Tegna Inc (TGNA) 2009 Q3 法說會逐字稿

Good day, and welcome everyone, to Gannett's third-quarter 2009 earnings conference call. This call is being recorded. Due to the large number of callers, we will limit you to one question or comment. We greatly appreciate your cooperation and courtesy.

Our speakers for today will be Craig Dubow, Chairman, President and CEO; and Gracia Martore, Executive Vice President and CFO. At this time, I would like to turn the call over to Ms. Gracia Martore. Please go ahead, ma'am.

Thanks, Laura, and good morning. Welcome to our conference call and webcast to review Gannett's third-quarter 2009 results. Hopefully you've had an opportunity to review our press release this morning, and it can also be found at www.gannett.com.

Before we get started, however, I need to remind you, as always, that our conference call and webcast today may include forward-looking statements, and our actual results may differ. Factors that might cause them to differ are outlined in our SEC filings.

This presentation also includes certain non-GAAP financial measures. We've provided a reconciliation of those measures to the most directly comparable GAAP measures in the press release and also on the investor relations portion of our website.

Craig will provide an update on our strategic efforts and summarize our quarterly results briefly. I will follow with a more detailed look at the numbers, as well as some balance sheet items. Now let me turn the call over to Craig, and welcome back.

Thanks, Gracia. Before we begin the discussion of our third-quarter results, I would like to mention a few things. First, I am very glad to be back, and I am looking forward to discussing the Gannett Company with you today. The surgeries, the recovery and rehab all went well, and I'm happy to say I am on a road to a full recovery. I received messages from many of you and I want to thank you for your kind thoughts.

Secondly, I would like to thank Gracia and the management team and all of our employees for their outstanding work during my leave.

We continued to move forward on several strategic initiatives, and that is testament to the strength of our management team here at Gannett. An important step was achieved in very late September with the launch and successful completion of our $500 million bond financing. The transaction was extremely well-received in the capital markets and gives us some flexibility as we manage our capital structure.

At the same time, we announced estimate ranges for several key results for the third quarter. I am very pleased to report that we exceeded even our expectations due to a better-than-anticipated finish to the quarter. This was driven primarily by better trends in advertising and our continued success in lowering costs and achieving greater efficiencies across all of our business segments.

Before we get into the quarter, I wanted to update you on the progress of some of those initiatives. Despite the continued weak economy, which we believe is still pretty fragile, a great deal has been accomplished in several key areas. We continue to execute on our long-term strategy. We are positioning the Company for when the economy rebounds. And at the same time, meet the continued consumer demand for content in any form and on any platform they desire.

To meet changing market dynamics and consumer expectations, we continue to transform our traditional businesses from content collection to content production and distribution on multiple platforms. At the same time, we are building a growing, profitable Digital business. A key benefit of the delivery of relevant content on multiple platforms is the ability to engage with a wider audience. Building and aggregating our audiences has never been more important to advertisers.

At the same time, access to the content across many platforms is increasingly important to the consumer. Our focus on expanding our reach and bringing customized content to consumers and marketing solutions to advertisers has put us in a better position to weather the current economic environment. It has also enabled us to succeed in the ever-changing media landscape.

Our efforts have not gone unnoticed. Scarborough recently completed an analysis of integrated newspaper audience ratings. Gannett papers hold the top three positions and five of the top 10 of the 170 newspapers included in the report. The top ranking was the Rochester DMA, where eight of 10 adults in the market read the printed version of our newspaper, the Democrat and Chronicle, visit our website or do both in a typical week. That local engagement combined with a national overlay of multiple markets is now being sought out by advertisers that need to reach a broad audience and provide locally relevant content to extend their distribution.

We announced two partnerships that helped us provide targeted information to very specific audiences. One was with Cityfeet, the leading online commercial real estate network. It will bring its database of over 350,000 commercial property listings to the online editions of our 83 domestic community newspapers.

The second was BizBuySell.com, which also partnered with our community newspapers to put its database at nearly 50,000 business-for-sale listings in over 400 franchise opportunities in our online editions. By adding these two databases to our online network, we will be delivering targeted local information that specific audiences seek.

Gannett's wide array of properties and platforms, our ability to integrate them to meet advertisers' needs, combined with the added benefit of our expertise in creating customer-centric content offers compelling marketing solutions to advertisers that few, if any, companies can provide.

The key to Gannett's success is a broad yet diverse reach, with many local touch points. A great example of this is the campaign that was put together by a team here for the National Breast Cancer foundation's effort to promote its early detection program. We are very proud of this as we were able to help deliver the message for an extremely important cause to the broadest audience possible through Gannett's vast assortment of properties. The campaign represents the type of cross-platform, cross-divisional solutions that Gannett is uniquely able to deliver to the marketplace. The network-wide campaign included our local newspapers, broadcast stations and websites, as well as national brands like USA TODAY, USA WEEKEND, Captivate and MomsLikeMe.com.

To fully understand the scope of Gannett's ability to deliver an audience across multiple platforms, let me quickly highlight some of the facets of this campaign. They included an early morning newscast with a single sponsor of the National Breast Cancer Foundation takeover of 20 of our TV stations; 60 30-second video vignettes produced by Gannett Video Enterprises that aired in various Gannett newscasts; the National Breast Cancer Foundation's on-air promotional spots, also produced by a Gannett Video Enterprises; home delivery, pink plastic bag wrapped with the National Breast Cancer Foundation's message; advertising in our community papers, four-color ads in USA TODAY and USA WEEKEND; National Breast Cancer Foundation's advertising in pink-shaded elevators screens in hotels and office buildings through the Captivate elevator network; MomsLikeMe.com homepage header sponsorship and the national online discussions group at MomsLikeMe.

As well, mobile pages on USA TODAY.com to register for an early detection plan. We are getting a lot of positive responses from advertisers due to this multiplatform cross-divisional approach. We see a lot of opportunity with this kind of approach, and will keep you posted as we move forward.

None of this is possible, however, without having relevant content that engages audiences both locally and nationally. Our ContentOne initiative is hitting its stride, and earlier this year -- or earlier this quarter, excuse me -- we held a content summit here in McLean to make content sharing and integration across all Gannett a reality. The benefits are significant. As you can see with the National Breast Cancer Foundation campaign, we are beginning the process of developing content specific to advertisers.

During the quarter, USA TODAY took another step in expanding its brand and our digital platform. In August, we announced the launch of USA TODAY's e-Edition, which is an exact replica of the newspaper, featuring additional interactive and exclusive content. The e-Edition product also includes a Saturday-Sunday edition called USA TODAY EXTRA. This is USA TODAY's first regular weekend product, and it is available only to print edition and e-Edition subscribers.

And earlier this month, they followed the success of the USA TODAY iPhone app with USA TODAY AutoPilot iPhone applications sponsored by Hampton Hotels. USA TODAY is leveraging its exceptional national brand recognition and popularity among travelers with the familiar look and feel of our USA TODAY newspaper. The app provides them with a host of unique features and tools to help them manage their travel experience with up-to-minute flight schedules and delays, weather conditions provided by regional radar based on your location via GPS and much, much more.

Throughout all of this, we have been focused on creating efficiencies in all parts of our business. Across the Company, we are making changes to operations and cost structure. These are not temporary moves. They are permanent and reflect the continuing efforts to find better ways to operate.

We also had to make some very, very difficult decisions that included workforce restructurings. While the economic downturn in the US and UK continued to soften advertiser demand, through these efforts and the incredible dedication and work of our employees, we were able to progress on some very important priorities.

First, as we have noted on many occasions, we are focused on using free cash flow we generate to pay down our debt. In spite of the weak economy, we generated over $255 million in operating cash flow, which we used to reduce debt by almost $200 million in the quarter. We have reduced our debt by over $500 million year to date. As I have said many times before, we are always assessing and managing our capital structure and try to take advantage of opportunities in the capital markets.

I am extremely proud of our recent successful bond offerings, which exemplifies this. We borrowed $500 million in the capital markets in two $250 million tranches priced with coupons at 8.75% and 9.375%, maturing in 2014 and 2017, respectively. As I noted earlier, the transaction was very well-received in the markets, and that says a lot about the confidence investors have in the future of the Gannett Company.

As I noted, we preannounced estimate ranges for several key results for the third quarter, so let me briefly cover key results from today's quarterly announcement and then turn the call over to Gracia.

Earnings per diluted share on a GAAP basis were $0.31. As anticipated, we reported charges that totaled about $47 million pretax, which translated to just over $30 million after-tax, or $0.13 per share. The special charges relate principally to various non-cash asset impairments and facility consolidation costs and workforce restructuring. Excluding the special items, earnings per diluted share on a non-GAAP basis were $0.44 per share. The comparable figure for the third quarter of 2008 was $0.76 per share.

Our operating revenues totaled $1.3 billion, which was down about 18%. While the state of the economy has not enabled us to return to top-line growth, we are seeing some favorable trends. We recognize that last year's revenue declines reflected the beginning of the accelerating economic slide and tough capital markets. Taking that into account, we still see revenue trends moving in the right direction in our Publishing segment. Once again, our year-over-year comparisons for Publishing ad revenue this quarter were better than the year-over-year comparisons for the first and second quarters.

In Broadcasting, the success we achieved last year with political and Olympics spending made for tough comparisons this year. As anticipated, retransmission fees were substantially higher in the quarter, and we are on pace to generate over $56 million for the year. Excluding the impact of Olympic and political spending, core revenues in Broadcasting were the best year-over-year comparisons of the year.

Digital segment revenue was down about 20% on a pro forma basis, but operating cash flow was about 45% higher, as we had a sharper expense decline than revenue decline. Year-to-date, our Digital revenue companywide were almost $680 million, and our Digital metrics for the most part were better this September relative to last September.

Our expenses were down about 14% and reflect all of the initiatives that we have underway to create efficiencies and fundamentally change our business process as well as substantially lower newsprint costs. Excluding the special items, companywide operating expenses were down about 16%. The Digital segment includes the consolidation of CareerBuilder for the full quarter. On a pro forma basis then, assuming we consolidated CareerBuilder for both quarters and excluding special items, our operating expenses were actually about 20% lower. That leads to operating cash flow of over $250 million and gives us the ability to pay down debt and continue to invest in the business.

Gracia will go into our results in some detail. But before I hand the call over to her, I think it is important to reiterate that the Gannett Company is now leaner and more customer-focused than it ever has been. We are solidly profitable, and that profitability, even in this tough economy, translates to substantial free cash flow.

Our Digital business is growing and profitable, and most important, an integral part of all of our operations. We have made and will continue to make the necessary changes necessary to better align expense with revenue opportunities as they evolve. Above all, we achieve our objectives by continuing to produce the content our audiences seek out and delivering it to them wherever and however they want to find it.

As our earnings announcement today demonstrates, we are achieving some measure of success. We have created a significant level of operating leverage that will drive even better results when the economy returns.

Before I turn the call over to Gracia, I just want to extend a heartfelt thanks for all of the effort and hard work that she in particular put in to drive the Company over the last number of months. I appreciate it, and now let me turn the call over to Gracia.

Thanks, Craig. I will provide a little more detail on our operating segments and cover some nonoperating and balance sheet items.

Moving to the segments, in Publishing, our total revenues on a pro forma basis were about 22% lower, and ad revenues were down about 28%. As Craig noted, we are seeing some favorable trends here. Ad declines continue to slow, and those declines were a few percentage points better than the second quarter, which was an improvement also over the first quarter. And September was our best comparison month thus far this year.

Domestic ad revenues for the quarter were down 26%, while at Newsquest they were down almost 29% in pounds. Once again, comparisons this quarter were the best thus far this year.

At Newsquest, the difference was significant. The third-quarter comparisons for ad revenue in pounds were eight percentage points better than the second quarter and 10 percentage points better than the first.

The results for each of our major categories were in the press release this morning as follows. Retail is about 22%, lower while national was 25% and classified revenue was about 37% lower. But the trend was moving in the right direction, and again, September was the best year-over-year comparison month of the year.

Retail advertising, although down, finished the quarter slightly better than the second quarter. In the US, across all products, the department stores and furniture categories remain challenged, although the third-quarter comparisons for both categories were better than the two prior quarters.

Retail advertising results in pounds in the UK followed much of the same pattern.

National advertising, however, was a bit tougher in the third quarter. Advertising revenue at USA TODAY was about 37% lower. Ad demand there continues to be hampered by the lingering dramatic slowdown in the travel and lodging industries. That slowdown affected USA TODAY's circulation figures as well. We firmly believe that as travel and lodging rebounds with the eventual upturn in the economy, USA TODAY is very well-positioned to be the excellent national advertising platform in print, online and mobile.

And as Craig noted, USA TODAY continues the online expansion of its national brand through the e-Edition and the USA TODAY travel app for the iPhone, both of which are off to a good start.

Classified advertising trends, on the other hand, improved throughout the quarter, and third-quarter year-over-year comparisons were about eight percentage points better than the second-quarter comparisons. The improvement in the year-over-year comps was over six percentage points on a constant currency basis. Trends in employment and real estate firmed over the quarter, and are noted in our press release today. The exchange rate, however, was a headwind for revenues this quarter, as it has been all year. So on a constant currency basis, the declines in classified would have been almost three percentage points better.

While economic signals are somewhat mixed, the economy in the UK seems to be stabilizing, or, at the very least, the downturn seems to be ebbing and results at Newsquest reflect that. The rate of increase in unemployment is slowing and the UK economy shrank just 6/10 of a percent in the second quarter, less than previously estimated; GDP stock falling in the three months through September.

Revenue declines at Newsquest in the major ad categories again were included in the press release this morning, as were the category details. Across all of the classified categories, the trends were moving in the right direction. Year-over-year comparisons for classified advertising at Newsquest again overall were about 10 percentage points better than the second quarter. The relative improvement was driven primarily by results in the real estate category, which was 22 percentage points better.

Before we move to expenses in publishing, there is one item regarding Newsquest and the other revenue category in the Publishing segment I want to cover. As you may recall, we had a non-cash write-down in the second quarter related to some printing assets in the UK that were being held for sale. We completed that sale at the beginning of the quarter, and our exit from that business resulted in the absence of about $21 million in revenues this quarter compared to the third quarter last year. The reduction in revenue impacts the All Other revenue line on the income statement and, of course, total revenues.

Now, turning to the expense side, we continue to make very good progress in efforts to reduce costs and gain greater efficiencies. Reported Publishing segment expenses were down about 20% in the quarter, but more importantly, they were about 22% lower excluding special items in both years. Successful efforts to restructure our workforce, as well as facility consolidations in this and prior quarters helped drive that expense level down.

Our focus on aligning our expense structure with revenue remains a priority. It is an important step in our ongoing efforts to position the Company for the future and to capture significant operating leverage when the economy does return.

One area of focus has been production and distribution costs. We are continuing to look at opportunities to print for others or to move our printing outside. The consolidation of ad production centers is one of the latest efforts underway, which we began rolling out toward the end of the quarter.

Now let me turn to newsprint expense for a moment. As you saw, newsprint expense was also a significant factor in our expense reduction. A substantial drop in newsprint usage prices, combined with a 30% plus decline in consumption, resulted in newsprint expense that was about 43% lower in the quarter. As you know, domestic and offshore newsprint markets continue to favor publishers. Since late 2008, North American prices have fallen in excess of $300 per metric ton. The primary driver for this downturn is a sizable imbalance in supply versus demand.

At our Newsquest operations in the UK, where newsprint prices are negotiated and fixed annually normally, we originally assumed 2009 prices would rise by a moderate double-digit percentage for the full year. But the same conditions of oversupply plaguing North American producers are also apparent throughout Europe. While prices were up in the mid to high teens in the first half of the year, as of mid-year, Newsquest prices will decline by a low teens percentage in the second half of the year compared to the first half of '09.

Industry observers in North America agree that over 2 million tons of capacity would have to be permanently removed to achieve market balance. Producers have idled, but not closed, production capacity as the variance between capacity and shipments continues to grow. These market fundamentals didn't support an attempt at August increase, but producers are again trying to raise prices, albeit inconsistently. Eastern and Western regions are divided on timing, and some producers are seeking to raise prices by a lesser amount than others.

Despite these increase announcements, prices are likely to remain under pressure and to bounce around a bit until supply is in line with demand. We will continue to see favorable price comparisons in the fourth quarter and certainly into next year.

Now moving to Broadcasting, we are seeing some promising trends here, as well. A substantial increase in retransmission revenue to over $14 million and a solid quarter by Captivate partially offset the near absence of about $50 million of Olympic and political spending and soft ad demand, particularly auto advertising. If you exclude Olympic and election spending, our core television revenue would have been down in the high single digits, making the third quarter the best quarter of the year on a comparable basis.

In September, in fact, several categories, such as packaged goods, medical/dental and media, had substantial double-digit gains.

Looking to the fourth quarter, the historic success we achieved in garnering an outsized share of political advertising in our markets -- over $58 million in the fourth quarter last year -- creates a fairly tough comparison this year. We expect to see a similar level of retransmission fees in the fourth as this quarter, so we expect to exceed $56 million for the year. Based on current trends, we expect the percentage decline in total television revenue in the fourth quarter to be in the low 20s percentage range. But excluding the impact of political, we expect net revenues to actually be up in the low single digit range.

Turning to the expense side, total expenses in Broadcasting reflect strategic consolidations, some compensation actions and more efficient operations. As you saw, reported expenses were down 4.1%, while expenses excluding special items were almost 9% lower.

Turning to our Digital segment, revenues totaled $143 million in the quarter, up about 84%, primarily due to the consolidation of CareerBuilder. Revenues declined about 20% on a pro forma basis, reflecting the impact the weak economy has had on employment advertising, as well as our Digital marketing services companies.

Expense savings outpaced the revenue declines and were about 28% on a pro forma basis. And although CareerBuilder's tight rein on expenses drove much of the cost saves, almost all of the Digital segment properties had expense savings that exceeded their revenue declines. Therefore, operating income was about $10 million, or 71% higher than last year; and operating cash flow increased about 45% over last year. The operating cash flow margin in the Digital segment on a pro forma basis was over 23% compared to almost 13% a year ago.

Digging a little deeper into CareerBuilder, North American network revenue declined about 28% compared to the third quarter last year. As a reminder, that revenue figure reflects CareerBuilder's own sales efforts, about 80% of the total, plus the revenue from the network of owner-affiliated newspapers.

Both the softness in employment and the limited opportunity for upsells from the affiliate newspapers had an impact. However, North American network revenue in the third quarter compared to 2009's second quarter was unchanged. In addition, revenue generated directly by CareerBuilder was flat from the second quarter to the third quarter of this year.

As Craig mentioned, we generated Digital revenues companywide of approximately $228 million in the quarter and almost $680 million year-to-date. The metrics we track, such as unique visitors, page views and visits, were all up in the month of September compared to September last year.

Drilling down a little bit into the online picture at our community publishing properties, national online revenue was up nicely, and online retail revenue, almost 25% of online revenue for US Community Publishing was positive. Another important category, automotive, was down in the low single digits. And employment, which has historically lagged any recovery, was down significantly. But online revenue, excluding employment, was actually up in the low single digits.

Now let me quickly cover some of the nonoperating items, and then I will move to our capital structure and balance sheet. The decline in equity income in unconsolidated investees was $6.1 million in the quarter, as you saw in the press release. The decline was primarily driven by a $5.4 million non-cash impairment, lower results from our newspaper partnerships, as well as the absence of CareerBuilder results that are now consolidated. However, results for some of our investments improved, particularly at Classified Ventures. Excluding the non-cash impairment, equity income would have been down about 11%.

Moving quickly to the balance sheet, as we mentioned, we successfully raised $500 million in the debt market in two tranches of $250 million each. The financing was significantly oversubscribed, priced at the very tight end of price talk, and meaningfully exceeded our initial expectations. As a result, we now have almost a quarter of our debt maturities in the fourth quarter of 2014 and beyond.

We used the proceeds of the financing to pay down debt outstanding under our revolving credit agreements and a portion of our term loan that is due in 2011. Additionally, we paid down $197 million of debt during the quarter and reduced debt by over $500 million year-to-date.

So at this point, we have about $3.3 billion in debt, and our all-in cost of debt is about 4.8%, which includes the cost of the new bonds we just issued. Balances under our revolving credit agreements, which run through 2012, now total approximately $1.6 billion. We have ample capacity under our revolving credit facilities and will generate significant free cash flow to pay our maturities in 2011 and beyond. And as a reminder, we have successfully rolled our revolving credit facilities for well over 30 years.

Finally, capital expenditures for the third quarter were $12.5 million and $45.8 million year-to-date. The fourth quarter is typically the largest quarter for CapEx, so we expect to complete the year with CapEx in the $75 million to $85 million range. Keep in mind that amount includes CareerBuilder's capital expenditures, although they are entirely self-funding.

So in summary, we felt good about the quarter. We made a lot of progress on our strategic priorities, in reducing our cost structure and achieving greater efficiencies, and successfully accessing the capital markets. We are seeing some encouraging trends in the market and believe we are solidly positioned going forward.

I will stop here, and I know Craig and I will be happy now to take your questions.

(Operator Instructions) John Janedis, Wells Fargo Securities.

I know it is still early, but can you talk about what you're seeing from a ratings perspective on your evening news and what impact Leno is having on revenue? And when you look at the [4-2] guidance of download [20s] at this point, how different do you think it would be if NBC decided to go with a more traditional schedule? Thanks.

You know, just taking a look first at the programming, John, my sense of it is that right now, we would probably be in a little better position with the traditional prime, but it is awfully early to tell yet. And from an overall standpoint, when you take a look at that, I think Leno itself is going to give us some opportunity as we move forward.

But taking a look at the news, again, what we must do is be certain that we are doing everything we can locally. So it is, again, early on all of this to really tell any impacts that we are going to have in that direction. But we will see where it goes and keep you posted as we move forward.

Alexia Quadrani, JPMorgan.

Thank you and welcome back, Craig. My question is on the cost side. If you could share with us what your preliminary thinking is on the costs for next year; is the decline we saw in this quarter a good run rate for next year? And did you have the furloughs? Did the furloughs continue into Q3, and what are your thoughts going forward. And maybe also touch on the newsprint. Have you stockpiled an above average amount, given the possibilities in price increases ahead?

Alexia, it is a little early for us to comment on the cost side for next year. We are literally just beginning to look at the budgets that are bubbling up from our local units.

What I will tell you is that a lot will depend on what the revenue outlook is for next year. I don't think we assume that the revenue outlook next year is going to be quite as difficult as it was this year. But we will have to take a look at that. And then some of the expensive initiatives that we've done are ongoing, and permanent reductions, we will cycle some of those.

But then there have been new ones, obviously, in July and beyond that will benefit us well into next year.

We did not do furloughs in the third quarter, nor do we have plans to do furloughs in the fourth quarter. So that about $25 million of expense benefit that we received in the second quarter, and I guess it was about $20 million or so in the first quarter, did not repeat in the third quarter, nor will repeat in the fourth quarter.

On the newsprint side, I would say that we've always done a good job on the inventory management side. And given where prices are, buttressed by some black liquor tax credits that some of the newsprint companies have enjoyed, we certainly have added to our inventory levels, as have others, I'm sure, in the industry.

All right. Thank you.

Peter Jacobs, Ragen MacKenzie.

Just a quick question, and that is could you just update us where you are in your financial covenant ratios please?

Sure. We will close the third quarter at about 3.03 times, and our covenant is 3.5 times max. And as we've said previously, we had expected that the covenant would peak in the third quarter; although, interestingly, it is not too far -- in fact, I think right on top of where it ended the second quarter. And in the fourth quarter, we have about [$55] million of severance cash expense that we took in the fourth quarter of last year that won't repeat. So we would anticipate that ratio would be lower as well in the fourth quarter.

Okay, great. Thank you.

Alexia Quadrani, JPMorgan.

Just a follow-up question on USA TODAY. I may have missed it, but what was the circulation revenue in the quarter? And are any other ad categories, outside from sort of the core travel, are you seeing weakness there as well?

Alexia, with regard to USA TODAY circulation revenue, I think that Dave Hunkey has indicated that for the full year, circulation revenue is about flat. In the -- as you recall, we had a price increase in the fourth quarter of last year, so now we are going to be cycling that price increase in the fourth quarter. And as well, as you know, USA TODAY circulation has been impacted by the tremendous downturn in travel-related and lodging-related vacancy levels and just simple lack of traveling. And that is obviously an important component for USA TODAY.

But I would add that USA TODAY continues to be the number one newspaper in print circulation in the country. Our subscription levels were virtually flat in the quarter, despite, obviously, the impact on single copy and newsstand sales and hotel delivery as a result of the travel impact. And the good news is that we have maintained every single one of our hotel contracts throughout this recession, and feel very good about how we are positioned.

I will remind you that back after 9/11, our hotel distribution, I think back then, was off about 30%. And then from September of '02 to September of '08, I think our hotel distribution was up about -- a little more than 50%.

So we anticipate that as the economy improves and as hotel and airline traffic comes back, that we will see the typical bounce that USA TODAY has always seen in that aftermath of those kinds of events.

Just in addition, two other areas, packaged good and restaurant, have also had some positive impact during the quarter. So there are, in addition to the travel on the negative side, those other areas are certainly working for us, and we look to see that to continue, Alexia.

Thank you.

Michael Kupinski, Noble Financial.

I'm sorry for the little background noise, and welcome back, Craig. Just to -- you may have mentioned this earlier, but I was just curious in terms of the regional disparities that you might have in terms of the newspapers you've made mention in the past, about some of your most difficult markets, I was just wondering if you can just talk a little bit about what you are seeing in those difficult markets. Are you seeing -- in terms of companywide trends, are they in line, are they below? If you could just give us a little bit more color there.

On the regional trends, things have, I think, evened out a bit. But we continue to see, for instance, in a Florida, where we have Fort Myers, where there was a huge amount of speculation in secondary, third, fourth homes, and folks were speculating, we continue to see obviously tremendous pressures there.

Conversely in Brevard, Florida, which is not too, too far from Fort Myers on the other coast, we are actually seeing things -- trends abate a little bit in that market. In Phoenix, things are continuing to struggle a bit on the real estate side, but I think they've done a good job of recasting their structure.

So we continue to see in the real estate side the California, Florida, Arizona, Nevada being very difficult. But in those other categories, it really is very much a community-by-community difference.

Gracia, in the past press releases, you indicated that those difficult markets, in Florida, Nevada, California, represented about -- a larger percentage of the declines in classifieds. So were they basically in line with the companywide performance in the quarter, or were they still trending well below the companywide performance?

They still would've trended probably 10 percentage points worse on the real estate vertical than in our other markets. But the gap in the other verticals, like employment and real estate, are not that inconsistent.

Okay. Terrific. Thank you.

John Kornreich, Sandler Capital.

Question is, one, can you update us on what you see as cash pension contributions, which I think are nothing this year, but '10 and '11.

And also, I still think you have something like $1 billion of face value bonds that are due in '11 and' 12. Have you been buying any of those in, or do you plan -- do you think it is a good idea to buy them in? Or is all free cash flow simply going to go to reducing the bank debt?

John, on the pension side, as we've said, we will not have any mandatory cash contributions in 2009. We will not have any mandatory, to the best of our knowledge at this point, given where our pension fund stands, in 2010. Obviously, 2011 and 2012 depend a lot on what assumptions you make on returns, discount rates, employee population, etc., etc.

Our pension plan, I think, on a preliminary basis, is up about 20% or so for the first nine months of this year. A lot will depend on where the market and we end the year, and where interest rates are, because that discount rate obviously can have a fairly significant impact on things as well.

With respect to the bonds due in '11 and '12, as you may recall, we did extend the maturity of some of those '11s and '12s; I think about over $250 million of those maturities were extended into '15 and '16. Obviously, we will continue to look at things on a very opportunistic basis. And if we saw opportunities to do some things to further move maturities around and it made good economic sense for us, then we would do that.

I think we have about $740 million of the '11s and '12s still due in '11 and '12 out of the $1 billion that we started with.

Gracia, also, while I have you, I know it is early, but if necessary, can you hold CapEx next year to the $80 million type range? I mean, are there any projects that just have to get done next year?

Well, we are just actually finalizing our capital budget, and it looks like it will come in in that range. And we've taken a look at sort of a five-year horizon. And we are pretty comfortable that for pure maintenance CapEx, plus doing every project that provides a strong ROI, that the $85 million or so, including CareerBuilder, will be a sufficient number for us to continue to grow the strategic part of our business, as well as to maintain our existing traditional businesses.

We have no big new press projects or any other, like a DTV conversion, that are on the horizon. Obviously, if something like that came up, then that would mean a shift in our thinking. But no regulatory issues that we are aware of that would cause us to spend outside of that sort of $85 million range.

Gracia, I just want to say that you and your team have been incredibly nimble in restructuring the balance sheet. Because I remember back in -- when you had the New York City Analyst luncheon, your bonds were yielding, I think, over 20%. And I couldn't figure out how you could do any refinancing. And here you are, you've done basically $750 million of financing just in the last few months. So you are very light on your feet -- terrific.

Thanks very much. I need to lose a few pounds, but yes, thanks. I think we've got time for one more -- two more questions.

Craig Huber, private investor.

Good morning, and welcome back, Craig. Glad to hear your back is doing better.

Thank you.

I guess a two- or three-part question. Can you just tell us, Gracia, your daily and Sunday circulation declined in the third quarter. How was that year-over-year?

And then also, this roughly 28% ad revenue decline in the newspapers in the quarter. How much of that would you think is from advertising rate as opposed to volume? I think last quarter you thought it was about five percentage points.

Yes. On the circulation side of things, I think the declines were similar to what we saw in the second quarter. And I think at that time, when Bob Dickey talked about it, he mentioned the fact that we've taken a number of aggressive pricing actions on virtually every one of our newspapers.

We've also reduced permanently some of that out of NDM or area that is important to our advertisers. So some of that circulation has been moved out. We've also seen some morphing to e-Editions, like at USA TODAY and some other things that we are doing.

Clearly we are going to be very careful on continued pricing actions, and it is not dissimilar to what we've seen in the past where when you take aggressive pricing actions, you see a falloff in circulation and then you spend some money on retention efforts and on start pressure and the like, and that circulation builds back up. But net-net, you see the benefit and we continue to see the benefit of those pricing actions in our revenues.

As to rate, I don't think we can probably add much more than what we said on the second-quarter earnings call that, again, rate, there is not one monolithic rate. There's online products, there are mobile products, there are all kinds of products that are in the mix.

And in that 5% range, whether it is give or take a couple of percentage points, hard to hone in particularly and specifically on that, other than to say that I think we are trying to be sensitive to our advertisers and the situations they find themselves in, and trying to be more creative with them and helping them get through this difficult economic period for them as well.

Then I think we will have tremendously solidified those relationships and as the economy improves, we will see more dollars flow out of them as we always had hoped.

Gracia, is that to say the circulation daily was -- I think you said second quarter three months ago was down in the 11% range for circulation.

I think it is in the low to mid teens, in that vicinity.

Okay. Then just also as a point of clarification on CareerBuilder, the numbers you threw out. The CareerBuilder salesforce only generated revenues. How much were those down in the quarter year-over-year, please?

Year-over-year in the quarter, I think we said that they were down -- let's see, CB generated -- they were down about 22% versus the prior year.

Great. Thank you very much.

You're welcome. Thanks, Craig.

John Janedis, Wells Fargo Securities.

Thanks for taking the follow-up. Just very quickly for housekeeping, looking out to '10 for TV, does the re-trans component stay around that $56 million or so, or $14 million to $15 million per quarter, or is there another step-up there?

There will be some step-ups as we move along, John.

Significant, Craig, year-over-year? Or is it more like kind of a CPI number?

Probably more in the CPI range would probably be more realistic.

Okay.

What do you think CPI is, John?

I'm not an economist, but not very much.

Well, I think we might do a little better than that.

Okay. And just on the Olympics front, I think you did $22 million back in '06. Would you expect any kind of large change from that number or would it be pretty close, do you think?

You know, it is a little early yet for us to tell. I think with the time zones, with everything that we've got going for us, there may be a possibility. But again, we've got a lot to look at with the advertisers and where this economy comes back. I don't think it is unrealistic, but it is a little early to try and figure that one out entirely yet.

Okay, thanks. Good luck.

Okay, we can take one last question and then we have to wrap it up.

Jim Goss, Barrington Research.

Thank you. I was wondering with the discussion of the e-Edition, if you are moving toward the notion of charging for at least some of the premium content. And maybe talk about how the considerations might be changing as we move into an era where not that has got to pay for itself as well.

And a corollary, were you suggesting that the decline in circ at USA TODAY was basically due to lower occupancy rates at the hotels with whom you have the contracts?

It is, number one, lower vacancy rates at hotels that we have contracts at. Number two, it is lower number of travelers just in general, so airport newsstands, those kinds of things. So it is a combination, I think, of all of those factors. Craig, did you want to --?

On the --?

On the daily circ. The first part of the --

The charging for premium content this year.

You know, we have been, Jim, as you know, looking at this for quite a period of time. And strategically, we have lots of considerations on the table. We are not at this point ready to make any pronouncements as to direction. But it's again, lots of study, lots of research, and I think what you're seeing us do is really become very customer-focused from a content standpoint on what that differentiation will be and really creating value.

So it is something to stay tuned with, but we've done a lot of research and we are going to continue looking at it.

Okay, and maybe one last thing. Craig, do you have any thoughts on the -- NBC as a cable network. That has popped up into the whole set of discussions around NBC Universal. And even if that would take years to unwind with affiliate relationships, probably wouldn't be viewed as a good trend for the largest NBC affiliate group operator. Is there any reality to that whole notion at all, and how would you react?

You know, obviously, we are not anywhere a part of those discussions. But I think your conclusion, it probably wouldn't be in the very best interest of us from the affiliate standpoint. But we are just going to have to wait and see. There is an awful lot going on in those discussions, and time will tell, and we will respond appropriately at that time.

Thanks very much.

Okay.

Laura, I think that concludes our call.

Wonderful, thank you. That concludes today's conference, and thank you for your participation.