Tegna Inc (TGNA) 2010 Q4 法說會逐字稿

Good day, everyone, and welcome to Gannett's fourth-quarter and year-end 2010 earnings conference call. I will note that today's call is being recorded. Due to a large number of callers, we will limit you to one question or comment today. We greatly appreciate your cooperation and courtesy.

Our speakers for today will be Craig Dubow, Chairman and Chief Executive Officer; and Gracia Martore, President and Chief Operating Officer. At this time, I would like to turn the conference over to Gracia Martore. Please go ahead.

Thanks, Sara. Good morning, and welcome to our conference call and webcast to review Gannett's fourth-quarter 2010 results, which we released prior to the market open this morning. Hopefully, you've had an opportunity to review them. You can also find them at www.Gannett.com.

Before we get started, as always, I need to remind you 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 have provided a reconciliation of those measures to the most directly comparable GAAP measures in the press release and on the investor relations portion of our website.

With me today, in addition to Craig, are Paul Saleh, our CFO; Jeff Heinz, our Head of IR. Craig will provide an update on several strategic efforts and summarize our results for the fourth quarter and full year. Then I will review the quarter and results for each of our business segments in a little more detail. Given the update we just provided at the UBS Conference in December, we will keep our comments relatively brief. Craig.

Thank you, Gracia, and good morning, everyone. We are pleased with the positive results that we delivered for the fourth quarter and full year. We recognized that the media landscape was changing and that we would need to take proactive measures to ensure that Gannett is best positioned to adapt to the changing environment and continues to operate successfully. Over the last year, we have strengthened our balance sheet and enhanced our financial flexibility, created and customized attractive multiplatform content for our customers, improved our production and distribution functions, enhanced local market presence in both our publishing and broadcast segments, and restructured costs and created efficiencies throughout the organization, among others.

As a result of our actions, we have improved the profitability of each of our business segments and generated operating cash flow of $1.3 billion this year, despite the challenging operating environment.

Now, let me turn to the fourth-quarter results. Our fourth-quarter results reflect another quarter of significantly better profitability and overall revenue growth. Our broadcasting and digital segment revenue growth was higher compared to last year, dramatically higher in the case of broadcasting. We've progressed on the year-over-year comparisons in our publishing segment, although our results mirror the state of the economy here and in the UK.

Domestically, results were strong in auto and employment, while real estate continued to show slower growth. In the UK, operating environment remains very challenging for us. Our focus on strategically identifying efficiency opportunities resulted in substantial growth in our profitability overall compared to the fourth quarter last year.

I am pleased to report another quarter of significant earnings per share growth. Excluding special items, our EPS for the fourth quarter was $0.83, up about 19% from the fourth quarter of 2009. Most importantly, we generated operating cash flow of almost $400 million in the quarter. Gracia will discuss our quarterly results in more detail in just a moment.

But before that, let me raise a few things I want to discuss about our strategic initiatives in more detail, the three key actions that reflect our commitment to enhancing and customizing our marketing solutions for advertisers to help their businesses grow, extending our re0ach and broadening our engagement in our local markets, and delivering content on any platform consumers want anywhere they want it.

Our partnership with Yahoo! is a great example of our ability to adapt to changing advertiser choices and customizing our advertiser solutions to help their business. In this environment, it is critically important for us to have digital solutions for advertisers in our local markets, and Yahoo! enhances the digital alternatives for our marketing and sales teams.

To be clear, the partnership with Yahoo! leverages the strength of our local market presence, our trusted brands and our local advertising relationships with Yahoo's audience and display advertising leadership. With Yahoo!, we have a significant competitive advantage in our markets. We can offer our advertisers unmatched audience reach and the ability to target their customers precisely, based on attributes like demography, geography and behavior.

Thus far, the partnership is working as planned; in US Community Publishing, 39 sites have rolled out Yahoo! and several other sites will be completed by the end of March. Our local digital sales teams have started the remaining launches.

In broadcasting, all seven of our targeted markets have launched Yahoo!. The final market, KPNX, launched about two weeks ago with The Arizona Republic. Building on our already strong presence in our local TV markets is a top priority for our broadcasting management team. As we have reported in the past, we have partnered with DataSphere to launch hyper local sites in an effort to deliver localized content to our consumers and a digital ad solution to small local businesses, something that we have not offered in the past. Our final market, Sacramento, launched January 20th with 30 sites. That brings our total to 264 hyper local neighborhood websites that have been launched in 10 markets.

We are showing month-over-month growth in page views per neighborhood site. To further drive audience gains, we are rolling out new marketing initiatives. We have delivered over 1.9 million total community site page views and 30,000 stories published to community sites across their nine markets in 2010.

Revenue associated with DataSphere is running ahead of projections.

We are launching a similar local focus effort in US Community Publishing for classified employment. As I noted, a bright spot in our results for almost the entire year has been our classified employment growth, up 10% in our local markets.

To further that success, USCP news, advertising and digital departments introduced a division-wide initiative to foster employment growth in our local communities. At local sites, employment advertising has been moved to the main section of the newspaper, elevating its profile. It has a new banner and page layout and is coupled with related content from CareerBuilder.

On Sundays during the first quarter, newsroom stories will explore how job growth can be stimulated. Many sites have planned major reporting projects with other sites that are partnering with community agencies to hold public forums and creating statewide collaborative projects.

We continue to deliver strong content that is trusted and relevant. USCP also focused on growing paid Sunday home delivery circulation by giving consumers an enhanced Sunday product and advertisers deeper reach.

Advertisers, especially national pre-print advertisers, want to have their advertising in the Sunday newspaper because it is a warm, lean-forward environment, meaning consumers deeply engage with the Sunday product, both the content, including the depth and variety, and the advertising, which serves as a weekly shopping guide.

So we decided to enrich the consumer experience even more by enhancing content and design. As a result, we have been successful promoting the benefit of Sunday home delivery. Sunday home delivery was up, on average compared to 2009, for the largest 32 local products that we have. Twenty sites achieved year-over-year growth on the annual average.

Our content is valued in our local markets, and we continue to assess that value through paid content models at three of our domestic publishing sites. As Bob Dickey noted at the UBS Conference, we have learned some important lessons thus far. The first is that subscriber engagement is much higher than nonsubscribers to a significant extent. Second, the three sites have delivered all their local online advertising campaigns through this testing period, and overall retention rates remain strong. Finally, promotion is critical. Page view increases at each site are being driven by comprehensive promotion strategies that uses several platforms, including e-mail and social media.

The Spectrum at St. George, for example, continues to show improvement in the year-over-year difference in page views since their August launch. In December, they experienced a dramatic increase, logging an 18% year-over-year increase in page views and a 7% year-over-year increase in unique visitors. The jump reflects the power of being the dominant source for news and information in a local market.

Our digital content continues to be popular and growing, particularly our USA TODAY news apps. Through January, our downloads totaled 7.3 million, 3.6 million for the iPhone, 1.4 million for the iPad, and 2.1 million for the Android. As you can see, the Apple products account for almost 70% of the downloads. However, the Android accounted for almost half of the downloads in January.

As I am sure you are aware, mobile content consumption continues to grow, and 2010 was an absolutely huge year. More than 234 million Americans age 13 and over used mobile devices in 2010 according to Comscore, and over 30% of mobile subscribers use smart phones. And our mobile statistics reflect that growth. We experienced a significant jump in mobile page views in 2010 from USA TODAY and our local sites, up 267% to 1.6 billion.

We also began to see signs of an emerging market for mobile advertising on both national and local levels. Obviously, the demands of mobile users are growing, and we want to deliver rich content and advertising that continually evolve to meet those demands. To deliver on that commitment, we announced plans last September to implement a common Gannett-wide software platform for mobile site development and hosting. USA TODAY'S site launched in December, and during the first quarter, we will launch over 100 sites for all local US news properties across Gannett.

The sites will have a new look and feel and support on-demand video for higher-end devices, such as an iPhone. Markets will have the ability to customize their sites. As importantly, we will be enhancing these sites throughout the year.

We continue to extend our strategy to make content available to consumers in any form that they want it. We announced the launch of Ongo last week. Ongo is a digital news service that provides subscribers with a new approach to reading, discovering and sharing news. The new paid subscription service responds to changing customer demand and preferences, allowing subscribers to create, customize, personalize and access the news and information that matters most to them, all in one place. Ongo is accessible through major web browsers on computers, smart phones and tablets, so subscribers enjoy their favorite publications on all of the devices they own for a single monthly fee.

As you can see, we successfully executed on several initiatives throughout 2010, and our results reflect those efforts. Against the backdrop of an uneven economic recovery, we delivered sequential improvement in our total operating revenues for each quarter of this year.

Now, I would like to briefly discuss our results by segment. For the fiscal year, earnings per share, excluding special items, was 32% higher. Our broadcasting segment revenues were up substantially this year, as expected. Our ratings for the Olympics and on election night were unparalleled, and market strength resulted in about $107 million in revenue associated with those events.

At the same time, core advertising remains strong. We increased our retransmission revenues over 12% this year. That growth enabled us to greatly expand the profitability of our broadcasting segment. Operating income, excluding special items, was up 50% this year compared to last, and exceeded operating income on the same basis in 2008 by $20 million, even though 2008 was a presidential election year. Quite an effort.

Digital segment revenues were up this year as well, and operating income, excluding special items, was about 43% higher. Results for CareerBuilder, PointRoll and ShopLocal all contributed to the profitability growth. Each business is already a leader in their respective sectors, and we expect them to continue their strong performance.

In the publishing segment, revenue growth is still elusive. We are not where we would like to be, but we are working diligently to get there. We are committed to keeping our expenses in line with our revenue.

We delivered on that commitment this year, with the result was a 15% increase in operating income, ex special items. In short, we improved the profitability of each of our business segments; specifically and as a result, generated $1.3 billion in operating cash flow. Looked at another way, we generated free cash flow per diluted share of $3.44 compared to $3.29 last year.

We further strengthened our balance sheet through debt reduction of $710 million during 2010 and made discretionary contributions to the pension plan totaling $130 million.

We reshaped our debt structure and through some well-executed, longer-term bond issues, created an extremely manageable maturity schedule. And we ensured our financial flexibility through the extension of our revolving credit facility.

In sum, all of our strategic efforts have enabled us to dramatically increase the results for our business. At the same time, we've positioned the Company for growth as a multimedia enterprise with valuable local franchises and national scale. Without a doubt, we are a much, much stronger and better Company than we were just one year ago.

With that, I will turn the call over to Gracia.

Thanks, Craig. I will cover our quarterly results in more detail, particularly each of our business segments, and then some balance sheet items.

I would also like to echo Craig's comments. We are certainly a stronger Company today than we were a year ago, and the results speak to that.

We generated positive growth for our total operating revenues this quarter, which continued the sequential improvement in our year-over-year comparisons. On a two-year comparison basis, the improvement was significant, up 9 percentage points. We managed our expenses in the quarter, continuing our efficiency efforts, and the result was a 3% reduction in operating expenses, excluding special items.

Publishing, digital and corporate expenses were all lower, while broadcast segment expenses were higher as expected, reflecting the substantial increase in revenue.

Higher revenue and lower operating expenses overall led to substantially higher profitability. Earnings per share from continuing operations for the fourth quarter on a GAAP basis were $0.72, an increase of 33% from last year. However, excluding special items, our EPS for the quarter was $0.83 compared to $0.70 in the fourth quarter last year, a 19% increase.

We summarized the special items that we are talking about in our release this morning. They totaled approximately $40.3 million this quarter on a pretax basis. In both this year and last year, the special items were the result principally of facility consolidations and asset impairments.

We also provided reconciliations of several non-GAAP items to our GAAP schedules in our release this morning as well. We sold The Honolulu Advertiser and its related assets and a small directory publishing business in the second quarter of 2010. Results for these former properties have been reclassified to discontinued operations. Revenue from these properties totaled approximately $30 million in the fourth quarter last year and were absent this year.

These properties generated about $23 million in revenues in the first quarter of 2010. Therefore, for modeling purposes and appropriate year-over-year comparisons, you should again adjust first-quarter numbers to remove those revenues from the previously reported revenues for the first quarter of 2010.

Now let's turn to our segment results, and I will begin with publishing. Total revenues there were down in the mid-single digits, reflecting the state of the domestic economy, as well as the UK's economic challenges, although there was sequential improvement in retail and classified. Circulation revenue and other publishing revenue comparisons were also better than the third quarter this year. A significant decline in national advertising, particularly in December against difficult comparisons, offset positive comparisons.

Revenue comparisons for the publishing segment on a two-year basis were the best quarterly comparisons of the year, and about 8 percentage points better than the two-year comparison for the third quarter.

Classified advertising on a two-year comparison basis was over 14 percentage points better than the two-year comparison for the last quarter. Here too, the two-year comparisons were the best of the year.

Domestic publishing revenues were approximately 4% lower compared to the fourth quarter last year. Classified lagged by just 2%, as the automotive and employment categories were up solidly again in the quarter; increases of 7% and 10%, respectively. That continues the positive year-over-year comparisons for those categories that were started in the second quarter this year.

The real estate category, reflecting continued housing challenges nationwide, continued to lag.

National advertising, as I noted, was lower in the quarter. We did have stronger national advertising at our US Community Publishing, but that was offset by softer ad demand at USA TODAY and its associated businesses. There was strength in the travel and financial categories there, both of which were in the top five categories in the quarter. However, several key categories lagged last year.

If you exclude USA TODAY and USA WEEKEND, national advertising for the total publishing segment was up almost 3% in the quarter.

At Newsquest, publishing revenue was down about 5% in pounds. Comparisons, however, were about 1 percentage point better than the third quarter. Similar to our domestic results, circulation and other revenue category comparisons were better than the third quarter.

National, unlike our domestic operations, was 8 percentage points better than the third quarter comparison and down just 2% compared to the fourth quarter last year.

The economic situation in the UK remains a challenge, as evidenced by the recent announcement that the economy contracted in the fourth quarter after a year of growth. The horrendous December weather there also had an impact. Some pundits, however, are suggesting the slowdown may indicate that consumer retrenchment and fiscal tightening are having an impact on important components of the UK economy, such as the construction and services sectors. We will clearly keep an eye on that, particularly as the year unfolds.

Digital advertising continues to be a significant focus for us. The growth in digital advertising in our publishing segment continued again this quarter and reflects those efforts.

Digital advertising revenue for the US Community Publishing, Newsquest and USA TODAY were all up nicely in the quarter, particularly US Community Publishing, which was up 16%, and USA TODAY, which jumped 19%.

Turning to expenses, publishing expenses, excluding special items, were down about 5%, in line with revenue declines. The impact of strategic efforts to identify operating efficiencies, as well as facility consolidations in previous quarters and this quarter, drove the expense decrease.

The decline, however, was partially offset by significantly higher newsprint expense, which was up over 18%. Higher newsprint usage prices were partially offset by a decline in consumption of about 6.5%.

Let me say a couple of words on the current newsprint landscape. Last year, newsprint prices rose on the strength of demand in exports, but continued growth in those markets is now uncertain due to the increased offshore customer inventories. Domestic prices have been relatively stable since the second half of 2010, although an East-West regional price variance persists.

Having said that, we expect newsprint usage price comparisons in the first quarter of this year to be unfavorable compared to the first quarter of 2010, when we had the lowest prices of 2010, but our consumption is expected to be lower.

The connection between pricing and demand can be tenuous, suggesting that a moderate approach by producers to price recovery would support a stable environment for both industries.

Publishing segment operating income, excluding special items, was just 2% lower in the quarter. The decline was driven principally by newsprint expense. Excluding newsprint expense and special items, operating income and cash flow would have both increased in the low single digits in the fourth quarter compared to the fourth quarter last year.

Now let me switch over to broadcast. Revenue results and profitability were substantially stronger this quarter. Revenue growth of 27% reflects the strength of our local franchises. Several factors contributed to that increase. Ad demand related to the November elections, which totaled approximately $52 million for the quarter; solid core advertising revenues; an increase in retransmission fees of 16% to about $16.5 million; and finally, a 44% increase in Captivate's revenues.

Although politically related spending was strong, television advertising demand, excluding political, was up in the quarter. The increase was tempered by the displacement effect of heavy political ad demand, which I will discuss more about that in a moment. If you exclude special items, broadcasting expenses were up about 12% in the quarter, as expected, reflecting primarily higher sales and marketing costs and the ramp of some initiatives.

Broadcasting revenue growth greatly outpaced expense increases; the results, a 47% increase in operating income, excluding special items, and a 41% increase in operating cash flow on the same basis.

As Craig noted, the more suitable comparison may be to the fourth quarter of 2008, given the level of political spending in that presidential election year. Excluding special items, we generated almost 20% more in operating income in the fourth quarter this year on an increase in total broadcasting revenue of just 9% and lower political revenue than in 2008, which, again, was a presidential election year.

In short, our margins this quarter were better than the fourth quarter of 2008, reflecting the improved efficiency of our broadcasting operations and our significant operating leverage.

Looking to the first quarter of 2011, we may face some headwinds in comparison to our combined revenue success of last year. The biggest, of course, is the Winter Olympic Games, which generated almost $19 million in ad demand on our NBC-affiliated stations. We also enjoyed election-related advertising of $3.3 million and a little over $2 million related to the Super Bowl on our CBS stations. And, as you know, the Super Bowl will be on Fox this year.

Still, solid core advertising in the fourth quarter, and particularly for December, which was not impacted by the displacement effect of political spending, bodes well for the first quarter. Despite the level of ad revenue that will be absent relative to the first quarter last year, given current trends, we expect total television revenues to be up in the very low single digits.

While the broadcasting segment had an outstanding quarter, our digital segment also generated much higher profitability from a 5% increase in revenues. The revenue increase was due principally to higher revenues at CareerBuilder. Operating expenses in the digital segment overall were tightly managed, and as a result, digital segment operating income, excluding special items, totaled approximately $38 million, an increase from the fourth quarter last year of over 45%. Operating cash flow on the same basis was up significantly as well, about 31%.

Digital advertising revenue Companywide was over $271 million in the quarter and 10% higher than in the fourth quarter last year, as each business segment increased their digital revenues.

Now let me turn quickly to the balance sheet. As we previously announced, we completed a bond financing at the beginning of the quarter. These transactions, in addition to our debt reduction, had an impact on our interest expense. Interest expense was up about $1.5 million in the quarter, reflecting significantly lower average debt balances, but also a higher average interest rate due to these longer-term, fixed-rate debt issuances.

As a reminder, we also extended our revolving credit facilities. Total commitments under the amended facilities are now $1.63 billion through March 15, 2012, and total extended commitments from the middle of March 2012 to the end of September 2014 will be $1.14 billion, more than ample capacity.

As Craig noted, the combined impact of these transactions is significant. We again have created a debt maturity profile that is easily manageable, as well as the financial flexibility to invest in our businesses, explore opportunities and better position the Company for future growth.

As we have noted, we generated significantly more cash flow this quarter than in the fourth quarter last year. We used a portion of it to reduce debt by about $67 million. We also made a $100 million pretax voluntary contribution to our pension plan in the quarter, bringing those contributions to $130 million in total. We also had a strong investment performance in the plan, which all resulted in a substantial improvement in the funded status of the plan.

So taking all of that into consideration, long-term debt at the end of the year was $2.35 billion and cash totaled $183 million. At this point, our all-in cost of debt is approximately 6.8%, including the impact of the new debt I noted. And our debt to EBITDA covenant at the end of the period was again below two times.

One final financial item. Capital expenditures in the fourth quarter were $32 million, bringing the total for the year to $69 million.

So in summary, the fourth quarter capped a year of improving results for the Gannett Company. Revenues overall were positive compared to last year's fourth quarter and completed the run of sequential improvement for the year. And we maintained our focus on restructuring our cost base.

The operating leverage created as a result dramatically improved the profitability of our Company. And, as Craig mentioned, we further strengthened our balance sheet. We at Gannett are well-positioned to adapt to the evolving media landscape and the prospect of a firmer economy in the year ahead.

And with that, we will open it up for questions. Sarah?

(Operator Instructions) Alexia Quadrani, JPMorgan.

Given what you said about newsprint pricing and the -- I guess could you give us a specific number of what you are budgeting at this point in the year -- I know it is early in the year -- what you think newsprint expense will be up for that year?

And given what you said about that, do you think you'll be able to sort of hit your goal of keeping the expense decline in line with revenues in the publishing segment this year?

Thanks for the question, Alexia. In our operating assumptions that we provided in early December, we indicated that domestically, our newsprint costs would increase in the high teens, and that at Newsquest we were expecting cost increases in the mid-teens.

Based on all the work that we have done so far -- we obviously haven't finalized our budget for the year -- we would expect to continue to, for the full year, meet our commitments to keeping expenses in line with revenues. Obviously in the first quarter, that will be a little bit more difficult because of the more difficult newsprint comparison in the first quarter than we would have later in the year, and some other expense factors. But in the full year, we would anticipate certainly meeting that commitment.

Absolutely.

Thank you. And any comments on how January is trending in the publishing segment?

You know, I think in part, we are seeing the effect of some of the fairly horrendous weather that we've all been experiencing up and down the East Coast, and that has clearly had an impact on some of our regional business, in particularly the New Jersey, New York areas and some other areas. So it is a little early to really give some prognostications. We would like the weather to clear up a little bit better. But we will keep you posted on that as the months unfold.

Thank you very much.

Craig Huber, Access 342.

A couple questions, if I could. This 4.8% drop in US publishing group -- for ad revenues, how much of that, Gracia, was volume versus price?

And then also, if I could, your daily and Sunday circulation volume in the quarter, what was the year-over-year percent change in the US Community newspapers, please?

Let me begin with the question that you asked from a rate perspective, Craig. Actually, taking a look at, for instance, in the classified area, for the quarter, while overall rates were down in the very, very low single digits, we did have some bright spots, for instance, in automotive and employment, which we indicated there were volume gains and revenue gains in. We also saw rates increase in those two categories.

In real estate, obviously that continues to be more challenged. We didn't have that kind of rate pickup. So I would say that it is a combination more, I think, strongly focused on the volume side than on the rate side, Craig.

And as to circulation, morning circulation was down about 4.1% in the quarter. Sunday, down a little over 3%. And at USA TODAY, within a few thousand copies of being flat with last year. So good news on the USA TODAY side, as we had indicated in December from a circulation standpoint. Thanks for the questions.

On the Sunday, this is really a result of the great work that Bob Dickey and his group have done, really focusing on growing that opportunity in those top 32. So we are feeling that those efforts are really beginning to pay off and are only anticipating future opportunities here.

Understood. If I could just ask -- are you having furloughs again here in the first quarter? If so, are they similar to last year in the first quarter, and I guess 1Q '08, as well?

As we previously mentioned, we are having furloughs in US Community Publishing in the first quarter. Those dollars will be less, obviously, than last year, when we had furloughs in a more significant part of the Company. So I think the number in the first quarter will be in the $10 million to $12 million range of this year, whereas last year, it was a few million dollars to several million dollars higher than that.

Great. Thank you.

John Janedis, UBS.

Thanks for taking the question. Your digital segment revenue slowed a little, I guess maybe to a level not seen since the employment recession. Could you talk about what you are seeing maybe at the non-CareerBuilder properties and your (inaudible) segment there.

And also, not sure if I missed it, but can you tell us the growth rate at CareerBuilder for the quarter? Thanks.

Just starting with the digital properties, we saw PointRoll up overall for the year, and that was in double digits, and felt very good about that. We had also very, very nice increases in our ShopLocal activities across the board.

I think the other key area that we talked about in our prepared comments, John, was really in the publishing side, as well as in TV, where those sites, in fact, because of DataSphere, as well, are really helping us garner greater opportunity. So we are seeing some nice results from all of that. But in particular, the domestic publishing has some nice results. Gracia, do you have the number?

Sure. Just to add to what Craig said, at CareerBuilder, we saw revenues on a network basis up in the high single digits. And one other comment with regard to PointRoll in the fourth quarter. As you may recall, in December of 2009, there was a fairly significant uptick in national advertising spending and in campaigns, and PointRoll was a huge beneficiary of that, as was USA TODAY, to a much lesser extent. So we had a very, very difficult comparison at the PointRoll level in December particularly. So I think -- that it is part of the reason why I think we saw a little bit more subdued results at those properties than we had otherwise seen.

Speaking of PointRoll and digital in general, what do you think from a revenue per page view perspective, given that you are seeing such a dramatic increase in page views?

We have to look for that. We may have to get that number back to you, but I can just say that with all of the efforts, specifically that PointRoll is working on and the work that they have going on with ShopLocal, we have seen some substantial improvement in the numbers As well, we are seeing, John, other improvement from all of our mobile sites that are moving over to the new platform that we talked about as well. In fact, that is just a huge increase for us, which is very welcome to see.

Gracia, do you have that handy?

Yes. What I think I would say, John, is that when I look at monthly page views -- and it's a little bit difficult because I am looking at one month versus digital revenues for the quarter -- I think that our revenue increases are commensurate with our page views. But we will dig a little deeper into that and have Jeff get back to you if there is any more granularity we can add to that.

Thank you very much.

Jim Goss, Barrington Research.

I wanted to ask about an effort you announced, I think in the middle of last year, about USA TODAY in trying to maybe use it as a test kitchen to reconstruct your approach to the whole effort to combine print with Internet and the iPad and other tablet editions.

I'm wondering how you were doing on that, how you are looking to measure your success. And specifically, have you found a way to improve the profitability of the nonprint element in a way that has been difficulty with the print editions to this point.

Thanks for the question. We have had a number of specific initiatives that we talked about during the course of the year. In part, what it is about is the ability of sharing content, and frankly, that has gone very, very well. There are a number of sites -- I may get this wrong, but I think I am close -- where we are moving the national and international pages directly to our local newspapers. I believe that is now over 60 papers have taken that, and we are in the high 50s with those papers that have also taken a full page of national sports.

So in great part what is happening is -- take the sports example -- it would then allow us to supplement that in a significant way with the local content that is generated. So it is just a far more robust approach, and that has been working very, very well for us.

There are a number of other initiatives. Gracia, do you have the number?

Yes, I was just going to say, Jim, when I look at the profitability at -- and it's difficult now to separate USATODAY.com out from the print product, as we do more and more together in that area. But when you look at the profitability of USATODAY.com for the full year and for the last quarter, it is up very, very significantly. So we see a lot of promise in a number of the initiatives that USA TODAY has outlined as it has restructured its look at the future.

Certainly the iPad and other devices have been a real positive for USA TODAY, both from an advertising perspective, as well as from the number of downloads and all of those important metrics.

But we are very pleased with where thus far we are. And we anticipate that as the year unfolds and as we do more ramping up of these initiatives, that is going to translate into much more significant bottom-line improvement, as well as top-line improvement, for USA TODAY.

Jim, I also think the mobile side that we had talked about -- we have over 100 sites that are going to be launched here very soon; we are right in the process of it. So I think you are going to see some other metric upticks as that goes out as well.

And certainly with the Version 2 that we just put out on USA TODAY -- excuse me -- the iPad application -- sorry -- we are seeing really positive response to that. So with the big addition there, the tech section, really made a difference. A lot of positive comment coming in on that as well.

So at this point, those initiatives, I think, are paying off, not only in the number of users from a unique standpoint, but as well, as Gracia said, we are seeing the pickup both in the top and bottom line. Thank you.

Are both the Internet and iPad editions totally ad-supported at this point? Or do you see any chance for any subscription elements, especially with the New York Times now trying to consider pay wall type ideas?

We are -- as you know, we have three test locations that are going on. We are looking across the board at this and trying to make absolutely the best call we can on it. To date, we are going to continue with what we have, from an ad-supported; that is going well for us. I think Matt Jones and all the work that he is doing on it, has done a fine job. But we are looking and considering as we move along, but we are not to a decision point there yet.

And as you know, Jim, we just announced last week our partnership -- and the launch, I should say, of Ongo, in conjunction with our partners, The New York Times and The Washington Post. And there, you can buy a bundle of products, including USA TODAY, at a certain subscription price and then others at additional prices.

And we will be looking at how that evolves. There may be some other things that we do along that theme in the next bit of time. So lots of work on a variety of different tests and options, backing our fundamental belief that our content is valuable and we anticipate that there is an opportunity to realize on that value.

Great. Thanks for your thoughts.

Evercore Partners, Doug Arthur.

Just staying with USA TODAY for a second, did the weakness in print advertising in Q4 surprise you? And when I look at the categories that you cite weakness in -- technology, telecom, auto and advocacy -- it doesn't seem to jive with what we are seeing in the market as a whole. So could you talk to sort of your plans going forward to turn the print side of the paper around? Thanks.

Yes. We have been working hard. I have to say when you take a look at some of the other key categories, it was a bit mixed. But I have to say auto has done very well for them overall. Retail has picked up significantly. And despite where we are on other real estate, that has done fairly well also.

So there are a number of areas that Dave Hunke is really working on with his new verticals strategy. And we are beginning to see some other opportunities as the health of the market picks up.

But for Q4, we did see with travel, there were some very positive increases there. The FICAT, which is financial and insurance, also had a good number. And credit cards was a pretty good, solid number as well. So it's a little different than what we are seeing in our other products, certainly at USCP. But I think we are making some very, very good progress.

Just to add to what Craig said, the telecom category was really a more challenging one for us, both in the fourth quarter, as well as in period 12. And I think that has been focused on in a couple of other earnings calls that I've had the opportunity to listen to. I think there was a lot of significant spending in that category towards the end of the fourth quarter of 2009, and we saw a diminishment, particularly in that particular category. So that one had an outsized impact on the numbers.

But I would say, Doug, that when you look at what we provided at UBS in terms of expectations -- or not expectations, but in fact where we stood at the end of the first two months of the quarter, other than in national, we are very much in line with all of the numbers that we showed at UBS.

So I think the only real surprise might have been a little bit of the weakness in national, which really gained a little momentum in period 12, again, as I mentioned, which was a little stronger for us in period 12 of 2009, when there were some budget opportunities that came up. So I think that is where we are on the fourth quarter.

Got it. Thanks.

Edward Atorino, Benchmark.

I've got two questions. On the Honolulu numbers, $30 million for the quarter and what -- about $100 million, $120 million on an annual basis? And would it be even quarterly, more or less?

Not necessarily even quarterly; probably more in the $100 million range, Ed, on an annual basis. But we will only have that impact that we have to adjust for in one more quarter next year, and then we will cycle the sale of The Advertiser in the second quarter.

Circulation, 10% of the number, give or take a little?

Yes, probably a little bit better than that.

On TV, 2010, you had politics, Olympics and retrans of $63 million. What did it all total up for the year -- political, Olympics and retrans? Well, retrans were $63 million, we know.

About $107 million for political and Olympics.

In 2012, there is Olympics again, correct?

Yes, and a presidential election (multiple speakers).

Yes, from London, and a big election.

So 2010 might be a little bit of a hammock year -- what do they call it -- a watershed year for TV, before going forward. And would retrans grow over the next couple of years? Have they got contracts in place to allow higher income?

Yes, Ed. As Dave shared at UBS, we anticipate that retrans revenues for 2011 will be in about the $75 million range. So about a 20% increase over what was accomplished in 2009 -- '10. And frankly, we have a number of our agreements coming up in the years after that. So we feel very good about the way we are positioned on the retrans front.

On the newspaper side, getting back to Craig's question, generally, with the type of marketplace out there, are rates for real or our advertisers simply spending dollars, if you know what I mean, as opposed to looking at rates?

I'm not -- you know it is --

If I'm Sax, and I've got a budget up 5%, and I'm coming to you and saying, I've got 5% more; this is it. Are they going to really sort of push for the -- that's what we get; let's see what we get for 5% more? So are advertisers more sensitive to rate or dollars?

You know, Ed, I think a lot of the work that Bob Dickey and his group have been doing has been more focused on looking at the total spend from a potential advertiser, what their total marketing budget is. And then through the use of our customer solutions groups and our solutions selling really helping that advertiser or marketer understand how to best use the totality of that marketing budget.

So we are less getting the kinds of description that you just said, which is, my budget is up 5%; what can I buy for that. It is much more, here is who I am trying to reach, here is what I am trying to achieve with my marketing dollars. Help me to structure a program that will accomplish that for me.

And that is the great thing about our customer solutions groups, both within USCP and what we are going to from a more national perspective, is much more solution-based selling, much more looking at not just the advertising budget, but the total marketing spend.

Got you. Okay, great. Did you give the total debt at the end of --? I might have missed that.

Yes, $2.35 billion at the end of the year.

Thank you.

Michael Kupinski, Noble Financial.

Thank you for taking the question. I was -- in terms of the sequential improvement in publishing in the fourth quarter, obviously, it seems like it stalled there a little bit. And you explained a lot about the national advertising, which accounted for a portion of it.

But I was wondering if you can give me your thoughts about the economy as we head into the first quarter, and maybe for the balance of the year, particularly excluding the effects of the weather. Were there any regional disparities or things that seemed a little bit odd in terms of maybe some of your newspapers in some of your more troubled markets that may not have showed the sequential improvement that you were thinking? Or is there anything in those regions that may be cause for concern in terms of the recovery?

Mike, I think the economy has continued to be a little bit of a conundrum. On one hand, we see some numbers and statistics that would suggest that things are picking up more than what it appears in the marketplace.

And then in other areas, for instance in retail sales, while there was a fairly powerful spending done around Thanksgiving, it seemed as though the consumers tightened up in their pocketbooks in the month of December, and retail sales in some situations were not quite as robust as those Thanksgiving numbers would have suggested they might be.

So I think -- in total, I think there is still a lot of uncertainty surrounding the economy. I think there is a lot of concern about what's going to happen to the municipalities and the states and the talk surrounding potential bankruptcies and the like. And that obviously can have an impact on what goes on in a community, if jobs are at stake as a result of municipalities cutting back, et cetera.

So I think what -- it is kind of similar to what we've said all along, which is that we've never seen an economic recovery that has gone in a straight line. There have always been those moments where fears take hold and then exuberance takes hold and then you continue to go back and forth as each number comes out and each new thing pops up.

But I think overall, we are really pleased with what we accomplished, both for the year and for the fourth quarter. We will see how the economy zigs and zags as we get into 2011 in a more meaningful way, and we will do what is necessary to produce strong results.

Obviously, in the UK, a little bit of a different scenario, with the contraction in the economy there in the fourth quarter, after four quarters of growth. And they've certainly taken a little bit of a different position on retrenchment in government spending and the like than we have in the US thus far. So we are going to have to see how that all plays out. But we will keep you posted, and we will share with you anything that we see, either positive or negative.

Just a small add to that, Michael. What we have from each of the divisions and, quite specifically, in the publishing group, we are well set. And with all of the client solutions groups, everything that has been done strategically, if we have just a bit of an uptick, we will capitalize on that as we move forward. So there is a lot of opportunity out there for us. We are excited by that, and I think it will certainly play out if we can just get the proper uptick.

In terms of the facility consolidations in the publishing segment, how much cost is that going to be taking out in terms of 2011? And if revenues don't appear where you would like to see them, are there further facility consolidations that you can take, or where else can you take some costs out of the publishing segment?

You know, at any given time, there are probably 50 different initiatives that we are looking at to better take advantage of technology, to better take advantage of opportunities to consolidate things, both internally, but as importantly, externally with other partners. And those are the more difficult ones to call and the timing of those.

But I would leave you with the thought that we continue to be very focused on making sure that our expenses are in line with our revenues, in totality, over a year's period of time. And we will continue to focus on doing that. But thanks for the questions.

Looking at the clock, it looks like we have time for just one more short, one-part question.

Leo Kulp, Citigroup.

Thanks for taking the question. On the UK front, have you seen a rebound in first quarter, post the fourth-quarter snowstorms, or are things getting worse with the VAT increase?

I think the VAT increase is taking its toll a bit there. I was reading an article, I think early this morning, talking about kind of the sticker shock of the VAT increase from -- for those that don't know -- from 17.5% to 20% VAT increase on goods in the UK. I think obviously that has to have an impact on consumers' pocketbooks, as well as the uncertainty surrounding what is going on in that environment.

But I know that Paul Davidson and his team are carefully monitoring all of that and taking steps to ensure that their results continue to be appropriate, given the economic backdrop that they are confronted with.

Thank you.

Thanks. Sarah?

That does conclude our question-and-answer session, ladies and gentlemen. I will turn the conference back over to management for any closing comments.

Thanks very much for joining all of us today. If you have any additional questions, I know that Jeff Heinz will be delighted to take them at 703-854-6917 or are we are happy also to help out at 6918. Have a wonderful day.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.