New York Times Co (NYT) 2008 Q2 法說會逐字稿

Good day and welcome to The New York Times second quarter 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 introductions I would like to turn the call over to Ms.

Catherine Mathis.

Please go ahead, ma'am.

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

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

And they include Janet Robinson, our President and CEO; Jim Follo, our Senior Vice President and Chief Financial Officer; Martin Nisenholtz, Senior Vice President, Digital Operations; Denise Warren, Senior Vice President and Chief Advertising Officer for the New York Times Media Group; and Roland Caputo, who is the Chief Financial Officer for the New York Times Media Group.

Denise and Roland are sitting in for Scott Heekin-Canedy who is traveling today.

Our discussion 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 reconciliations to the most comparable GAAP measures in our earnings press release which is available on our Corporate website at www.nytco.com.

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

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

Thank you, Catherine, and good morning, everyone.

The results we announced today reflect both the slowdown in the United States economy as well as secular forces affecting our industry.

Second quarter EPS, from continuing operations, was $0.15 per share compared with $0.15 in the second quarter of 2007.

We had no special items this past quarter, but in the comparable quarter last year we had two, a $0.29 loss on the sale of our New Jersey printing facility and a $0.15 gain on the sale of our radio station.

In total, these special items reduced EPS by $0.14 per share in the second quarter of 2007.

Therefore, excluding the special items, EPS from continuing operations was $0.29 in the second quarter of last year.

Since most analysts exclude buyout costs in making their EPS estimates, I should point out that ours totaled $0.11 in the second quarter of 2008, $0.09 a share more than we recorded in the same period last year.

In the midst of the softening economy, in the litany of tough numbers that it spawned, it is no surprise that our business is challenged.

In light of that, we want to make sure that several key points that are important to our future are not lost.

First, continued strength of The Times brand is evident in our ability to raise home delivery and newsstand prices, which in turn is reflected in the growth of our circulation revenues.

It is also reflected in our ability to increase our print revenues in the luxury advertising categories.

Second, as we continued our transformation, Internet revenues grew strongly and our digital innovations position us well for the future.

And, last, we have been and will continue to be very disciplined in reducing costs.

This quarter our operating costs, excluding depreciation, amortization, and buyouts, were down 3.6% in the quarter.

Jim will discuss in greater detail the many steps we are taking to continue to drive down costs without detracting from the quality of our journalism or our ability to achieve our strategic objectives.

Turning now to revenues - total revenues for the company declined 6%, with ad revenues down 10.6%, circulation revenues up 2.5%, and other revenues up 2.5%.

Ad revenues at The News Media Group decreased 11.8%, with national advertising down 5.7%, retail down 9.5%, and classified down 24.4%.

At The Times Media Group ad revenues decreased 9.5% in the quarter.

National print categories that performed well included live entertainment, which has been helped by increased concert and Broadway theater advertising; corporate, which benefited from advertising from energy companies; and fashion jewelry, which saw increased revenues from both fashion and watch advertisers.

In total, luxury print advertising, which makes up about 10% of The Times Media Group's advertising revenues, increased in the low single digits, in part due to the performance of our T-branded Sunday supplemental magazine.

The national print categories where we saw the largest declines were telecommunications, which decreased as wireless carriers reduced their advertising; studio entertainment, which was up against very strong growth in June of 2007; and technology products, which declined as a result of fewer new product campaigns.

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

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

At The New England Media Group, advertising revenues declined 15.1%, national ad revenues decreased in the second quarter, with the largest declines in the telecommunications, pharmaceutical and package goods, and travel categories.

Retail advertising revenues decreased due to weakness in department store, home improvement and apparel advertising.

As was true at The Times, live-entertainment advertising increased 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 US cities, real estate advertising declined in Boston, due to the soft housing market.

In The Regional Media Group, advertising revenues decreased 16%.

Approximately three quarters of the decline was due to less classified advertising.

The declines this quarter were again concentrated at our newspapers in Florida and California, which have been deeply affected by the troubles in the housing market.

Total circulation revenues were up 2.5% in the quarter, mainly because of higher home delivery and newsstand prices.

The Times increased home delivery and newsstand prices last July and earlier this month.

It increased home delivery prices an average of 4.5%.

We plan to increase the daily newsstand price of The Times from $1.25 to $1.50 effective August 18th.

The Globe increased its newsstand price in the metropolitan Boston area from $0.50 to $0.75 in February.

Other revenues at The News Media Group rose 1.4% as a result of rental income from space we lease out in our new headquarters, and additional commercial printing revenue.

In August, we began leasing out an additional floor in our new building, bringing to six the number of floors leased.

In the fourth quarter of 2007, The New England Media Group began its multi-year 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 important 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 13% in the quarter and generated $91.3 million, or 12.3% of the company's revenues.

Internet advertising revenues generated 18.3% in the quarter.

The About Group had another strong quarter.

Total revenues grew 15.8% to $28.6 million because of increased cost-per-click advertising and the acquisition of ConsumerSearch.com in May of 2007.

The ongoing development of content verticals 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 47.2 million unique visitors in June, up approximately 10% from June of 2007.

Our reach represents nearly 30% of the on-line audience in the United States.

NYtimes.com continued to show exceedingly strong traffic growth as we provided access to the content that was formerly part of Times Select, the paid product we made free last September.

And we have accordingly benefited from the growth of Search as the dominant entryway to the web.

According to Nielsen Online, in June, the number of unique visitors totaled 17.7 million, up 41%.

The audience of NYtimes.com is nearly twice the size of the next newspaper website.

For the month of June, Nielsen Online again ranked NYtimes.com the number one newspaper website, a position it has long held.

In the quarter, display advertising at NYtimes.com was particularly strong, given our robust traffic growth, our investments in our verticals, and our success in selling innovative new formats.

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

To date in July, we have seen the effects of the deepening economic slowdown, particularly in categories sensitive to the price of oil - airlines, hotels and autos.

And we expect that this will continue for some time to come.

These are difficult times in the media industry.

We believe, however, that we have many strengths that are helping us successfully transform our company.

We have strong and trusted brands that we are leveraging into new products in print and on-line.

Our digital businesses have been growing at double digit rates.

And we are increasing the share of our revenues and profits that come from our on-line businesses.

We have a proven commitment to expense reduction and are executing well on our expansive program to reduce our cash cost base.

Let me turn the call over to Jim, who will tell you more about that.

Thank you, Janet.

We continued to tightly manage our expenses in the second quarter.

Operating costs, excluding depreciation and amortization and buyouts, declined 3.6%, mainly as a result of lower compensation costs and newsprint expense.

Depreciation and amortization in the quarter totaled $32.6 million versus $46.6 million in the same period a year earlier.

The decrease is mainly due to the fact that we had no accelerated depreciation this quarter.

In the second quarter of last year, we had $13.1 million in accelerated depreciation with the consolidation of our New York area printing plants, which we completed in March of this year.

As Janet mentioned, buyout costs increased in the quarter and totaled $27.6 million, versus $5 million, a swing of $22.6 million or $0.09 per share.

You will note in our guidance that we increased the amount we expect to spend on buyouts this year from a range of $30 million to $35 million, to a range of $40 million to $50 million.

In the first half of this year, we spent a total of $38.8 million on buyouts.

Compensation costs declined in the quarter due to lower incentive compensation and a reduced work force.

Newsprint expense decreased 10.1%, with 16.8% from lower consumption, offset in part by a 6.7% increase in prices.

The Times reduced the width of its printed pages last August, and the Globe did so in the fourth quarter, further decreasing our newsprint consumption.

In May, we reduced the width of our Florence, Alabama paper to a 44-inch web-width and we are planning to move six other regional newspapers to that size.

These initiatives are expected to result in newsprint savings of approximately $12 million on an annualized basis.

We are executing well on our program to reduce our cash cost base.

We had previously stated that we expected to reduce our 2007 cash cost base by $230 million by 2009, excluding the effects of inflation, buyouts and one-time costs.

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

As a result of our continuous cost reduction efforts, we now expect to exceed these amounts.

We believe that our second-half 2008 cost performance will continue to be strong, despite the effect of increased newsprint prices.

The progress we have made on our cost reduction measures has occurred across the company.

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

We have successfully lowered our circulation expense by reducing the number of discounted copies and focusing on more profitable ones.

At The New England Media Group, we consolidated The Globe Direct mail operations into the Worcester Telegram and Gazette production facility and are moving Boston.com into The Boston Globe's offices.

In our Regional Media Group, we consolidated our Gainesville and Ocala mailrooms.

The Gadsden Times outsourced printing of the paper to a new printing facility owned by a third party.

As we are -- we are also pursuing other production efficiencies.

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

This is evident at The About Group, where costs increased to $19.5 million from $16.2 million, in part, the result of investments in new revenue initiatives.

In addition, ConsumerSearch, which was acquired in May 2007, recorded costs for the entire second quarter of 2008 and only part of the quarter in 2007.

While our new revenue initiatives will initially result in lower operating margins, we believe they are critical to growing The About Group's business over the long term.

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

Moving to CapEx, our second quarter expenditures totaled $36 million and in the first half of the year our CapEx amounted to $68 million.

For the full year we expect that our total capital expenditures will be between $150 million and $165 million, including approximately $35 million for the consolidation of our New York area plants and about $22 million for our new headquarters.

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

And with that, we would be happy to open it up for questions.

Thank you.

(OPERATOR INSTRUCTIONS) And we'll take our first question from Alexia Quadrani with JP Morgan.

Thank you.

Just a couple of questions.

First on the digital side, you -- you continue to have very good growth in the on-line advertising businesses.

Could you give us a sense of how pricing is trending on the display side of the business there?

Are you seeing any pushback now that the budgets are getting bit more tighter?

I -- I will start out, Alexia, it's Martin, and then turn it over to Denise for some commentary at NYtimes.com.

In general, pricing has held firm.

In fact, through the first half of the year, we've seen reasonably decent price increases on the major display units across the company.

I -- you know there are -- there has been a bifurcation - that's the way we've been characterizing it in the past - between what I would call premium positions on the web and the more general remnant inventory that exists, and it is characterized, in large part, by banner advertising.

So that bifurcation is meaningful in different ways at our different sites.

At NYtimes.com, for example, we don't see much cannibalization, if any cannibalization, of the premium side, either in rate or in our sell-throughs based on our remnant business, which has been growing quite nicely.

On the contrary, at About.com, we have seen softness in the display categories, in part because we think we have had execution issues there, and to Jim's earlier point, we've invested behind those issues in building the sales team over the last half of the year.

So, in general, to date, I think we've seen a strain on the rate side.

At NewYorkTimes.com about 50% of our overall revenue is priced on a CPM basis and we have seen increases year-to-date, year-over-year in the CPM-priced business.

In addition, as Martin alluded to, we try to maximize all of our revenue and all of our inventories, and we do sell some of our inventory out at the networks and we've seen substantial increases in the CPM that we've been able to generate from the ad networks.

And the fixed price units that we sell, which account for about 30% of our overall revenue, we've also seen rate increases in, as well, this year.

Okay.

Thank you.

And just switching gears over to the print side, you know, looking at the weakness in The Boston Globe, which appeared to have its challenges really before the economy really got tough.

Looking at that, I guess, the performance, year-to-date or in the quarter, do you think at this point the weakness of The Boston Globe is really just economy-driven, or do you think that's still a challenging market longer term?

This is Janet.

I think it certainly is economy driven, and you are right to note that, indeed, their decline started before the economy began to turn.

I think that marketplace has been experiencing more recessionary-like behavior for a longer period of time than the national economy.

And, as we've noted often, because of the strong broadband penetration in Boston and many categories with major advertisers leaving that market in recent years, that has added to the declines, needless to say, that we have seen.

It remains a challenged market.

Our Group up there does some very fine work and is continuing to, in regard to capturing as many dollars out of the market as possible, but it certainly is a challenged area of the country.

And then, just lastly, the remaining buyout expense expected for the year, should we assume that's going to fall into Q3?

It will occur both in Q3 and Q4, about equal amounts.

Thank you.

And our next question will come from John Janedis with Wachovia.

Hi, thank you.

Jim, just as an expense follow-up, I think you said that the -- ex-D&A, and the buyouts, that operating costs were off something like 3.6% in the quarter.

When factoring in the balance of the cuts into the second-half of the year, is that a decent range, if you will, for 3Q and a 4Q -- with the increase in newsprint, knowing that is going higher?

Just to repeat a comment I made earlier - we are going to experience higher and accelerating newsprint price increases in the back-half of the year.

Despite that, we're expecting to see good, strong cost performance.

While we haven't given a specific number, we think that we are getting some benefits of having some -- executed some plans early part of the year that we will have some benefits at the back-half.

So that will give us some benefits that didn't exist in the front-half.

So we continue to be confident in our ability to deliver some good, strong numbers, but I'm reluctant to put out a specific number.

Okay.

And along those lines, is there any kind of impact that you can quantify as it relates to increasing gas costs on delivery?

We look at that often.

I mean, it's easier to do on the distribution side of the business and we think that that could be a couple or a few million dollars.

It is much harder to do when it works its way into vendors who ultimately pass through price increases to us.

So it's really a very hard number to put a precise number on.

Okay.

And just, Janet, I think that historically some of the national auto players and, maybe to some extent, the airlines, were on annual contracts with The Times.

And I'm wondering is that the case for this year and does that mean that you maybe see a pickup in rate if they don't reach frequency during the second-half?

I'm going to have Denise answer that for The Times.

Very few of those advertisers are on contracts at this point in time.

Okay.

And then along those lines, can you help us think about the impact of oil on some of those advertisers, meaning is there some sort of level in price where we could maybe see a recovery from the airlines and others?

It's going to be hard to predict at what level there would be a recovery.

I mean, as of right now, oil prices remain very high and it is impacting industries across the board.

To the extent they remain in the range that they've been in, we expect it to continue to impact their performance across the board.

Okay.

All right.

Thanks a lot.

And your next question will come from Edward Atorino with Benchmark.

Well, I was going to ask the cost question, which has been asked.

On the circulation price hike, would you give -- is that about a $10 million annual rate, if I take 800,000 circ and rate per week, etc?

This is Roland.

It's a little bit more nuanced than that.

We have contractual obligations with wholesalers both within the NDM and outside the NDM.

And the price -- the revenue that we net per copy varies, so we're in the midst of refining our calculations.

But let me say this, in the past we've been very pleased with the bottom line impact of each and every one of our single copy price increases, up to and including the one that we implemented in July of 2007.

And we expect this -- the results of this one to be comparable to those in the past.

Second question, Janet sort of hinted at this, the June trend was pretty bad.

Is July any better, any worse, or can you be specific on that?

I think that -- I'm going to have Denise add to this.

I think it's clear that many of the advertising budgets are tightening up, not to say that they are totally going away.

There may be more opportunity for those to loosen up at the end of the 3rd quarter and the 4th.

But right now, I think people are tightening those budgets and really saving dollars to perhaps use at a later date.

And I think that we have to plan accordingly which is exactly why, as Jim noted, we are continuing to focus very much on the cost side of our business.

Last question, any pop in the studio entertainment with the spate of, looks like, some good movies coming out?

You know, this is -- as you know, we've -- we've talked about this category from the standpoint of it being very volatile in terms of the release schedules and our having low visibility.

The studios will spend when they do have hits on their hands, but it is very hard to project whether or not the slate of movies coming out will be those that they will spend against or not.

So I'm not at liberty, at this time, to give a projection on where we think that's going to go.

They still, obviously, recognize The New York Times as a wonderful place to advertise, to get their message out, so that continues.

But it really is subject to the vagaries of each individual movie and the box office performance and the competition.

Okay, thank you.

Your next question will come from Craig Huber with Lehman Brothers.

Yes, good morning.

Just to be a little clearer, your July comments for your newspapers, are the trends there -- I know we're not done with the month -- are the trends there looking worse than what you saw in June for your two flagship papers, on a percentage basis, year-over-year?

We really can't give you the specifics.

I think from a standpoint of what we've said, Craig, it really is the case.

We see some tightening-up in a variety of categories.

I think the economy certainly has many of the major category clients very concerned.

And I think that you are going to see some softness across the board at all media companies in regards to spending patterns, the newspaper media companies.

And a couple of other nitpick questions.

You talked about coming in with better than $230 million cost savings in total over the next two years.

Can you quantify that or give us a range of how much better - are you talking $20 million, $50 million, or sort of in between?

This is Jim, Craig.

We haven't given a number.

You know, we are in --

Are you willing to now?

And I'm not willing to now, other than we've delivered on our numbers in the past and we will deliver on our comments going forward.

I will only say that we continue our ongoing efforts, and some of the areas that have led to that increase has -- we're continuing to push on the production efficiency side, the circulation efficiency side, unfortunately, on head count side.

We did take up our buyout number from our previous guidance that we gave on the last quarter.

So we're pushing on all buttons and we will continue to do that as long as we need to.

We think there's more, but we're not willing to specifically -- we're not willing to in a detailed way move that --.

Can you give me a sense -- your editorial staff, the size of your editorial staff at each of your flagship papers, how it compares today versus at the end of, say, 2006?

Realize your New York Times, you took out, what, 7.5% or so of the editorial staff earlier this year.

But for both staffs, how much is it down relative to the end of '06?

I can give you the numbers with regard to The New York Times.

In total, at the beginning of the year, we had approximately 1350 in The New York Times newsroom.

As you know, we did announce a buyout earlier in the year for approximately 100 people.

So it is down.

It is still at a very high level.

I should point out also that The New York Times newsroom has access, and we use the reporting of the IHT, as well, which is between 100 and 150 people.

So from a journalistic standpoint our resources are very strong.

I don't have the numbers on The Boston Globe, but if you call me later I can certainly provide them.

Do you have the end of '06, as well, for The Times?

Basically, in February we announced the buyout, so at the beginning of the year -- I'm sorry, at the end of '06, I don't.

But I would say that the end of '07 was the highest it's ever been.

Okay.

Then lastly, your non-newsprint cash costs in the quarter, adjusting for the buyouts and the one-time items last year, were they down about 4% in the quarter, the newspapers?

It had little impact on the 3.6%.

I think on a pre-raw-material basis, it was actually 3.5%.

I do just want to make one point.

I mean this is the first quarter that we've had a negative impact for newsprint prices.

We have not seen that previously.

So if you were to exclude the impact of prices, our actual performance was about 4.4% better, year-over-year.

And then, lastly, if I could, what should investors use for CapEx for your company for 2009?

You know, we are still in the planning stages for 2009, but we have been very clear that we expect those numbers to be significantly lower than they are this year.

There are three large projects this year that will not be repeating next year.

We've got a fairly significant upgrade, got the building which was completed early part of the year and we've got the Edison plant consolidation.

When you strip all those out, you are below $100 million.

Haven't given more detailed guidance than that, but we expect to keep a pretty tight range on our CapEx going into next year.

Okay.

Thank you.

And next we'll hear from Peter Appert with Goldman Sachs.

Thanks.

Janet, you gave us some color on categories that are stronger and weaker, but I'm noticing a pretty significant deterioration in the ad revenue trends at The New York Times over the last several months.

So at the margin, which are the categories or which are the major advertisers that really cut back most substantially to drive that?

This is Denise Warren.

We did have a weakness in entertainment because of the tough comps that Janet referenced, so I think that is probably impacting the June performance in a big way.

Okay.

Otherwise the trends are fairly similar to what they have been.

Okay.

And my recollection is entertainment is maybe something like 10%.

Is that right?

Yeah, yeah, just about, a little bit higher actually.

Okay.

And then, Jim, in terms of the $130 million cost target for this year, is it possible for you to give us any sort of breakout of the composition of where that $130 million comes from?

You are asking for detail behind the $130 million?

I can certainly talk to you about the categories.

I mean, we've done quite a bit of outsourcing this year.

Our circulation efficiencies efforts has been a very large component of that.

When you say "circulation efficiency," is that primarily just less promotion spending?

It's some promotional spending, but it is also eliminating what we consider unprofitable circulation and the raw materials that go along with that as well.

What I was hoping for was, maybe, you could give us a rough breakout of percent from circ efficiency efforts, versus head count reduction, versus other categories.

You know, I can tell you, Peter, there is not one number that makes up the dominant portion of that $130 million, and there is a long list of items that are on our list.

You know, again, we continue to look at the efficiencies in the delivery elements of our business, consolidation of some of our production facilities.

The web-width reductions have played a meaningful role, as I've said.

The Edison plant closing is a pretty big part of the -- $30 million of that $130 million; web-width is $12 million.

So those are some of the bigger numbers in there.

And then there's, again, a very long list of additional items, and we continue to focus and add more items to the list.

Things that have previously not been in that $130 million are now on the list, and that's what gives us the confidence that we can exceed those numbers.

Peter --

Just a little color on the circulation, because I don't want you to get the wrong idea that it is just cutting promotion.

But with the quality circulation strategy, you save money on acquisition, you save money on distribution, you save money on printing, you save money on newsprint, you save money on bad debt.

So, when you wrap that all the together, that's a very large item contributing to the cost savings; it is not just about not spending promotion dollars.

It is not really about that at all.

It is about the efficiency of the acquisition.

It is important to remember, Peter, also that we have offshored circulation telemarketing and customer service functions, as well as financial back office.

And that is ongoing.

And we are also looking in the -- offshoring in the IT area as well.

And additional offshoring is extending to order-to-cash.

So all of the lists that Jim had noted, plus what Roland has just added, and the offshoring, I think really gives you a very sound list of the kind of efforts that are going on behind our cost reductions.

Okay, fair enough.

And, Janet, this is a tough one, but as you think preliminarily about 2009, I'm wondering how you think the ad-cycle goes in the context of a macro environment that maybe is more or less the same as what we're seeing now.

Can you get back to positive revenue comps next year, do you think?

I think we certainly see a tough second-half, if indeed the economy continues to act the way it's acting right now.

I think it's very early for us to be looking at 2009.

I think that there are signs, certainly, from some sources that say that the housing market will not improve until the latter part of 2009, at the earliest, so I think that there is still increased difficulty in regard to the ad market going forward.

But I think it's very early for us to be projecting our thoughts regarding that, Peter.

Okay, fair enough.

Last -- last thing then, Janet, any thoughts on the pending Newsday transaction and how that potentially could impact you guys?

I don't think that there will be a huge impact.

We certainly have readership on Long Island.

And there are people that live in the boroughs that read both The Times and Newsday.

But I think from a standpoint of our focus, it will continue to be on the quality of circulation that is here in the NDM and certainly on the national expansion efforts that continue to play a very strong role in regard to circulation revenue increases, and also expansion of our national footprint.

Okay.

Thank you.

You are welcome, Peter.

And your next question will come from David Clark will Deutsche Bank.

Okay.

Thank you.

Good morning.

A couple of circulation questions.

First, what sort of trend are you expecting for Sunday circulation in the September six-month ABC period?

I believe that you said a decent portion of the 9% decline in the March period was due to some deliberate factors, reduction of third party and such.

What do you think the underlying rate for Sunday is?

Well, I'm not prepared to give you a percentage, but I will tell you that our last March ABC statement was the last period that comped against a period -- a prior period, that had material amounts of other paid, either third party bulk or bonus days.

So that should help us in our comp coming September.

Would you expect it -- so that you would expect the September period to be better than the 9% decline?

Given that -- that piece of information, I would.

Okay, okay.

And then I'm just curious.

Do you -- how much subscriber or reader overlap is there between The New York Times and The Wall Street Journal?

Is that something that you guys know?

Yeah.

It's relatively small, David.

I would say that it's around 11% or so.

Okay.

So 11% of your circulation are also subscribers to The Journal.

That's correct.

Yeah, okay.

And then just one final circulation question.

How many subscriptions roughly have you sold through the Amazon Kindle?

Is it a meaningful amount?

Is the trend there good?

It is a small amount, but we are under the terms of a confidentiality agreement so we're not allowed to disclose it.

Okay.

But the -- I would say that the trends are good.

I guess following on that, do you see that, either the Kindle or other potential e-readers, do you see a meaningful opportunity there for increasing circulation?

These are R&D efforts.

I think that it's very early days on e-readers.

Certainly the Kindle seems to be attracting a lot of attention.

We are the number 11th or 12th most-purchased product, I believe, on the Kindle these days.

And that, I think you can see by simply going into "Most Popular." So you can -- you know, you can see that on Whispernet.

But I think it is safe to say that it is very early days for e-readers and I would characterize this more as a R&D effort than a meaningful revenue contributor.

Sure, appreciate that.

Thank you.

Your next question will come from Scott Wipperman with Goldman Sachs

Hi, this is [Scott Marchuketis].

I'm on the credit-research side.

I just have two quick questions for you.

First of all, I just want to talk about the liquidity position.

You have an $800 million revolver, half of which expires in mid-2009.

I'm just wondering if you could tell us what's drawn under the total revolver and if you are in negotiations with the banks to extend that facility, at least the next years that's maturing, for future years?

And then secondly, there's one financial covenant in the bank facility with regards to shareholder equity being $950 million.

Can you talk about the add-backs to get back to that number and where you stand related to that covenant today?

Thanks a lot.

As far as the borrowings under our revolver, we're at about $375 million out of a total capacity of $800 million.

We are -- we're in discussions with our banks.

One of our lines, revolvers, expires in May of next year.

We're in discussions right now --.

And regarding the covenant, we have a lot of room relative to that minimum stockholders equity covenant.

We exclude non-cash impairment charges, so, if you add back the charges we had in '06 and '07, we're well ahead of that minimum --.

Are the add-backs $800 million in nature, or is that a number that you'd disclose?

If you look at -- if you look at the 2006 impairment it was about $814 million.

Okay.

2007 was much smaller, but we would add those back to our book-equity, the total equity.

And just a quick follow-up, we've seen a lot of downgrades by the agencies in the newspaper sector, particularly among some of the higher-yielding names.

Now, you stand at low triple B.

I'm just wondering if it is really important for you to keep an investment-grade rating in light of the shareholder demands for enhancing shareholder value, whether it is restructuring the portfolio, or buybacks of that nature.

Is keeping an investment-grade rating critical anymore?

Look, it has historically been important to us and we consider -- look, it is the balance between increasing share value and cost of debt borrowing, and we balance those two.

But we've historically enjoyed investment-grade rating and we expect to do that in the future.

Thank you very much.

And a follow-up question from Edward Atorino with Benchmark.

Oh, no.

It's been asked.

Thanks.

And that does conclude our Q&A session for today.

I'll turn the call back over to Ms.

Catherine Mathis.

Thank you, everyone, for participating today and if you have other questions, give me a call.

Thanks so much.

Bye now.

And that does conclude our conference for today.

Thank you for your participation and have a wonderful day.