New York Times Co (NYT) 2010 Q4 法說會逐字稿

Good day, and welcome to The New York Times fourth-quarter 2010 earnings conference call.

Today's call is being recorded.

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

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

Paula Schwartz, Director of Investor Relations.

Please go ahead.

Thank you, and good morning, everyone.

Welcome to our fourth-quarter 2010 earnings conference call.

We have several members of our senior management team here to discuss our results with you including -- Janet Robinson, President and CEO; Jim Follo, Senior Vice President and Chief Financial Officer; Scott Heekin-Canedy, President and General Manager of the Times; and Martin Nisenholtz, Senior Vice President of Digital Operations.

All of the comparisons on this conference call will be for the fourth quarter of 2010 to the fourth quarter of 2009 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 2009 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.

Now I will turn the call over to Janet Robinson.

Thank you, Paula, and good morning, everyone.

Our fourth-quarter and full-year results reflect both the transformation our industry is undergoing, and the choppy form the economic recovery is taking.

During this time, we took decisive actions as demonstrated by the fact that our operating profit before depreciation, amortization, severance and special items increased 20% for the year compared with 2009, with slightly lower overall revenues offset by a greater improvement in cost savings.

The year did prove more challenging as it progressed, with operating profit on that same basis declining 7% in the fourth quarter, as revenues declined slightly more than costs improved during that period.

Last year's progress on the print advertising front and its steady double-digit growth in our digital advertising numbers are proof of our enduring brand strength.

While we ended the quarter and the year slightly down in overall advertising revenue, 2010 provided significant evolution and encouragement for our Company in many ways.

We are well positioned to capitalize on the digitization of our content in the coming year, and we remain confident in our new online pay strategy and the Company's overall future.

In the fourth quarter, we continued our focus on core initiatives including -- maintaining our brand promise of high-quality journalism, our most coveted asset; expanding and preparing to further monetize our digital offerings with the impending introduction of NYTimes.com pay model, and the very positive reception to our new NYTimes app for the iPad; rigorously controlling our expenses as we identify areas for continued cost reengineering, even against the backdrop of difficult cost comparisons; improving our liquidity, partially through the $225 million debt transaction we completed in the quarter and our growing cash balance; and managing our asset portfolio to maintain its alignment with our core operations.

In the fourth quarter, the advertising marketplace remained volatile, as the 11% increase in digital advertising could not fully offset the 7% decline in our print advertising.

We were able to reduce the Company's operating expenses before depreciation, amortization and severance in the quarter by 2%, or $10 million, even in the face of very tough comparable numbers resulting from 2009's deep expense cuts.

The cost decline in the quarter was 5% on a GAAP basis.

We maintained our relentless focus on managing costs in the fourth quarter to mitigate the effects of revenue declines on our operating performance.

In addition to the operating profit metrics I mentioned earlier, on a GAAP basis we reported operating profit from continuing operations of $112 million in the fourth quarter compared with $136 million in the same period of 2009.

And for the full year, our operating profit totaled $234 million, more than triple the $74 million we reported in 2009.

Diluted earnings per share from continuing operations excluding severance expense and special items were $0.46 in the fourth quarter compared with $0.44 in the same period of 2009.

On a GAAP basis, we reported diluted EPS of $0.44 from continuing operations in the quarter compared with $0.48 in the fourth-quarter 2009 period.

Our digital offerings continued to gain momentum in the fourth quarter.

We intend to introduce our pay model for NYTimes.com soon, and will release more details on price and gate placement in the near future.

Separately, in October we launched our expanded content NYTimes app for the iPad, which builds on our initial Editors' Choice app, and offers access to more than 25 sections of Times content with an impressive array of videos and photos.

The app has had more than 1.5 million downloads, and is currently free but will simultaneously convert to a subscription product with NYTimes.com.

The expanded content to iPad app has received stellar reviews so far, and advertisers such as Mercedes Benz and Bank of America have leveraged our ability to create rich advertising experiences that build on the unique capabilities of the device.

As a result, we have multiple commitments from advertisers well into 2011.

We are seeing a very wide range of advertisers that are committing to the iPad app, from luxury to technology to entertainment.

We have worked closely with those clients to deliver innovative, engaging advertising that readers react to and remember.

We have remain focused on diversifying our revenue streams, and strengthening our digital businesses.

The e-Reader application business has proven to be a vibrant market, where consumers are willing to pay for quality content through an immersive reading experience similar to that of a print newspaper.

Today, some of the e-Reader platforms that offer content from our publications include -- The Nook, Sony Reader, Kindle, HOBO Reader, and our PC and Mac reading applications.

We charge across all of these platforms, and we have excelled in these customer monetization efforts.

Another one of our strategic focuses is managing our asset portfolio.

Early in the fourth quarter, we made a $4 million investment in Ongo, a personalized consumer news service that allows users to read and share digital news from multiple publishers on a single interface, with similar contributions coming from the Washington Post and Gannett.

This subscription-based service launched just last week, and now features top stories from the New York Times and the Boston Globe, as well as content from a variety of other leading news providers.

Ongo is accessible through any major web browser on computers, smartphones and tablets, and offers a variety of convenient customization features that we believe will appeal to our readers.

Now let me offer some more depth on our fourth-quarter revenue.

Total revenues for the Company declined 3%, with advertising revenues down 3%, circulation revenues down 4%, and other revenues up 3%.

Steady growth in digital advertising revenues, which rose 11%, partially offset a 7% decrease in print advertising revenues that kept our total advertising revenue to down 3% compared with the fourth quarter of 2009.

The positive impact of transitioning into a multi-platform company is becoming more apparent with each quarter.

Online advertising revenue continued to grow its share of revenue, and made up 26% of our total ad revenues in the quarter, up from 23% in the fourth quarter of 2009.

At the News Media Group, which includes The New York Times, New England and Regional Media Groups, continued strength in digital advertising, which was up 20%, could not offset the 7% decrease in print advertising.

The Group's total advertising revenues, which declined 3% year-over-year in the quarter, increased 1% in October, 4% in November, and declined 13% in December.

A large amount of expected year-end ad spending did not materialize in December, compounded by difficult 2009 comparison numbers.

Digital advertising remained resilient, led by growth into national display.

In the fourth quarter, we also saw gains in retail display, as well as two of the major classified advertising categories -- real estate and automotive.

By total advertising category, national and retail revenues were each down 2%, and classified was down 8%.

Within the classified area, recruitment was down 1%, real estate declined 6%, and automotive was down 15%.

Breaking down The News Media Group into its component properties, at the Times Media Group advertising revenues were down 3% in the quarter, as growth in digital display and classified advertising were more than offset by print declines.

Aggregate classified advertising at The Times Media Group decreased in all three major categories -- automotive, real estate and recruitment.

But retail advertising revenues showed positive growth for the quarter in both print and digital.

Aggregate national advertising was down 3%, and the national print ad categories where we saw the largest declines were telecommunications where wireless carriers reduced spending, and we were faced with tough 2009 comparison numbers; financial services, as bank spending declines offset impressive gains from investment firms and insurance companies; and national automotive, where domestic manufacturers' reduced spending in the category was up against difficult 2009 comparisons.

The national print ad categories where we saw the largest gains were hotels, based on substantial increases from a variety of properties and travel destinations; books, which saw strong growth from publishers; and international fashion, driven by gains from top designers.

Strong growth in online national advertising was led by gains in the technology, luxury, and financial services category.

As the number of platforms where readers demand our content proliferates, the Company remains aggressive in advertising product innovation, building premiere positions across all modes of delivery.

More than 80% of The Times' top 100 print advertisers also spent on our website in 2010.

NYTimes.com especially continues to be a trailblazer in brand advertising, and market has come to us for our reach, the quality of our audience, and our ability to create and execute unique campaigns.

The site has made bold moves on the advertising front, particularly on the home page where we have managed to balance a greater user experience with a great advertiser experience.Premium advertisers such as HBO, Cartier, and Lincoln have all made NYTimes.com their first destination for breaking digital advertising campaigns.

We are also using the iPad platform to drive innovation in advertising, and have seen stunning creative from luxury advertisers such as Chanel, which ran an interactive, rich-media ad unit last year.

And we fully intend to extend our reach with Android and other platforms as they come into the market.

At The New England Media Group, advertising revenues declined 3% in the quarter due to weakness in print advertising.

Digital ad revenues showed strong growth, reflecting increases in every online category including national, retail, and all classified categories.

Overall, national ad revenues were up 3%, led by gains in the financial services, live entertainment, and pharmaceutical categories.

Total retail advertising revenues were lower, led by softness in print categories including department stores, sporting goods, and home improvement.

Classified advertising saw print growth in the recruitment and automotive categories.

Early in the fourth quarter, The Boston Globe announced its own digital pay strategy, which will launch in the second half of this year.

The Globe will split its digital brand into two distinct websites, keeping Boston.com free, while establishing a subscription pay site, BostonGlobe.com, that will feature content produced by the newspapers' journalists.

Boston.com will continue its focus on being a one-stop source for all things Boston that offers everything from breaking news to social networking.

At The Regional Media Group, advertising revenues decreased 4%, primarily due to weakness in print advertising in the retail and classified categories.

Recruitment classified advertising grew slightly in the quarter, while the other classified categories declined.

At The News Media Group, circulation revenues were down 4% due to volume declines across the Group.

Looking ahead, we will continue to evaluating our circulation pricing in coordination with our overall multi-platform strategy.

And as you know, we will soon be introducing a second digital revenue stream.

In the fourth quarter, we also launched a significant expansion of our popular DealBook site at The New York Times, more than doubling our staff in that area, along with our ability to cover breaking financial news for a high-level audience of C-Suite executives and decision makers.

Since the relaunch, DealBooks' online traffic has increased dramatically, and the site saw its highest traffic month ever in December, more than doubling its page views from December 2009.

Current and new advertisers to the section, which now features a print page several days a week, and a daily DealBook video, have taken notice.

There is also a DealBook news reader application for the Blackberry.

Also on the digital front, in November we launched our NYTimes.com bestsellers section for books, which now enables users to more easily navigate the list, and to access historical lists.

Readers can now purchase these top books more readily by using the buy buttons next to each book, which link directly to a variety of booksellers.

In the fourth quarter, we also announced plans to begin publishing e-book's bestseller list early this year.

Fiction and nonfiction e-book bestseller lists are a natural extension of this franchise, as portable devices proliferate and grow usership.

The new rankings will reflect sales aggregated from a growing number of online service providers that sell e-books.

These digital efforts, along with many others, have helped to ensure that NYTimes.com remains the most highly trafficked newspaper website in the United States, with about 32 million unique visitors in December.

That number grows to nearly 45 million uniques when you look at the sites' global audience.

With all of this discussion of the Company's digital advancements, let me also assure you that we will be printing newspapers for many years to come.

According to the September 2010 ABC statistics, The Times' circulation is 877,000 on weekdays and 1.4 million on Sundays.

And our total readership is significantly higher, at about 5 million on weekdays and 6 million on Sundays.

We are very proud of our strong national circulation base, which nicely complements our strength in the New York market, with 57% of weekday and 62% of Sunday home-delivery newspapers going to subscribers outside of the greater New York market.

We remain focused on the high quality and most profitable individually paid circulation that is most preferred by our advertisers.

We have also expanded our local area reporting with a twice-a-week print pages of local content in key markets, such as San Francisco, Chicago, and just recently the State of Texas, which attracts new subscribers and generates incremental ad revenue in these markets.

Expanding our reach and audience has ultimately driven our efforts to grow our audience in print, online, mobile, e-readers, social media, and other products.

In particular, during the past couple of years, The Times has launched a number of mobile products, such as our iPhone, Android, Blackberry, and [Pre Palm] apps.

In the fourth quarter, we averaged more than 100 million page views per month from these mobile sites and apps.

We have also reached more than 6 million downloads of our iPhone news app since its 2008 launch, with more than 2.5 [million] of those downloads taking place in 2010 alone.

In the fourth quarter, the Company launched and updated a variety of iPhone and iPad products.

The International Herald Tribune, for example, launched its news app on both the iPad and iPhone with Cartier as the blue chip launch sponsor.

The apps are currently free but will eventually convert to subscription products.

Moving on to The About Group, total revenues declined 3% to $35 million in the fourth quarter.

Advertising revenues declined 4% due to declines in both cost-per-click and display advertising.

Design changes in cost-per-click advertisements served by Google had a negative impact on page views and click-through rates in the quarter, and we expect that to be the case through the first half of this year.

With approximately 80% of its traffic coming from search, About is continuing to develop ways to optimize its evergreen content to a growing base of digital users.

Display advertising saw fourth quarter declines in categories such as entertainment and manufacturing, but showed growth in categories including consumer packaged goods and pharmaceuticals.

Although display advertising grew in December, it began to see the effects of the uneven economy in the fourth quarter due to difficult comparisons with the fourth quarter of 2009 when display advertising grew 24%, as well as competitive pressures in the market.

Longer term, About is planning multiple avenues for content expansion, including video and a variety of business-to-business and foreign language sites.

In December, for instance, About launched its new industry and trade channel, which provides users with B-to-B industry and trade content across 50 sectors including media, construction, conventions and hospitality, aviation, broadband, and energy.

The About Group's operating costs increased 4%, and operating cost excluding depreciation amortization increased 3% to $16 million, primarily due to higher marketing expenses.

Operating profit declined 10% to $16 million in the quarter, but it increased 22% to $62 million for the year.

About's operating margin rose to a noteworthy 46% in 2010 from 42% in 2009.

Total revenues from all of our digital businesses increased 11% in the fourth quarter to $113 million from $102 million in the fourth quarter of 2009.

Digital businesses accounted for 17% of the Company's revenue in the fourth quarter versus 15% in the same period of 2009.

Total digital advertising revenues rose 11% to $101 million from $91 million in the same period of 2009.

Turning now to our outlook, advertising revenues continue to be highly volatile, particularly over the past two months.

Accordingly, visibility remains limited.

In January, print advertising started out soft and strengthened as the month progressed.

Weather was likely a factor impacting volatility and results.

We finished the month with print advertising revenues decreasing at approximately the same level of the fourth quarter, and digital advertising revenues increasing in the mid-single digits as we experienced continued strength at The News Media Group partially offset by softness at The About Group.

Circulation revenues in the first quarter are expected to decrease in line with the declines we experienced in the second half of 2010.

Now let me turn the call over to Jim, who will give you more details on our results.

Thanks, Janet.

Our focus on controlling expenses has not abated.

Operating costs, excluding depreciation, amortization and severance, decreased 2% in the quarter despite higher newsprint prices, which were offset by lower compensation and benefit costs, and decreases in various other expenses.

There were no special items in the fourth quarter, but earnings per share in the fourth quarter of 2009 had been favorably affected by $0.22 for a pension curtailment gain resulting from the freezing of benefits under various Company-sponsored qualified and non-qualified pension plans; and unfavorably affected by $0.07 for a loss on leases and for a fee for the early termination of a third-party printing contract; and by $0.01 for a write-down of assets due to the reduced scope of a system project.

Severance costs were $0.02 per share in the quarter, or less than $5 million, compared to $0.10 per share, or $25 million in the fourth quarter of 2009.

Depreciation and amortization decreased $30 million in the quarter, and to $121 million from $134 million for the year.

In 2011, we expect depreciation and amortization to be between $125 million and $130 million.

Newsprint expense increased by 28%, with significantly higher prices offset slightly by decrease in consumption.

There were no additional East Coast newsprint prices in the second half of the year.

However, newsprint prices were still significantly higher in the fourth quarter compared with the same period of 2009.

We believe newsprint prices in 2011 will be higher as supply and demand conditions in the North American newsprint market are expected to remain balanced.

In November, we completed a $225 million debt offering of 6.625% senior notes due 2016.

Our ability to effect this debt transaction on these terms underscores the confidence that the financial investment community have in our future.

Net interest expense increased 11% in the quarter to $23 million, and increased 4% for the full year to $85 million.

In 2011, we expect interest expense to be between $100 million and $105 million.

Joint ventures saw a $3 million loss in the fourth quarter.

For 2010, income from joint ventures was $19 million compared to $21 million in 2009.

In 2010, we recorded a $12.7 million pre-tax gain on the sale of an asset at one of our paper mills in which we have an investment.

Turning now to our pension obligations.

The Company made contributions of $70 million in the fourth quarter, and $176 million for the full year to certain qualified pension plans.

The majority of these contributions were discretionary.

Our pension assets also benefited from a strong performance in 2010.

However, the funded status of these plans has been adversely affected by interest rates used to value our plan liabilities that were lower at year-end 2010 versus year-end 2009.

For accounting purposes, on a GAAP basis, based upon preliminary results the underfunded status of the Company's qualified pension plans as of year-end was approximately $447 million, an improvement of about $74 million from the year-end 2009.

For funding purposes, on an ERISA basis, based upon preliminary results the Company estimates that at January 1, 2011, underfunded status was approximately $275 million, an improvement of approximately $145 million from the prior year.

The Company made a $9 million contribution in January, and may make discretionary contributions in 2011 based upon cash flows, pension asset performance, interest rates and other factors, but will not be required to make mandatory contributions other than contractual contributions of approximately $32 million in connection with The New York Times Newspaper Guild Pension Plan.

Our diligence when it comes to the balance sheet continues to deliver results.

With the proceeds from our recent debt issuance, along with strong cash flow from operations, we have continued to improve our liquidity position, and finished the quarter with $400 million in cash and short-term investments, even after making our pension contributions.

We reduced our net debt to $597 million from $732 million at the end of year-end 2009.

We have no outstanding borrowings, excluding letters of credit, under our revolving credit facility in the quarter.

Our effective income tax rate was 21.2% in the fourth quarter, and 38.7% in 2010.

In the fourth quarter, income tax expense was reduced by approximately $19 million for the reversal of reserves for uncertain tax positions due to the closing of tax audits, and the lapse of applicable statutes of limitations.

The effective tax rate for 2010 was unfavorably affected by an $11 million one-time charge for the reduction in future tax benefits for retiree health benefits, resulting from federal healthcare legislation enacted in the first quarter of last year.

We have taken decisive steps to manage capital spending, which further contributed to our improved liquidity in 2010.

Capital expenditures totaled $15 million in the quarter, and $35 million for the full year.

This year, we project capital spending will be approximately $45 million to $55 million, as we invest in digital systems across the Company.

We remain committed to aggressively managing our operating expenses, despite higher newsprint prices and pension expense.

Given current industry forecasts, in 2011 newsprint prices are expected to increase and negatively impact operating expense, particularly in the first half of the year.

We are well positioned to thrive in an increasingly digital media marketplace thanks to the significant progress we continue to make in reinventing our enterprise.

Despite the highly competitive environment and volatile economic conditions, successful efforts across our organization continue to positively impact our overall financial performance, demonstrating our trademark excellence and resilience.

With that, we would be happy to take your questions.

(Operator Instructions) Alexia Quadrani, JPMorgan.

Thank you.

A couple questions on the print side first.

I was wondering if you could give us a bit more color on your plans on the expenses for 2011.

You guys have done an impressive job containing costs through this cycle, and I'm just trying to get a sense of how much more cost you think you can take out of the business in 2011?

Alexia, we haven't obviously given a detailed number.

We did suggest that there is some headwind in two areas, principally in newsprint prices and pension.

That being said, we had some of that same headwind in the back half of [2011], particularly in the second half on newsprint prices, and we've obviously managed to find a way to offset that growth in expenses.

It's early in the year.

I think we will be adaptable to our cost structure as we need to.

And I think we will -- as I said, we will continue to be aggressive.

But we are not prepared right now to give a full-year forecast on where those costs go.

But I think our track record has been strong in that area.

I guess put another way, you don't think you're getting close to the bone?

You think there is more opportunities left in the business?

Look, you could have made that case in 2010 as well, given we took $475 million out in '09, and we found a way to reduce our cash expenses by $111 million despite the headwind on newsprint prices.

We feel confident that we have the organizational discipline to do that, and I would expect to continue to do that.

I will say just as you think of how the year will develop, obviously, the negative impact in newsprint prices will be more pronounced early in the year until we start catching up to the way those prices increase through that next year or so.

More of the pressure will be in the front half of the year on newsprint prices than would be in the back.

And I was a little surprised to see the auto classified number down so much.

I think you said it was up in Boston, but weak every place else.

Any more color you can give on that?

We were seeing the trends a bit better at some of your peers in the fourth quarter.

Alexia, this is Scott.

I would point out that at The Times, auto classified is a pretty small category.

Classified in total is 10% of our business, and automotive is a couple points of revenue.

There continues to be volatility in the whole revenue base, but classified in particular.

In contrast, I will point out also that recruitment has been in positive territory for the last couple quarters of the year, and real estate is on a trend of continuing improvement throughout 2010 into the final quarter.

And the last question on the digital side.

Janet, you talked a bit about the success you have had in advertising on the iPad app.

I know this is still, obviously, a new endeavor.

But any sense -- I'm just trying to get a sense of revenues that you're talking about there in terms of size.

Any general sense in when that may become a significant number -- significant portion of digital revenue?

Well, I think that there is an aggressive sales effort underway in regard to the sponsorships that we have already sold in regard to the application.

We noted -- in fact, all of the fourth quarter of last year, that indeed we were selling this very proactively, and that people were lining up, which sold out really very quickly in the fourth quarter.

And as you look to 2011, it's clear that we are selling very rapidly in regard to those sponsorships associated with that as well.

It's clear also in regard to other applications that we have out there.

The IHT just launching theirs.

That indeed, this sponsorship model works very nicely in regard to the application.

And consequently, with there being a healthy market place for it, we seem to be doing extremely well in garnering quite a bit of market share there.

Okay, thank you.

Craig Huber, Access 342.

Good morning.

Thanks for taking the questions.

This negative 7.2% print advertising revenue drop here in the fourth quarter, Janet, how much of that do you think was pricing versus volume, first question.

It's very much volume.

From a standpoint of The Times -- The Times' rate yield was up, in fact, in the fourth quarter of last year, all of last year.

For the entire year.

For the entire year, and The Boston Globe was flat to a little up in regard to rate.

There was a slight decrease on the regional newspapers, but it really is a volume issue, Craig, as opposed to rate.

Okay.

And then I think you mentioned in the month of January, your digital newspaper ad revenues were up 3% to 5%.

Can you just talk about that?

Because it is obviously a major slowdown from what you had in the back half of the year, 20% or so?

No, I think we talked about all digital being in the mid-single digits.

The News Media Group digital revenues, as Janet said, continue to grow very robustly -- grew very robustly in January.

About continued to be soft.

Those would be the two levers.

Okay, sorry I misunderstood you there.

Could you also speak about your pension plan?

Did your assumptions for the discount rate -- or the long-term rate of return on the plan assets, did that change at all from what you had at the end of last year?

Discount rates obviously changed as I said in my remarks.

What did it change to, if you could tell us, please?

There is two sets of numbers here.

From a funding perspective, which is amended by ERISA, the rate we used in 2009 was about 6.7%, and the number for 2010 year-end was about 6.36%.

So there was about a 34 basis point decline.

I think I've regularly said that the most sensitive -- the thing that is most sensitive to funding is interest rate changes.

So three quarters -- or one-third of 1 point is quite a big number.

From a GAAP respective, that number is actually larger because of the way the discount rate is calculated.

For end of year 2009, the discount rate was about 6.30%, and for end of 2010 was about 5.65%.

So that's about 65 basis point decline.

And that has quite a bit of sensitivity, obviously.

What about the rate of return assumption, please?

The rate of return assumption for 2010 was 8.75%.

We will finalize our view of that rate for 2011 in our 10-K, and that will be something that will be subject, as it always is, to discussion at our committee meeting in (multiple speakers).

So that obviously did not change for your Company?

Not in 2010.

That's correct.

And then, Janet, one more question --

I'm sorry, Craig.

I was just saying that that is something we evaluate annually.

It's an annual number.

It's a one-year number that gets evaluated on an annual basis as we will do this year, and we will finalize it and report it in the 10-K.

And then I'm sorry, Janet, can you talk at all about what your outlook is here for the month of February for newspaper ad revenue trends.

Is that trending similar to the whole month of January, what you can see so far?

It's very early in the month for us to give any forecast.

We outlined what the situation was in January, that January started off slow, that weather has been a factor in that, certainly.

And still, economic sluggishness.

As January went on, we saw more improvement in the third, fourth and fifth weeks of the month.

But as far as February in the quarter, it's much too early for us to forecast.

Okay, thank you.

You're welcome.

Leo Kulp with Citi.

Hello.

Thanks for taking the question.

So, have you been able to sell advertising effectively against the international user base on the online?

Yes, we actually have done that in a couple of different ways.

We have the sales force that operates out of the IHT, and we integrated those sales forces a while ago.

And they do a very nice job selling The Times global package.

So we sell both US advertisers into the global package, as well as endemic advertisers by country.

I would say that it would be a stretch to say that we would go into France and sell the French user base to French companies.

I think that's where you would want to draw the line, but we have a very sizable international marketplace now at The New York Times, and we do monetize it.

And since we integrated The New York Times -- NYTimes.com and IHT websites, we have seen substantial growth in international traffic and our international sales.

That dates back almost two years now.

Okay, thanks for that.

One other one.

You mentioned that the benefits in comp helped out in the fourth quarter.

What did that come from?

Was that from the pension contribution, or was there something else?

A whole host of things.

Year-over-year, our headcount is down 3% to 4%.

That was a contributor.

Obviously, benefits has been something that we have been pretty aggressively tackling.

So on a year-over-year basis we had [four pros] in our defined benefit plan a year ago.

There were some timing issues with respect to how we book our variable compensation, but there's a whole host of factors.

But we have seen that really throughout the year as well.

Thank you.

John Janedis with BUS.

Hello, thanks.

Good morning.

Can you help us understand Ongo.com a little bit better?

Meaning, if I pay the $6.99 a month, what don't I get that I would if I were to go directly to the partner websites, or that would be behind the pay wall for the iPad or NYTimes.com?

Sure.

The Times offers 20 stories a day to the Ongo service.

Obviously, if you are a Times loyalist, a regular Times user, you would come to NYTimes.com, and once we go forward with the metered model, you would pay your fee and you would use The Times on an unlimited basis.

You would use many more than the amount of content, or you would use the amount of content that you wanted to choose.

At Ongo, the positioning for Ongo is really a best of the best.

In other words, it's an aggregation service that takes content from the best brands -- and it has just started, so the number of brands currently being offered is somewhat limited.

It's The Times, The Post, and The Gannett newspapers right now, as well as others including content from the FT and the Associated Press.

And that all gets combined and aggregated into a best of the best position.

So you would potentially come to NYTimes.com as your first read, but if you wanted to go and then find what was going on at the FT and The Post and the USA Today and your local newspaper and other sources, you would use that aggregation service to do that.

And you can almost think of it as a Zulu of news in some ways.

Ultimately, things will be upsold so people will be able to create the potential to upsell to other packages of content.

And so it's a combination of [chelation]-- that is the editors at Ongo packaged this for you, as well as algorithmic science, which allows them to integrate all of this stuff and present it in an aggregated way.

Okay, thanks.

And then Jim, I know you referenced the newsprint expense increase, and you didn't want to go for the full year, but when you look at the first quarter, I assume there will be some costs related to the pay wall, maybe some marketing around that at some point?

Would you expect expenses to actually be flattish in 1Q, and then maybe trend flat to down the rest of the year?

Can you help us at least on the first quarter?

As I said in my remarks earlier, just the way the math will work on newsprint.

There will be more impact on newsprint cost early in the year than later in the year.

I am not prepared to necessarily put a number out there.

I think on the pay wall side, I think most of those costs are being capitalized.

There is very little impact, but we have seen that -- again, we have been building this thing for six months or more, and we have not really called that out in any material way as a real impact on our business.

And that should not change in the first half of the year.

Beyond that, I think we'll just have to be aggressive in finding ways to manage our costs as we see fit.

But things are fairly dynamic and volatile, and we will be flexible in our views of expenses going forward.

One last question, thanks.

On the classified side, Scott, obviously you mentioned that you have less exposure relative to peers for that category.

Do you expect any kind of impact in the first quarter from the later Easter on the print business?

I have forgotten -- I think Easter was in April last year?

I think it was maybe April 4 versus later April.

I would think maybe you would get more retail in March of last year that you wouldn't get this year?

I don't know what your thoughts are on that?

Yes, it has been a long time since we've experienced an Easter so late in April, and we are still looking at that.

I wouldn't expect it to have a material effect on the quarters.

Thank you.

Doug Arthur with Evercore.

Two questions.

Janet, I guess one of the few positives on the print side was dramatically better retail, particularly at The Times.

That category has been down a lot year-to-date, so Q4 is a big improvement.

I'm wondering if you can elaborate on that a little bit, and whether you think that's a turn in the trend.

And then I've got a follow-up to Jim.

Sure, I might have Scott give you the overview in regard to the retail there.

I would point out that there were difficult comps in Boston in regard to retail.

Their pre-print business did quite nicely in the fourth quarter, but they had a very big Macy's spend I know in the fourth quarter of last year.

And they had quite a bit of advertising from Macy's, but it was exceptional in regard to the comparisons year-over-year.

And Scott is going to give you The Times story.

The retail there -- there are several major categories in retail -- department stores, mass market, fine arts, fashion jewelry.

So there are different things going on in each of those categories.

But as a generalization, it reflects the optimism about the consumer marketplace and intentions for holiday spending in the fourth quarter.

I think it was very circumstantial and reflects the -- is another way to think about volatility in categories as marketers respond to very specific and short-term market conditions.

But not only was it up as you might be looking at it, it was up in print and digital combined.

We are at that stage in our evolution where our primary focus is on how spending is taking place in the two mediums on a combined basis, as Janet pointed out in her remarks.

Over 80% of our top 100 accounts are spending in both media, and their campaigns are, very typically, integrated campaigns.

So it is too early to call the pop in the Q4 a trend?

I would be reluctant to call it a trend.

As I said, I think it was specific to the environment of the fourth quarter, and I'm not sure we can extrapolate that environment.

Okay.

And then a follow-up for Jim.

Jim, how do you lose money in joint ventures when you have minority interest in newsprint mills?

Well, NESB, which is a ball team that doesn't do a lot of ball-playing in the fourth quarter.

It tends -- look, there is some -- in the fourth quarter as well, there is some issue related to an acquisition that NESB did, and there was some acquisition accounting that also drove that as well.

That's principally it.

The fourth quarter tends to be a very light quarter where it is profitable at the newsprint mills, and it's not profitable in the baseball world.

That's the way it generally works.

Okay, thanks.

And there are no further questions.

At this time, I would like to turn the conference back to Paula Schwartz for any additional or closing comments.

Thank you for joining our call.

If you have any additional questions, please give us a call.

Thank you.

Good bye.

That does conclude today's conference.

Thank you for your participation.