New York Times Co (NYT) 2009 Q3 法說會逐字稿

Good day and welcome to the New York Times third quarter 2009 earnings conference.

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.

Paula Schwartz.

Please go ahead.

Thank you, Audrey, and welcome to our third quarter earnings conference call.

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

They include Janet Robinson, President and CEO, Jim Follo, Senior Vice President and Chief Financial Officer, Scott Heekin-Canedy, President and General Manager of the New York Times, and Denise Warren, Senior Vice President and Chief Advertising Officer at the New York Times Media Group and General Manager of NYtimes.com.

Martin Nisenholtz,Senior Vice President - Digital Operations, is traveling on business today and could not join us.

All comparisons on this conference call will be for the third quarter of 2009, to the third quarter of 2008 unless otherwise stated.

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 2008 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 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 a MP3 player.

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

Thank you, Paula and good morning, everyone.

The third quarter results were reported this morning continued to be driven by affects of the global economic recession and the sustained advertising slowdown it has produced.

However, our results also reflect the positive benefits of the sustained actions we have been aggressively pursuing to reposition our businesses for the evolving future of the media industry.

Principal among those actions are continuing to secure strong performance on costs, growing our circulation revenues, which demonstrates continuing steady demand for our products, as well as high value on those products that the products command, even as the content marketplace becomes increasingly digital.

Restructuring our debt with a focus on long-term stability, and managing and rebalancing our asset portfolio to strengthen our core operations.

Looking at the details, our operating profit, excluding depreciation, amortization, severance and special items, grew 30%, to $80.6 million in the third quarter from $61.9 million in the third quarter last year.

On a GAAP basis, we reported an operating loss of $25.4 million, compared with a loss of $150.4 million in the third quarter of 2008.

Earnings per share from continuing operations, excluding severance expense and special items, were $0.16 per share, compared with $0.05 in the same period last year.

On a GAAP basis, we reported a loss per share from continuing operations of $0.25, compared with $0.80 in the third quarter of 2008.

The third quarter results were favorably affected by a gain on the sale of surplus real estate assets of $0.02 per share.

And unfavorably affected by a charge of $0.33 for estimated pension withdrawal obligations as well as a curtailment charge, which Jim will discuss in detail.

$0.08 for tax expense due to the reduction of deferred tax balances as a result of lower income taxes and $0.02 for severance.

EPS in the third quarter of last year was unfavorably affected by noncash charges of $0.78 and $0.07 per share for severance.

Strong cost control remained a leading contributor to our improved operating performance in the quarter.

We continued to aggressively reduce our expenses, and the actions we have taken over the past quarters are evidenced in the 22% decline in operating costs in the third quarter.

With our many initiatives to operate more efficiently and affectively across the company, we expect our cost performance to remain strong and we expect to achieve approximately $475 million in savings this year.

An increase of $25 million since we last spoke.

And we are continuing these efforts with a view towards 2010.

Earlier this week, the Times announced that it plans to reduce it's news room staffing by 100 jobs, and additional business side positions by the end of the year.

This move was made with reluctance.

And only after ensuring we could manage the reduction without damaging the quality of our news report and business operations.

Turning to our balance sheet, which Jim will discuss in greater depth, we have made significant progress in reducing our debt, which declined by over $140 million from its balance at the end of 2008.

This has been another area of strategic focus for management, that contributes to the improved positioning and financial stability of our Company as we look to the future.

The final area of strategic focus, managing and rebalancing our asset portfolio, has shown progress in the quarter.

Earlier this month, we completed the sale of WQXR-FM, our New York City classical music station for a gross proceeds of $45 million.

The proceeds from this transaction were used to further reduce our outstanding debt balance.

We are also move ago head with the potential sale of our interest in the New England Sports Ventures, which includes the Boston Red Sox and approximately 80% of New England Sports Network, a highly rated regional cable channel.

The bidding process is progressing and we are pleased with the status.

Last week, we announced that after careful consideration and analysis we terminated the process to terminate the Boston Globe, Boston.

com and related businesses and they will remain within the company.

We continue to assess strategic alternatives for the Wooster Telegram and Gazette, and are determined to reach a conclusion there quickly.

The Globe has significantly improved its financial performance by following the strategic plan it set out at the beginning of this year.

The plan has several components that have helped to increase revenues and lower costs, including consolidated printing facilities, increasing circulation prices, reducing compensation for nonunion employees and restructuring the Globe's labor contracts.

All along, we explicitly recognized that a careful restructuring of the Globe was one possible route, and thanks to the hard work by the Globe's staff, that is precisely what has been done.

Now let me provide you with more detail on our revenues.

Total revenues for the Company declined 17% with ad revenues down 27%.

Circulation revenues up 7%, and other revenues down 39%.

Excluding the results from City and Suburban, the company's retail and news stand distribution subsidiary, which was closed in early January, total revenues declined 14%, circulation revenues rose 8%, and other revenues decreased 11%.

At the News Media Group, which includes the New York Times, New England, and Regional Media Groups, ad revenues decreased 30%, primarily because of lower print advertising.

By advertising category, national revenues were down 29%, retail was down 25%, and classified was down 38%.

Within the classified area, recruitment advertising fell 53%, real estate declined 44%, and automotive was down 32%.

The News Media Group's print advertising revenues decreased 31% in the quarter, while digital revenues were down 19% with most of the decline coming from classified advertising.

Overall, the rate of decline in advertising revenues at the News Media Group was flat during the quarter as total advertising revenues decreased 29% in July, 30% in August, and 29% in September.

At the Times Media Group, advertising revenues decreased 30% in the quarter.

The national print categories where we saw the largest declines were financial services, where major banks, mutual funds, credit card and insurance companies reduced spending, compared with last year when advertising by these companies significantly increased as they reassured their customers amidst the crisis in the financial markets.

Studio entertainment, where there was limited support for new releases and the films released this summer did not match the performance of those in last year's third quarter and telecommunications, due to reduced spending from the major carriers.

The national print ad category where we saw an increase was healthcare.

Because of pharmaceutical companies and hospitals increasing their placements.

Although it continues to be a challenging time for luxury advertising, last month we were pleased to celebrate the 5th anniversary of T Magazine and commemorate its success with readers and advertisers in the world of fashion, travel and design.

Classified advertising at the Times Media Group decreased in all three major categories, real estate, recruitment and automotive.

The rate of decline in recruitment and automotive advertising moderated as the quarter progressed.

Retail advertising revenues decreased due to declines in fashion jewelry, home furnishing store, department store and fine arts advertising.

At the New England Media Group, advertising revenues declined 27% in the quarter, national ad revenues decreased as declines in entertainment, telecommunications and bank categories more than off-set growth in national automotive, technology, packaged goods and financial service advertising.

Retail advertising revenues were lower as a result of weakness in electronics and appliance, home furnishings and sporting goods advertising.

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

At the Regional Media Group, advertising revenues decreased 32%, while the rate of decline for advertising revenue in July and August were similar to that of the second quarter, it began to moderate in September, primarily due to retail advertising.

Circulation revenues grew 7% in the quarter, namely because of higher subscription and news stand prices at the Times and the Globe.

Excluding C&S, circulation revenues rose 8%.

The results from our price increases have been encouraging, and indicate that our high-quality journalism is valued by our readers.

Circulation revenues now represent 42% of the Company's total revenues, compared with 33% in the third quarter last year.

This speaks to our continuing effort to build and enhance the quality circulation that is so coveted by our advertisers in every category.

In order to get the Times in the hands of even more readers, we continue to work with organizations across the country to print and distribute the paper.

In August, we announced a new agreement to print the Times in Nashville, our 25th national print site.

This arrangement enables us to expand newsstand and home delivery to readers in the Nashville area and to move to existing surrounding areas of Tennessee, northern Alabama, northern Mississippi, and eastern Arkansas and western Kentucky.

We are also looking offer quality local content for our readers both in print and online.

Our intent is to rollout expanded reports in key markets, beginning in San Francisco and then followed by Chicago.

A longer term objective of this initiative is to work with local journalists and news organizations in a collaborate way in major markets around the country.

We believe metro news will add another dimension to our coverage, supplementing the national, international and cultural news and opinion and will help to grow and retain print circulation and expand our regional coverage online.

Extending our national reach is an important component of our multi platform strategy, which embraces the need to accommodate the growing demand for our world class journalism.

This is why we are forcefully and relentlessly growing our audience in print, online, mobile and on social networking sites, such as Facebook and Twitter.

And this is why more people now read the Times in more places than at any other point throughout our history.

Moving to the third component of the Group's revenues, other revenues decreased 39%, mainly as a result of the closure of C&S.

In the third quarter of last year, C&S had other revenues of approximately $19 million.

Excluding C&S, other revenues decreased 10% at the News Media Group, mainly because of lower commercial printing and direct mail advertising services at the New England Media Group.

At the same time that our cost and circulation initiatives are yielding positive results, the Times Company has remained a leader in capitalizing on the values of our core brands to build premier positions in the new digital and multi platform media landscape.

And while digital businesses in general have not been immune to the advertising downturn, our focus is on creating and expanding platforms that will prosper over the long-term.

In the third quarter, digital ad revenues at the News Media Group declined 19%, led by classified advertising.

But the rate of decline on online advertising revenues at the Group began to improve modestly toward the end of the quarter, with decreases of 19% in July, 23% in August, and 15% in September.

And NYTimes.com display advertising had difficult comparisons to last year's third quarter when it had strong double digit gains.

Importantly, I would like to note that NYTimes.com, which is the largest newspaper website remains a premier environment for online brand advertising.

In September alone, six major display branding campaigns broke on its home page, including Air France, CBS, HBO, and Siemens.

For the past several months we've been exploring ways to develop alternative revenue streams for NYtimes.com.

We're continuing to evaluate our options, and will announce a decision when we believe we have crafted the best possible business approach.

At the About Group, total revenues rose 7% in the quarter to $31 million, due to a higher cost per click advertising.

Growth in advertising revenues, which were up 10%, and strong expanse control enabled the group to increase it's operating profit 27% to $13.7 million.

The About Group's operating margin expanded to 45% in the third quarter, up from 38% in the third quarter of last year.

Over the past 18 months, About.com has taken a number of steps to improve its sales initiatives, including expanding the professional expertise of its sales team, revamping its marketing strategy and developing new offerings for marketers.

In total, revenues from our internet businesses decreased 7% to $78.9 million from $85.1 million.

Internet business has accounted for 14% of the Company's revenues in the third quarter, versus 12% in the third quarter of last year.

As we continue our transition from a Company focused primarily on print, to one that is increasingly digital in focus and multi platform in delivery, online advertising revenues are an important part of our mix.

They made up 23% of our ad revenues in the quarter, up from 19% in the same period a year ago.

Looking ahead, visibility remains limited for advertising in the fourth quarter, but as is the case across the media sector, we have seen encouraging signs of improvement in the overall economy and in discussions with our advertisers.

Early in the fourth quarter, print advertising trends in comparison to the third quarter have improved modestly.

While digital advertising trends are improving more significantly.

Meanwhile, we believe that the strategic initiatives we have taken at the corporate level, securing strong performance on cost, growing our circulation revenues, restructuring our debt, and managing and rebalancing our asset portfolio, combined with our ongoing drive to build out and maximize the revenues from our digital platforms have kept us on course to be securely positioned as a leading player in the new media universe.

As the economy and ad markets improve, we believe we will further benefit from the aggressive restructuring of our business.

Now let me turn the call over to Jim, who will tell you more about our cost reduction initiatives and steps that we have taken to enhance our financial flexibility.

Thank you, Janet.

We continued our strong expense discipline in the third quarter, furthering the progress we made in the first half of the year, and building on our multi year drive to reduce our cost base.

Operating costs declined 22%, as reductions occurred in nearly all major expense categories.

We remain focused on lowering expenses, and we now expect to achieve approximately $475 million of savings in 2009 while continuing to bolster the quality of our journalism.

Across the board, we've been reducing costs, and some of the major year-over-year savings we expect in 2009 are approximately $118 million from the closure of C&S, $65 million for newsprint, $35 million in severance expense, $18 million as a result of changes in our benefit plans for nonunion employees, $10 million in the second half of the year from our unions in Boston, $9 million in the second half of the year for the consolidation of the Globe's two printing plants, and significant savings as a result of the decrease in the size of the Company's work force, which at the end of September was down 20% from the prior year.

In addition, salaries were reduced in the second quarter, which has been providing us with savings.

Severance cost was $0.02 per share in the quarter or $3.8 million, compared with $0.07 per share or $18.1 million in the same quarter last year.

This quarter we had an estimated charge of $76.1 million for pension withdrawal obligations under several multi employer pension plans at the Globe and a curtailment loss for the Company sponsored plan also at the Globe.

Last quarter, we restructured several labor contracts at the Globe in order to save $20 million in annual operating costs, Which was essential to our plan to put it on better financial footing.

The charge was the result of amendments to these various collective bargaining agreements that allowed the withdrawal from these multi employer plans and the freezing of benefits under the company sponsor plan.

While we are required to record the charge, once an estimate is determined, the withdrawal liability will be paid over a period that could extend to 20 years or more.

We believe this is an important step we need to take in order to fix an obligation that would have otherwise grown over time.

Depreciation and amortization decreased 8%, to $31.3 million, from $33.9 million in the third quarter of 2008, primarily because of lower depreciable assets.

Newsprint expense decreased 45%, with 28% from lower pricing and 17% from lower consumption.

Newsprint transactions have decreased significantly this year in that peak levels in November, 2008.

Current newsprint prices are at historic lows with a majority of north American suppliers losing cash at present levels.

Suppliers have recently announced price increases which forecasters expect will increase news print prices in the fourth quarter.

Suppliers are expected to continue to reduce capacity in order to balance a downturn in demand.

Interest cost increased in the quarter to $21 million from $11.7 million as a result of higher rates on our debt, offset in part by lower average debt outstanding.

For the year, we expect interest expense to be approximately $85 million.

At the end of the third quarter, the amount outstanding under our evolving credit declined to approximately $105 million from $200 million at the end of the second quarter.

We have made significant progress in lowering our total debt level from approximately $1.1 billion at the end of last year, to approximately $910 million at the end of September.

And this month, we used the proceeds from the sale of WQXR-FM to further reduce debt.

Next month, we have a $44.5 million in medium term notes maturing.

Because we have restructured our debt, approximately three quarters of it now matured in 2015 or later.

We remain comfortably within compliance with our minimum stockholders equity involvement and our revolving credit agreement.

In the third quarter, our effective income tax rate was 8.3%, compared with 26% in the same period last year.

The tax benefit in this year's third quarter was unfavorably affected by $11.7 million in tax expense, due to the reduction of the Company's deferred tax balances as a result of lower income tax rates.

CapEx in the quarter totaled $3 million, and year-to-date was $38 million.

We have taken decisive steps to reduce capital spending and improve liquidity.

This year, we expect our capital expenditures will decrease from the 2008 levels of approximately $127 million, to approximately $60 million.

As always, we continue to evaluate our assets to determine if they remain a strategic fit, and given the outlook for the business and therefore financial performance makes sense to be part of the Company.

We have closed on the sale of WQXR-FM, and are pleased by the interest we have seen in our stake in the New England Sports Ventures.

With the moves we have made to refinance and repay debt, our manufacture cost saving initiatives and our continued evaluation of our portfolio, we believe we have the financial strength to manage in this challenging time.

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

Thank you.

The question-and-answer session will be conducted electronically today.

(Operator Instructions).

And our first question today will come from Alexia Quadrani.

Thank you.

You guys have done such an impressive job on the cost side this year.

Can you give us any sense of how much of your action, particularly in the severance, including the most recent announcement this week will contribute to savings in 2010?

Alexia, we're still early in the budget and planning process for next year.

I'm not prepared to really give a number for cost guidance next year.

However, a couple of things obviously do go in our favor.

I think we would still expect to see at least for the first part of the year some favorable trends in newsprint prices year-over-year.

So I think that will work well with us for the first part of the year.

Obviously the announcement that we just made this week on the news room reductions will really benefit us next year.

And we just continue to -- we're going to continue to be very focused on making sure the cost structure is as efficient as possible.

A couple of the actions we've taken up in Boston will have full next year, both the union renegotiations will affect this year.

We have half the year this year and the plant consolidation up there as well.

So there are many things going in our favor.

It would be hard to imagine repeating the $475 million but we'll really maintain folks on that next year and we'll certainly be able to drive cost down further.

And you mentioned paper pricing.

Do you have any view on whether you think the paper pricing hikes will stick at the year-over-year end and if so, I know it's probably early, if you have any sense on what pricing will look like for you for the full year?

I think we think that a good majority of the prices will likely stick in the quarter.

That being said, they are still at pretty historically low prices.

As far as the balance of the year, it's hard to imagine prices continuing to move up from that point given the excess capacity and I think their ability to really move quickly to reduce that capacity.

So I do not feel there is going to be significant pressure beyond this point.

And one last question.

Sort of a bigger picture question maybe for Janet.

You've had such a great perspective being in this industry for a while.

Do you have any sense, or I would love to hear your view on how much of that classified business in the newspaper industry or even in your properties that have fallen off in this downturn, how much of that do you think is a permanent shift away from the paper product or how much may return in a better economic environment?

I think there will be a modest return in some categories, particularly in real estate, particularly in our case in the New York Times, because we are for all intents and purposes the MLS in this area.

But I think there will be a modest economic turn when the economic winds turn in our favor.

But what you've seen in those and the newspaper industry is performing alliances with online, not only our own websites, pulling in more classified as the economic winds improve.

I also think the partnerships that we have struck with many of the recruitment real estate and automotive websites will also be positive for us and for others in the industry.

Thank you.

And our next question will come from Craig Huber.

Good morning.

A few questions.

Janet, where is the circulation daily for New York Times and Boston Globe?

How much was it down in the third quarter?

We do not announce the percentage declined because the ABC audits are coming out in a few weeks, in fact.

We certainly, with our increases in rate structure for both the globe and the times, we'll see declines.

But from the standpoint of the projections that we had, we are extremely encouraged, both at the Times and the Globe in regard to the loyalty that is being shown by our reader base and the loyalty that indeed people are showing even in the face of rate increases.

And also could you speak if you would about your advertising rates that you your two flagship papers.

How much is that down for the year ago.

I know its tough across the categories.

But a few months ago you said it was down slightly.

Like 1 to 3%.

And you've asked this question before, Craig.

I think the rate question is very complicated because it's driven by many factors.

Certainly by volume and by the mix of advertising.

When certain advertisers reduce their volume, they soften pay a much higher rate for their advertising.

This is as you well know the structure of a media rate card.

Accordingly, separating rate from volume is not a precise science.

And nowadays many contracts and proposals are very customized due to the fact that we are selling multi platform and certainly because of scheduling and section requests.

However, it is clear that a significant portion of the advertising declines at the New York Times has been driven by volume.

And at any MG and the regional group, rates are lower, yes, year-over-year in the third quarter, although the rate of declines really vary by property and certainly by location.

And volume is also a major factor in those two Media Groups as well.

I'm sorry to push this, but do you maybe have a sense on the range of how much is it down?

Is it 3 to 7% across your properties, the advertising rate?

No.

It's very -- as I said, it's very complex particularly because our properties are so different, the Times being so different from New England and the regionals.

So it really, as I said, is a complicated factor for both volume and mix.

But it is primarily driven by volume at the Times in particular.

And to clarify, we see in your press release and your comments that the trends for early fourth quarter for print are modestly better than you saw in the third.

Is that -- does that mean it's better than just -- given the fact that the comparisons are easier over the year for 3 to 5 percentage points, is it better that you're trying to see in investors.

We're seeing improvement.

A modest improvement.

We're seeing certainly more requests for proposals across the board.

We're seeing a modest growth in regard to commitment.

We still are seeing just in time commitments so the visibility continues to be cloudy.

But I think we are encouraged that indeed we see advertisers telling us that their business is improving and consequently requesting for information from us in regard to rates and placement and certainly customized programs.

I'll give you an example.

The retailers in September as noted in my remarks, we started to see a little bit of a pickup.

We had in depth conversations with them in regard to their improvement, so we do see traffic improving in regard to the stores and consequently when that's the case, they tend to want to do more in regard to building even more traffic.

Same holds true in regard to some of the national advertisers with technology and national automotive, with certainly the bankruptcies behind, General Motors and Chrysler and some activity certainly in technology and healthcare, we are seeing more commitments coming our way in regard to national schedules as well.

Classified, as noted earlier, continues to be a difficult category of business.

But we are seeing some modest improvement in regard to those other two categories.

I did state too, Craig, that you know, we're seeing more of an uptick in digital advertising.

And maybe I'll just have Denise give you a little bit of color in regard to what we're seeing on the digital front.

Sure.

So as Janet mentioned, there are some sectors of the digital marketplace that are showing improved growth.

Just to call out a couple, financial, automotive, corporate, healthcare, just to name a few.

I think what we're really seeing on the digital side for NYtimes.com is that marketers are responding to NYtimes.

com as the premier environment online to launch and house their branding messages.

Janet mentioned the home page units that we ran from several marketers in September and that continues and it's boding very, very well for NYtimes.com.

I would just add Craig, one thing we have been pleased and encouraged with the About performance, with regard to the cost per click advertising but both also an improving trend in regard to display advertising.

As I noted, we made a very deliberate upgrade in regard to the professional expertise in regard to display sales talent at About.com.

And lastly, if I could, to your pension what is the update on the underfunded status, if you have that.

Your obligations there?

We have not updated that number publicly.

Obviously we've gotten the benefit from a strong equity market performance throughout the year.

So while the assets are up, and I think we'll update that number in our next filing.

But on the opposite side, interest rates have come down so we've had some -- so we've had some offset from the asset performance but I would expect that number will be real positive, but not as positive as you would think given the equity market performance because of interest rates.

Great.

Thank you very much.

You're welcome.

And our next question will come from John Janedis with Wells Fargo.

I know Martin isn't there, but if you could help us with the About.com, the sequential improvement, as you mentioned, Janet, was really notable, and I'm wondering to what is driving that.

Thanks.

As I said, John, it's really both.

It's both display, showing signs of improvement with the investment that we've made.

Specifically in regard to packaged goods, travel, retail, the healthcare.

Those are the categories that seem to be showing some good trends.

And certainly cost per click.

We have certainly benefited by our acquisition of About in regard to their expertise in regard to cost per click advertising, and search engine optimization across the entire company, but we certainly have seen an uptick in regard to cost per click for them in this quarter.

They have done a very good job as well in regard to cost reduction.

They have been very careful in regard to their spending during the course of the year, particularly as the recessionary factors were affecting them as well.

So the combination really of improved performance on the top line and certainly careful expense reduction reaped a very strong benefit of growth for them.

Their traffic continues to be very strong, so that of course attracts a lot of advertisers.

There are 40 million unique users per month in the US and 60 million worldwide.

They are continuing to invest in their product in regard to the quality of the content so I think that we have a very strong acquisition in About and getting stronger.

Okay.

Thank you.

And you alluded to this as well, Janet, but as I look at the news media segment revenue buckets, circulation represented about 45% in the third quarter versus about 30% historically.

I'm wondering if you can help us think about what that means longer term for the margin structure of the segment if that trend continues?

This is Scott, John.

Our circulation revenue base is strong and stable.

That percentage he cited is somewhat of a function of the seasonality.

The circulation revenue is pretty stable and steady through the year, whereas advertising fluctuates through the season.

But we believe that our our circ revenue gives us a strong contributor to overall margin performance.

The future is all upside.

I think the same holds true in regard to the Globe.

There was a very decided increase, as you know, John, in regard to Boston.

With the circulation increases in May and June, both single copy and home delivery.

But at the same time, a decrease in regard to the footprint.

So we have benefited, needless to say, from those increases and the balancing between the advertising revenue and the circulation revenue is an important one for us to continue to look at.

But we feel very confident that we can continue to look at strong circulation revenue flow as we go forward up there as well.

One thing I would add to that is we kind of think of advertising revenue as incrementally 90% margin business so our margins will be tightly dependent upon or highly volatile based on an ad recovery, but we do expect advertising dollars to come in 90% larger.

And Jim, one quick last one for you.

I think as you mentioned, your pro forma cash operating cost I think pre-newsprint were off about 19%.

As you look to the fourth quarter, directionally, can that get above 20 or do you believe we've reached the peak here?

Well, do the math.

That 475 would imply a number less than 20.

The 475, if you subtract it out, what we did to date would end up in the 16 or 17 range.

All in, I think we've done historically well relative to our guidance so I'm comfortable at that level.

I think you may have asked me the same question on the last call and I gave a similar answer.

But we are -- we do face stiffer comps, no question about it, through last year, given everything that was going on in the economy last year and so there was a cost issue that has to be accounted for here and you could do the math to get something in the 15 to 17% range.

Okay, thank you.

To your point, you started the year at a 330 number so you've been doing a great job.

Thanks.

Thanks, John.

And now we'll hear from Edward Atorino at Benchmark.

With the $76 million pension withdraw and curtailment, is some of that sort of a retroactive catchup?

And that's a third quarter number, but is it sort of a 9-month item, if you know what I mean?

Did that sort of play catchup on that at all?

No.

That was -- that was the result of the negotiations that took place in June.

And essentially what that represents is at the point in time, our share of the unfunded balance of all of the multi employer plans that we withdrew from, essentially at a point in time.

So that's our best guess as to what that was at that time.

And once you're out of it, that number doesn't grow.

So it is more of a point in time umber.

But does it reflect sort of a catch up on -- do you know what I mean?

Or could some of that be allocated mentally or mathematically or that some of the cost could be reflected to what happened in the year as just opposed to the third quarter.

Look, I don't think -- it's certainly not attributable to our performance in the third quarter, but I don't believe it's a catchup against the 49 number.

Okay.

Thanks.

And that does conclude our question-and-answer session at this time.

Ms.

Schwartz, I'll turn things back to you for any additional or closing remarks.

Thank you very much for joining us today.

Please call us if you have any further questions.

Bye-bye.

And again, that does conclude today's call.

Thank you all for your participation.