiated with Harbinger to bring two new Board members on which will take place next week at our annual meeting and our Board of Directors meeting and we are welcoming them and welcoming their insights and their perspectives regarding the Company and what we can do to increase the shareholder value.

There's a lot of common ground that we feel as though we have with these directors, the other two that are coming in as well that were nominated by the Company in regard to what we've done strategically with the Company.

It is clear that we agree with them and they agree with us in regard to accelerating our focus in regard to the digital world and our strength in that.

It's also very clear that we, as we have rebalanced our portfolio they are in agreement that rebalancing our portfolio is an important part of how we are looking at our Company going forward and what we have done in the past.

So I think there's a great deal of common ground that we already have, and I think that we can expect -- you can expect the Company to focus on increasing shareholder value just as we have in the past.

I appreciate that.

I'm just wondering, has there been anything additive though, to what you guys would have already done on your own?

That you guys have picked up so far from adding these two folks?

From a standpoint of similar mindsets in regard to the investments and acquisitions we have made, the focus in regard to cost reduction and productivity and efficiency it is very similar to what, to be honest, the Company has been doing day in and day out for a number of years now.

There isn't anything new.

No.

I would just add to that.

They are not actually on the Board today and they will join the Board through the process that everybody else will.

I think it's a little early to start making judgments there.

Last question.

On About.com, the contract you have with Google, I'm just wondering, what year does that contract with Google expire?

That contract was just renegotiated in the fall and it's a five-year contract.

Four-year contract.

I'm sorry.

Great.

Thank you very much.

We'll go next to David Clark, Deutsche Bank.

A couple of digital questions.

First, you saw a strong bump in uniques at TheNewYorkTimes.com in the first quarter, presumably due to very strong interest in your political coverage.

What is the character of that surge in uniques?

Are they mostly one-off, transient readers coming from news aggregators, and are those readers valuable to advertisers?

Can that kind of traffic surge be effectively monetized?

Actually, let me talk about the traffic gains at NYTimes.com because the political piece is just one part of the story and I think it's actually a minor part of the story.

The much more important part of the story began last fall when we brought the pay wall down from Time Select and we began to optimize all of the articles or most of the articles in the Times database, not just the current news article but the archives as well for search.

Search has become, as you all know the dominant portal or the dominant entryway into the web for many people.

And so it's very important for a Company with the sheer number of article that we have, I think we have something like 16 million or 17 million articles to make sure that those articles are visible to search.

And over the last six months we've executed on that promise, so what you are seeing for the first two months of the year which I think all the data we have at this point, we are seeing about a 33% increase in paid views and about a 56% increase in uniques.

So that's the strategic backdrop to those very massive increases both in terms of usage and in terms of page view growth.

The page view growth itself is obviously something that we intend to monetize and we monetize it in two ways, both through our premium display sales force which obviously gets the best rates, and as Janet alluded to in her opening, we do get very significant higher rates than most websites do in the average and we also monetize it through relationships with a broad variety of ad networks.

So each page you almost have to look at each page as its own little business in a way.

Depends on the category, it depends on certainly how many people have viewed it, and I wouldn't want to generalize and say that there's one way to think about monetizing those pages.

But they are not for the most part political coverage.

That's very helpful.

Just to follow-up on that, how is the display piece -- how fast is the display piece at the NYTimes.com growing right now in terms of revenue?

The first quarter grew about 23.8% and that is true across the media group websites.

We were growing in that range in Boston and at the regional group as well on display.

We are also very -- I should say happy about what's happening in April on the display side of NYTimes.com as well.

So those revenue lines are very very healthy at the Times Company and you have to keep in mind that the governor on some of them have to do with some of the results and help wanted as Jan indicated at the outset.

At The Times Company it is a much much smaller percentage of our revenue than it is in a typical newspaper Company.

It's getting smaller by the quarter by the way.

Okay.

And then could you talk about the benefits that you are expecting to see from Quadrant One and then also from an advertiser perspective how is Quadrant One better for them for doing a national ad buy than many of the other national ad networks that are out there?

Such as Centro.

What we expect to see from Quadrant One as you've sort of answered your own question.

It's a way for advertisers to buy nationally across a variety of websites and to some extent to target specific geographies in that aggregated buy.

So we expect to see benefits because we'll see more national advertising flowing to those websites.

It's pretty much that simple.

My question would also be, what is from an advertising perspective, what market niche is Quadrant One filling that couldn't be fulfilled by Centro or some of the other national network?

That's a complicated question.

The short answer is quality content.

Okay.

Most of the ad networks that exist today, advertising.com is the best example, provide inventory across thousands and thousands of websites and that inventory is very uneven in terms of its quality.

That's why for the most part direct response advertisers use those networks because they don't care as much about the branding side of the equation as they do about simply arbitraging the direct response results, whereas as brand advertising moves over, I think there's going to be a lot more attention to the character of the web page, the brand that it's sitting on, the proximity to that brand and the quality of the content.

And one of the things that Quadrant One can assure all of is advertisers is that 100% of the pages that the advertiser was going to run in is running against quality content thus for by a news room.

So it's really a quality story.

Thank you.

Very helpful.

Certainly send needs of use story as well, obviously to the point, before you can buy very flexibly across a variety of these quality websites.

Great.

Thanks.

Sure.

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

I have a few questions here.

One, I wonder if you could refresh us, our memory as to how big is the airline category for the Times and advertising category, and also how did the studio entertainment do in the March quarter?

I presume it was down.

And a third question, a really quick one, on corporate expense.

I presume the increase in the quarter was due to the stock-based compensation.

Is there a way to isolate the underlying increase?

The corporate expense is a big part of that is stock-based compensation.

There's some small contribution such as consulting fees, but principally stock based compensation.

We don't have a distinct airline category.

It's part of a larger travel category which includes all transportation segments and hotels among others.

That category was down in the first quarter.

It's very economy sensitive, if you will, and I'm sure you are familiar with what is going on in the airline segment itself, which is probably what is behind your question.

Studio was down slightly but I characterize it as relatively stable.

How big was the contribution from the travel category overall then?

All of those pieces combined is in the mid single digits of our revenue base.

And a follow-up to actually Martin's comment can you give us a break out of the online advertising revenues by category in the quarter?

Yes, I can do that.

For the Company, that is -- the overall -- the display business grew 15.5% in the quarter.

And as I've said at the News Media Group that line grew about 24%.

Classifieds actually declined about 1.9% in the quarter.

So that total advertising grew 16% in the quarter.

And the spread between display and classified in the quarter?

The split between display and classifieds.

Yes.

I have that as well.

I don't know that I have for the Company but I have it for each of the properties.

At NYTimes.com display for the quarter was 70% and classified was 27%.

Other revenue was 3%.

And in Boston -- this will just take me a second to bring this up.

Sorry.

The display business in Boston was 40%, the classified business was 58% and other revenue was 2%.

So those are the two major news website.

I don't have a breakdown for the regional websites but we can get you that.

That's fine.

Great.

Thank you.

Sure.

We'll go next to Edward Atorino, Benchmark.

Jim, you gave some numbers on the other charges beside the ones outlined in the press release regarding the consolidation and the other ones.

Would you just mind repeating those?

Most of it is in the press release.

The number that might not be is the Edison plant consolidation charges which is nonrecurring at $4 million.

The impact on translating our foreign operations was $2.4 million.

The stock compensation timing we do is about 6.2.

That's in the -- so it's 4 and the 2.4, okay, thanks.

Thank you.

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

Jim, the -- just so we get a better understanding how you are thinking about the cost dynamics.

How do you benchmark the underlying cost inflation that you think you face in the business?

We think of that number in somewhere around the 3% range overall.

That would include or not included newsprint?

That would exclude that.

We're not fully, we have a -- it's very difficult to predict that number.

I think our core non-newsprint base cost we think of it about 3% and then the mark -- whatever the market dine nicks are different.

So thinking about your cost basically up 3 minus 1.30, whatever happens with newsprint?

We have said one time cost.

We don't see things outside of buyouts as being material and I quite frankly don't see anything beyond the $4 million we incurred on Edison as a meaningful issue and getting to that cost reduction.

And then anything new on thinking about monetization of the building?

I have nothing new to report, all the issues continue to be debated and they are all on the table and e obviously have to be sensitive to the market conditions and the credit markets as well.

Got it.

Then Janet, the third plank of the strategy in terms of rebalancing portfolio, you've obviously done a ton of stuff over the course of the last couple of years.

So does the pace of activity, do you think in terms of helping us understand how the evolution of the Company goes continues at a high pace in here and I guess relevant to earlier points, the change in the Board is that a catalyst for further acceleration in activity in terms of rebalancing?

You know, Peter that we don't comment on acquisitions or divestiture but you also know that we are a very disciplined and constantly evaluating the portfolio not only for performance but for a strategic fit and rest assured we will continue to do so.

It's just the way we do business.

I think it's also important to note that we were the first in the industry really to start on a very focused march towards rebalancing the portfolio with the acquisition of About in March of 2005 and then certainly with the divestiture of our Broadcast Group that have gone at a very very good price at the top of the market and the sale of Discovery Times and QEW, it's clear that we have been and will continue to be on a march to make sure that our portfolio is balanced in way that will increase shareholder value.

When we look at all of our properties we are looking for improved results.

We are looking for very good cost management, and we are going to continue to do that going forward.

I think that's one of the points that I made earlier in regard to our two new Board members that the strategic direction that has been outlined is very much in line with what we have done, increasing our digital holdings and certainly rebalancing our portfolio.

Sure.

Great.

Thank you.

Specifically Janet or maybe Martin, in terms of acquisition opportunities not specifically but acquisition opportunities as you see them in the Internet market space, is there much out there and have the valuations become more interesting in the context of the market connection?

There is a lot out there, but it is very very hard to find deals that are -- let's just say, that would produce a great deal of cash flow.

There are a lot of web 2.0 companies looking for exits now, but very few of them have the kind of revenue or cash flow that we would look for to have a meaningful impact on our business.

On the other hand, we continue to mine the marketplace for every possible good -- good deal and we continuously look at these things.

If I might, going back to Karl's question about revenue growth, I should just add that our CPC line grew about 47% in the first quarter.

That's how you get to the 16%.

I neglected to give you the CPC growth rate which is a substantial number.

Martin, a lot of the trends -- and recently a fair number of smaller transactions have begun by NYT.

Is that probably what we should look for going forward?

I think from a standpoint of the history, that is exactly what has happened, bolt-ons and tuck-ins either for About or for NYTimes.com that can certainly increase the traffic and consequently the ad inventory.

We are very conscious of looking at acquisitions that will create shareholder value and certainly give us a stronger revenue stream and stronger traffic but we are going to remain very disciplined in regard to looking at them from a financial perspective, Peter.

Great.

Thanks Janet.

There are no further questions Ms.

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

Thanks so much for joining us today.

If there are any other questions, don't hesitate to call.

Bye now.

This does conclude today's conference.

Thank you for your participation.