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Executives

Catherine J. Mathis - Senior Vice President, Corporate Communications

Janet L. Robinson - President and Chief Executive Officer

James M. Follo - Senior Vice President and Chief Financial Officer

Scott Heekin-Canedy - President and General Manager

Martin A. Nisenholtz - Senior Vice President, Digital Operations

Analysts

Edward Atorino - Benchmark Company

John Janedis - Wachovia Securities

Craig Huber - Barclays Capital

Alexia Quadrani - JPMorgan

Barry Lucas - Gabelli & Company

Scott Davis - JPMorgan

The New York Times Company (NYT) Q1 2009 Earnings Call April 21, 2009 11:00 AM ET

Operator

Good day, and welcome to the New York Times' First Quarter 2009 Earnings Conference Call. Today's call is being recorded. A question-and-answer session will follow today's presentation. (Operator Instructions).

For opening remarks and introductions, I'd like to turn the call over to Ms. Catherine Mathis. Please go ahead, ma'am.

Catherine J. Mathis

Thank you. And welcome to our first quarter earnings conference call. We have several members of our senior management team here today to discuss our results with you. And they include Janet Robinson, our President and CEO; Jim Follo, our Senior Vice President and Chief Financial Officer; Scott Heekin-Canedy, President and General Manager of The New York Times; Martin Nisenholtz, Senior Vice President of Digital Operations.

All comparisons on this conference call will be to the first quarter of 2009 to the first quarter of 2008 unless otherwise stated. Our discussion will include forward-looking statements and our actual results may differ from those predicted. Some of the factors that may cause them to differ are included in our 2008 10-K.

Our presentation will also include non-GAAP financial measures, and we have provided reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our corporate website at www.nytco.com. An archive of this call will be available on our website as well a transcript and a version that's downloadable to an MP3 player.

With that, I'd like to turn the call over to Janet Robinson.

Janet L. Robinson

Thank you, Catherine. And good morning everyone. Like many companies across America and our industry, the challenges we face intensified in the first quarter. The effect of the global economic downturn coupled with secular changes affecting newspapers resulted in significant declines in revenues as advertisers pulled back on print placement in all categories: national, retail and especially classified. Digital revenues also declined although modestly as a result of the weakening economy.

For the first quarter, we reported an operating loss of 61.6 million, compared with operating profit of 6.2 million in the first quarter of 2008. Excluding depreciation, amortization, severance and special items, our first quarter operating profit was 16.5 million, compared with 77.7 million in the first quarter of last year.

For the first quarter, we reported a loss per share from continuing operations of $0.52, which included $0.07 for the loss on leases at City & Suburban, our New York area distribution business that we closed in January, and $0.11 in severance costs.

The New England Media Group, which includes the Boston Globe, The Worcester Telegram & Gazette and their websites had significant losses in the quarter. And I will share more about that in a moment.

Last year in the first quarter, we've reported $0.00 per share, which included $0.07 for the write-down of assets for our systems project, $0.04 per share for severance costs, and a favorable tax reserve adjustment of $0.03.

As many of you know in 2008, we reduced our operating costs by nearly 5% or 136 million. This quarter, our operating costs decreased 9.5%. Excluding depreciation, amortization and severance, operating costs declined 11.6%. This year we planned to save more than 330 million in operating costs. Jim will go into greater detail on this in his remarks.

Before going into our revenue discussion, let me add that this quarter we took steps to significantly improve our financial flexibility, so that we can continue to execute on our long-term strategy.

In January, we completed a private transaction for 250 million in senior unsecured notes and warrants. In March, we closed on a sale-leaseback of a portion of the space we own and occupy in our New York City headquarters. The proceeds from these transactions were used to repay existing debt, including amounts borrowed under our revolving credit facility that expires next month, and a portion of the notes due in November 2009 ended March 2010.

We have sufficient capacity under our revolving credit agreement to repay maturity, the 44.5 million notes due at the end of this year. After that, our next major debt maturity is more than two years away, nearly three quarters of our debt now matures in 2015 or later.

We also suspended our dividend in the quarter, and are progressing on the sale of our 17.75% stakes in New England Sports Ventures, whose holdings include the Boston Red Sox, Fenway Park and approximately 80% of the New England Sports Network, a regional cable sports network. We are pleased by the response we have seen from prospective buyers.

In short, we are making great strides in achieving our goals, while the decline in advertising masks the success we are having in transforming our company, we believe that the steps we have taken and are taking to be in interest of our employees, readers, advertisers and shareholders over the long-term. We believe that when the economy turns around which it will, we will be very well positioned to benefit from the cost restructuring.

Now, let me provide you with more detail on the revenues. Total revenues for the company declined 18.6%. With that revenues down 27%, circulation revenues up 1% and other revenues down 27.7%. Excluding the C&S revenues, total revenues declined 17.4%. Circulation revenues rose 2% and other revenues were flat.

At the News Media Group, which includes the New York Times, New England and Regional Media Groups, ad revenues decreased 28.4% with national advertising down 21.9%, retail down 25% and circulation down 45.1%. Within the classified area, recruitment advertising fell 60.1%, real estate declined 44.9%, and automotive was down 42.2%.

At the Times Media Group, advertising revenues decreased 27.3% in the quarter. The national print categories where we saw the largest declines were studio entertainment, where the studios released fewer films in last year, and provided limited support for new releases and a weaker award season.

International fashion, which saw lower spending from luxury advertisers due to the global economic crises and live entertainment were in unprecedented number of Broadway shows closed and fewer shows opened due to cautiousness in the current economic environment.

National print ad categories that performed well included corporate, which saw gains from energy related companies and government trade groups and cosmetic manufacturers and stores led by campaigns from Procter & Gamble for some of its product lines.

Classified advertising decreased in all three major categories: real estate, recruitment and automotive. Retail advertising revenues were down, led by declines in home furnishing stores, fine arts, fashion and jewelry advertising. During this time, on print ad dollars are decreasing. The Times is very focused on making sure that we are getting our fair share of the market.

For 2008, we had 53% of the national newspaper market, compared with 28% for the Wall Street Journal and 19% for USA Today, excluding house ads spending.

At the New England Media Group, advertising revenues declined 31.6% in the quarter. National ad revenues decreased as declines in media, studio entertainment and live entertainment categories more then offset modest growth and bank and financial advertising.

Retail advertising revenues were lower, led by weakness in department store, furniture, home furnishings, clothing and shoe store advertising. Overall, classified advertising at the New England Media Group was soft in all three major areas: recruitment, real state and automotive.

Over the past several years, the Globe, which is the most significant part of the New England Media Group, has faced very difficult challenges as secular changes, business consolidations and excess from the market have resulted in significant revenue declines.

Globe management is engaged in a wide ranging effort to restructure its cost base. And in connection with that it is engaged in serious discussions with the Globe unions. These negotiations are critical to putting the Globe on substantial, sustainable financial footings. We are not going to comment publicly on the negotiations until they have been concluded.

At the same time that we are working with the unions, the Globe is undertaking other substantial measures to increase revenues and lower costs, including the consolidation of its printing facilities.

At the Regional Media Group, advertising revenues decreased 29.3%, a little over half of the decline was due to less classified advertising.

Total circulation revenues were up 1% in the quarter, primarily because of higher prices at the Times, New England and the Regional Media Groups. Excluding C&S, circulation revenues increased 2%. We continued to see that high quality journalism is valued by readers and advertisers and have... we have been able to raise our home-delivery and newsstand prices. And earlier this month, the Globe announced the price increased for newsstand copies.

At The New York Times, we have more than 830,000 subscribers, who have been with us for two years or more, up from 650,000 in 2000. A large portion of the Times is core subscribers are already active users of the web, and are not leaving print in significant numbers.

Across the company, circulation revenues made up 38% of our total revenues in the quarter, significantly higher than others in the industry and a sizeable and stable base of revenues.

As other newspapers cutback on international and national coverage or cease operation, we believe there will be opportunities for the time to fill this void, resulting in increased revenues from circulations, new services and other products.

Yesterday, the New York Times was honored with five Pulitzer Prizes. This speaks to the extraordinary work done by our journalist across the broad range of areas, including international coverage, photography, breaking news, cultural criticism and investigative journalism.

Other revenues for the News Media Group decreased 27.7%, mainly as a result of the closure of C&S.

In the first quarter of last year, C&S had other revenues of approximately 17 million. Excluding C&S, other revenues increased 1.1% at the News Media Group.

Before I conclude my remarks, I would like to spend a few minuets discussing our digital business, including the chatter in the marketplace about online business models for newspapers.

In the quarter, digital ad revenues at the News Media Group declined 8%, driven by classified advertising declines. NYTimes.com's display advertising posted good growth in the quarter and continued to exceed industry trends as measured by eMarketer.

At the About Group, total revenues decreased 4.7% to 26.8 million as lower levels of display advertising were partially offset by higher cost for quick advertising. In total, internet businesses account for 12.8% of the company's revenues in the first quarter, versus 11.1% last year.

In addition, The Times Company has the 13th largest presence on the web, with 52.3 million unique visitors in the United States in March 2009 according to Nielson Online, up about 4% from 50.4 million unique visitors in March of 2008.

Also according to Nielson Online, NYTimes.com had 20.1 million unique visitors in March, versus 18.9 million in March 2008, up about 7% and was the number one newspaper website in the United States, a position that has long held.

One area that has received a great deal of attention recently, both in the Media and within the Times Company, is how to develop alternative revenue streams for online content. Twice in the Times's history, we have experimented with charging users for online content. The first was in 1996, when we charged international users to access NYTimes.com. The second was in 2005, when we created Times Select. Since then, we have continued to explore opportunities to charge for our online journalism.

Recently, we analyzed the business models of more than 30 different organizations to determine which are the most effective in generating digital revenues. What we have learned is that the advertising model we have used at NYTimes.com has generated more revenue than the vast majority of other organizations, including some that are much larger than our site. That said, we want to determine if there are other opportunities for us to create additional online revenue streams. Our goal is to add substantial new revenue from our users without materially affecting the growth of our industry leading online display advertising business.

As the advertising marketplace particularly in trend changes, we continued to explore our payment models as well as other approaches to generate revenues from our online content. Our position as the leading newspaper website and a top five news and information site is the result of our focus on quality and innovation. You can be sure that we will continue both with regard to the product and the business model.

In closing, this is a very difficult period for our company, our industry and the economy. At this time and it is very early in the quarter, we believe the rate of decline in ad revenues in the second quarter will be similar to that of the first.

In time, however, we believe that the economy will grow and the advertising market will improve. While, we are looking forward to that day, we are not leading for it. We are moving aggressively to restructure our cost base inline with our current revenues, and continue to develop innovative new digital products that enhance our financial performance.

When advertising improves, we believe we will be well positioned to meet the needs of the marketplace and to benefit from our restructured cost base.

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

James M. Follo

Thank you, Janet. We continued to tightly manage our expenses in the first quarter. As Janet said, operating costs excluding depreciation and amortization and severance declined 11.6%, as reductions occurred in nearly all major expense categories. This reflects our cost saving initiatives including the closure of C&S.

With economy as weak as it is, we are putting in even greater focus on lowering costs. We plan to decrease our operating costs, excluding depreciation and amortization and severance by more than $330 million in 2009.

Some of the components of this amount have already been announced, such as the $112 million with C&S, $80 million as a result of the changes in our benefit plans, and about $9 million in the second half of the year for the consolidation of the Globe's two printing plants.

Severance costs were $0.11 per share in the quarter or $25 million, compared to $0.04 per share or $11.2 million in the same quarter last year. At the end of March, our head count was down 15.5% from the prior year.

Depreciation and amortization decreased 12.3% to 36.8 million from 41.9 million in the first quarter of 2008, primarily because of lower accelerated depreciation. Newsprint expense increased 0.9%, with a 25.2% increase in prices nearly offset by a 24.3% decline in consumption. Newsprint transactions peaked last November and have been trending down. Forecasters believe that prices will continue to decrease as the decline in newsprint demand continues.

In 2008, we reduced the size of the printed pages, page of sixth of our regional newspapers, which will benefit us this year. And at the end of March, we decreased the size of printed pages of some copies of the National Edition of the Times, go through... which will result in additional newsprint savings.

Last month, we completed a sale-leaseback for $225 million for part of the space we own and occupy in our New York City headquarters. This is essentially a financing transaction. The rental payments will total approximately $25 million for the first year and will escalate to the term of the lease. The lease term is 15 years... as an option... repurchased our portion of the building with $250 million during the tenth year of the lease.

The sale proceeds will be recorded as a financing liability and the rental payments associated with the sale-leaseback will be treated as interest expense for tax and accounting purposes.

In addition, the difference between the purchase option price of $250 million and the sale proceeds of 225 million, as well as the transaction costs will be amortized over ten year period as an increase to the financing liability through interest expense.

Interest costs increased in the quarter from 11.7 million to 18.1 million as a result of higher rates on our debt. At the end of the quarter, our debt totaled 1.3 billion. This includes the financing liability related to the sale-leaseback transaction that closed in early March. The proceeds in this transaction were held in an escrow account at quarter end, and subsequently used along with borrowings under our revolving credit facility to redeem $250 million of notes due in March 2010.

After redemption of the notes, our total debt was approximately $1 billion. We remain in compliance with the minimum shareholders' equity covenant in our revolving credit agreements, and have a significant cushion over the maximum required.

Quarterly interest expense for the remainder of the year is expected to be higher than it was in the first quarter because of the sale-leaseback occurred at the end of March. For the year, the company expects interest expense to be approximately $90 million.

In the first quarter, we also repurchased $55 million of notes due in November, 2009. We have sufficient capacity under our revolving credit agreements to repay the balance of these notes at maturity.

We had an income tax benefit of $1.1 million in the quarter. The tax provision was unfavorably affected by significant losses at the New England Media Group, which only at minimum setback tax benefit is recognized due to our recent Massachusetts law change and various non-deductible losses. These items were partially offset by a $12 million adjustment to reduce the company's reserve for uncertain tax positions.

We have taken decisive steps to reduce capital spending and approve our flexibility. This year, we expect our capital expenditures will decrease from the 2008 level of approximately $127 million to approximately $80 million.

As Janet said, in February, our Board of Directors suspended our quarterly dividend which was a difficult but necessary decision that we believe provides us with greater financial flexibility in these uncertain economic times.

With regards to our pensions, at year-end the unfunded obligation for our qualified pension plans was approximately 535 million, as measured in accordance with ERISA. As we have said, we have carryover credits allowing us to offset required contributions to our plan in 2009. Recent guidance from IRS regarding funding calculations will provide additional flexibility on the timing of cash contributions.

We believe, based upon this guidance that we will be able to offset a significant portion, if not all, of the 2010 required contribution with additional carryover credits. We may still make... I'd like to make contributions to the plans in 2010 based upon market and other factors, but have no plans to do so in 2009. We do expect to make contributions through a joint trusted pension for Guild employees of the Times in 2009.

As always, we continued to value our assets to determine if they remain a strategic fit and given the outlook for our business in the financial performance make sense to continue to be part of the company.

At the end of March, we sold the Times Daily, a newspaper in Florence, Alabama, to a strategic buyer in an adjacent market. As Janet mentioned, we are pleased by the interest we have seen in our interest in the New England Sports Ventures.

With the moves we have made to refinance and pay down debt and the proposed asset sale, we have the financial strength to manage through this challenging time.

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

Question-and-Answer Session

Operator

The question-and-answer session will be conducted electronically. (Operator Instructions). And we'll take our first question from Edward Atorino with Benchmark.

Edward Atorino - Benchmark Company

I'm never first. Turn me-off. Jim, on the staff reduction, the base then would be last year's cost and expenses, excluding depreciation and excluding charges?

James Follo

I'm sorry Ed. I didn't follow that question.

Edward Atorino - Benchmark Company

See, the cost base from which the 330 is coming down is last year's cost excluding depreciation and staff reductions.

James Follo

And severance costs. That is correct.

Edward Atorino - Benchmark Company

And severance costs, which are roughly $2.7 billion, I guess, something like that?

James Follo

I don't have it --

Edward Atorino - Benchmark Company

No, okay. And this one I guess not based. Okay.

James Follo

That is the calculation.

Edward Atorino - Benchmark Company

And I guess, I have to ask the question everybody else is going to ask, how is... do you see any light at the end of the tunnel or it sounds like second quarter is not going to be that great? Any increase about beyond the next couple of months?

Janet Robinson

I think, Ed, this is Janet. I think that, what I said in the quote that it's trending similar to what we're seeing in the first quarter, is really what we're seeing right now. We do hear, of course, from advertisers that they are saving their marketing spend during this first quarter and second quarter. And traditionally, of course, particularly in the newspaper industry, third and fourth are stronger quarters for ad spending. That has been the case certainly in years past. But this economic climate certainly doesn't dictate any prediction by any stretch.

But I think there is a saving of dollars in the first half of this year that hopefully we will see loosen up as the year goes on.

Edward Atorino - Benchmark Company

Circulation revenues were up. How about volume for the three groups: Times, Globe and Regionals?

Janet Robinson

No, the volume was down as well. One thing we do see in the second half of the year though and even in the second quarter, due to the strong efforts in regard to cost reduction as outlined by not only this 330 that we just noted, but certainly things that we have done in past years that we're reaping the benefits of. We do expect to see in the remaining quarters of the year an improvement in our operating profit. I think this is really the benefit of what we've done in regard to being extremely proactive in regard to what and what we've done on the cost side, which includes client consolidations and staff reductions and a whole host of elements. We believe that this operating profit will be better in the quarters going forward excluding depreciation, amortization, severance and special items.

Edward Atorino - Benchmark Company

Thank you.

Operator

We'll take our next question from John Janedis with Wachovia.

John Janedis - Wachovia Securities

Hi. Good morning. Thank you. Janet, I'm not sure whether you can tell us, but can you talk more about the expense opportunities in Boston? It looks like ad revenues for the market in 1Q or about half of '05 level. And I'm just wondering based on how you think about the future of that market, what's the right level of expenses, and how much flexibility do you have given the composition of that workforce? Thanks.

Janet Robinson

Well, as you know, we are working right now very closely with our union. So, we are in a situation where we're not going to comment and to integrate degree in regard to those negotiations than what we are looking for.

I will say that there has been a very proactive effort on the part of Globe management to bring down costs than recent years. And that has included everything from staff reduction to plant consolidation, to circulation profitability moves. And there are certainly things before them that they have already announced in regard to circulation increases in that market. They took one in September last year, and they recently announced that they are taking another one as of May 4th, in regard to single copy.

So, I think until we finish with our discussions with the unions, it's going to be very difficult for me to be precise in regard to what the cost base really will be. I will say that we are being extremely proactive in regard to lowering the cost base of the New England Group.

John Janedis - Wachovia Securities

Okay. And maybe as a follow-up to additional, when you look at 2Q related to 1Q, is there much variability on specific properties or regions or even categories from 1Q to 2Q?

Scott Heekin-Canedy

John, this is Scott. Not a whole lot of variability, the whole first half seems to be characterized by the deep economic uncertainties and this is touching just about every segment of the economy. And as Janet has already mentioned, we're hearing a similar of expectation or maybe hope that some of the macro steps that are being taken to invest the economy will start to... will lead to some sort of moderation in the second half. And there is a general theme among advertisers that they are prepared to open up the loss we spend in something (ph).

Janet Robinson

I think that's also true. It's somewhat in New England, particularly in the retail side and a little bit in regard to the same story that we're hearing in regard to the Regionals. But as you know, those two newspapers have been much more classified dependent than the Times.

John Janedis - Wachovia Securities

And a quick follow-up, on the movie studio side, there are obviously putting a fewer movies that here, a fair amount of sequels. Is the category still your largest or among the largest and what's the outlook there?

Scott Heekin-Canedy

That continues to be the largest category for the Times. And the performance has through the first half is likely to carry on through the full year. We don't see a real change in the fundamentals of the studio advertising this year.

There are other categories. I mean studios have performed better than our overall revenue base. There are other categories that have been performing quite better as well those include financial services which is up against incredibly strong comps for Q1 from last year. Our corporate is quite strong, telecom and techs are both showing some relative better performance, compared to the whole department stores in next market as well.

James Follo

Hey Jim, I'm sorry, one last question, I'm sorry. But, Jim a few quarters ago, I think you would put out a number of total savings of 230 across the company, I think a 100 in '08 and then 130 in '09. Is today's number get us to 430 in total?

James Follo

Just to clarify, the 230 we gave out kind of mid to late '07 was 130 million in 2008, and 100 million in 2009. And we had said that was excluding onetime charges severance inflation. We've taken the inflation formula out of it. We far exceeded the 130. I don't have the exact number, but we certainly exceeded the 130 by pretty wide margins in 2008. And what was left over in 2009 is a 100. And this number is 330 relative to that 100 and we've taken the inflation, qualify out of that. So it's quite much larger than that.

John Janedis - Wachovia Securities

All right. Thanks so much.

Operator

And we'll take our next question from Craig Huber with Barclays.

Craig Huber - Barclays Capital

Yes, good morning, few questions. The same questions Ed had please. What we should daily in Sunday percent change or circulation volume at your flagship paper also the Boston Globe in the first quarter please?

Janet Robinson

We are releasing fast actions in regard to ABC number on Monday, April 27th.

Craig Huber - Barclays Capital

Okay. So, you can't preview here then or you --

Janet Robinson

No.

Craig Huber - Barclays Capital

Okay. This $12 million that you briefly talked about, this also need income tax part of your press release here adds about 8 to $0.09 to your earnings. Was it mentioned in the first page or two like the exact same tax gain, was it helped by $0.03 a year ago? Is that to say that then just be all clear here that the underlying number excluding the lease write-off basically, severance and this 12 million tax benefit, the number was 42 to $0.43 lost in the quarter?

James Follo

The 12 million reference here was a discrete item in the quarter. That's under the new relatively new tax rules on a quarterly basis to evaluate year-to-year tax contingency line. And it was an adjustment in the quarter of 12 million. So that is correct.

Craig Huber - Barclays Capital

Okay. So we should treat it then, you're suggesting like what happened a year ago?

James Follo

Certainly not. Certainly, we wouldn't treat as a recurring item, if that's what you're asking. It would not be recurring item.

Craig Huber - Barclays Capital

Okay. It is $0.03 a year ago. Okay. And then also investors were asking me, what is your estimate of how much your cash severance costs to be for this year? I know you said it would be a lower rest of course in the first quarter, what do you anticipate here in spend of cash severance for the total year? Thanks.

James Follo

Well, look Craig, as you know we adjust our spending as we go and we make regular changes to our plans as we need to. I mean, I think, first being buyouts we had in the first quarter that's 25 million reducing is a what is substantially higher than anything we have forecasted for the rest of the year. But to be precise on that number is very difficult.

I can tell you will say this though, we feel highly confident that we won't come anywhere close to approaching what we did last year. Last year, our severance number was somewhere in the 80 million range. And we don't see number coming in anywhere closer to that. But... I do think, I believe right now our severance is behind us. We had, the C&S closure contributed that was kind of onetime event here is, a number of things happening at Boston which we don't see at the same level, current for the rest of the year. But it's a hard number to be very precise on.

Craig Huber - Barclays Capital

And then also by clear about your equity investments, I mean given the average should be above water recent bankruptcy here. What does that mean for your 49% stake in JV you have with them in the Canadian newsprint company?

James Follo

The bankruptcy was avid to the above water (ph), this is a joint venture in which they are partners and which is unaffected by the bankruptcy. So there was no change at all, we don't see any impact on that at all.

Craig Huber - Barclays Capital

Okay, very good. Thank you.

Operator

And Alexia Quadrani with JPMorgan has our next question.

Alexia Quadrani - JPMorgan

Hi. Thank you. It's just a quick follow-up on your comments on Boston earlier. Do you think you can get back to profitability at the Globe, which is the other savings initiative that you're doing? Or do you... have to... is it really assuming some concessions from the unions there?

Janet Robinson

As I said earlier, we are not really in comment mode, primarily because of our negotiations that are ongoing with the unions. As I will... as I did say and I will say again the Globe management has been very proactive for a number of years in regard to cost reductions. They are being very proactive in regard to rate increases, particularly in regard to circulation. They have moved in regard to the consolidation of funding facilities there. They are working very hard in regard to circulation profitability, in regard to the zones that they distribute the paper. All of those moves are going to help the Globe move to a stronger financial position. And our discussions that are ongoing with our unions hopefully will help in that regard as well.

Alexia Quadrani - JPMorgan

And we've seen some other companies talk about closures of certain properties, where they've just become so unprofitable or they feel they can't get significant improvements even stability returns. Do you... I guess do you confidently look to your portfolio and see if that's an option for you?

Janet Robinson

We have always said that we don't comment on acquisitions and divestitures, and we don't comment on business closures as well. We are constantly evaluating what our portfolio contains and certainly the financial performance of all of those... all of the units within our portfolio.

Alexia Quadrani - JPMorgan

And then just lastly, I think Jim, you talked about paper pricing obviously coming down. Could you give us a sense about how much sort of what you're budgeting for paper pricing in the second half?

James Follo

Well, I can say that... in the first quarter, price had a negative impact on our business, somewhere in the 11 to $12 million, and I think we actually see kind of for the full year. We see... we kind of see the impact of prices. It's somewhat neutral for the full year. So, towards... you need to get to the back half of the years before you start seeing the positives to offset this negative $12 million. So, it's kind of the way we think about it for the full year. So, certainly back half benefit, first half will not be.

Alexia Quadrani - JPMorgan

Thank you.

Operator

(Operator Instructions). Ed Atorino with Benchmark has a follow-up question.

Edward Atorino - Benchmark Company

Actually Craig answered it. Thanks. I mean asked it, right.

Operator

And Craig Huber with Barclays has another question.

Craig Huber - Barclays Capital

Yeah. This is Craig Huber again. Just on your bank line, it's my understanding that this trout of $400 million that's coming due May of this year is the same bank group as your $400 million credit line that comes due to in 2011. Given, I understand, as you were not able to renew the May 2009 credit agreement, how confident are you when we get out to June 2011 that you can actually re-do that bank line that somewhat favorable terms in the advantage point?

James Follo

Well, let me just address. We issued the $400 million that expires... that expired unused and unneeded that we never had an intention on renewing that. And I don't think it's a fair cauterization to say the bank wasn't interested. I mean we had discussions with banks, the bank group and many others. We just... we wanted directionally what was best for the business at that time.

But as you look forward, as the margin we had $220 million under the line, where we find ourselves from a debt structure perspective is we have largely unsecured debt. We expect to be generating cash from our business. We are executing on certain assets sales which we talked about. So, I think as you look... we are still more than two years away from what's $220 million. We have... really we have substantial if needed security. So, I don't... as I sit here today and anticipate that that issue whatever it may be, I mean it could be nothing. We could have no borrowings under that. It's just chipping us... it's a little speculative now that we are saying what the intensions are, what the credit markets are. But we just don't see that two and half years out is something that really hangs over ahead in the way and we think it's hard to deal with.

Craig Huber - Barclays Capital

Okay. Thank you.

Operator

And Barry Lucas with Gabelli & Company has our next question.

Barry Lucas - Gabelli & Company

Thank you and good morning. Just a quick here. I mean you back out the resources at C&S and the News Media Group at 16.4 million. What was the operating loss? So in Q1 of 2010, what would the variance be?

James Follo

I am sorry. You asked about 2010?

Barry Lucas - Gabelli & Company

Well, no. Just trying to get a handle over the operating loss in Q1 '09 for C&S was?

James Follo

Of the C&S?

Barry Lucas - Gabelli & Company

Yeah.

James Follo

The operating... we said about $30 million in improved operating results, so about $80 million in per year in revenues and that's pretty equal over the quarter. So, we're going to lose about $20 million of quarter in revenues. And we're going to benefit by about 30 million in operating. And that's pretty straight lined over the entire year.

Barry Lucas - Gabelli & Company

Great. Thanks Jim.

Operator

And Scott Davis with JPMorgan has our next question.

Scott Davis - JPMorgan

Hi. Good morning. So about our comment, I guess is somewhat small in the great schemes of things. But I was looking for little color on it. When you said that the second quarter felt like its training similar to the first quarter, was that for newspapers or for about our comment? And second, when you mentioned higher cost for quick advertising, I was wondering if somebody could give a little color on that, is it better quick through rates because of more relevant ads, is it pricing, just a little color into this?

Martin Nisenholtz

Sure. Taking the CPC question first, it's basically... first of all the gains are fairly modest on. But it's basically that the pricing levels in the option seem to be holding up and that volume has increased just a little bit. So we feel that the numbers are on trend to perform roughly as they have.

With respect to the second quarter, I think the characterization that Janet provided applies to about as well. We have seen relatively anemic display advertising results at about. And that by the way started fairly early in 2008, and that was a bit of canary in the coal mine with respect to internet display advertising. It started to show trends that other websites began to show sort of toward the fourth quarter.

The good news is that NYTimes.com has not been subject to those trends. And that's something that I think Janet points out as well in her introduction. But CPC is obviously an accountable form of advertising, it's a form of advertising that should remain reasonably good in a recession.

Scott Davis - JPMorgan

Thank you, Martin.

Operator

And Edward Atorino with Benchmark has our next question.

Edward Atorino - Benchmark Company

Hi, Janet. Sort of a big picture question, as you or your advertising people talked to advertisers, do you get the sense that the sort of learning to live with less, do you know what I mean in a recovery might we see a muted recovery at least early on as advertisers get courageous with cash?

Janet Robinson

I think that they are learning certainly in the first half to live with less, because they are either force to or they are saving dollars. For the second half of the year particularly in regards to some of the categories to spend more heavily in the third and the fourth quarter.

I think that there is so much fragmentation that's going on in the advertising market. I think that their spend will reflect that in regard to what works best for them. And we have to be there to offer them alternatives in regard to what if, where they spend their dollars. This isn't just a print company anymore as you well know it. This is definitely much more diversified in regard to our advertising offerings. And we intend on being there for them.

But I think advertisers as the economy improve will understand that they have a strong need to advertise. Those ones that are more successful I believe that are going to spend more during a downtime primarily to gain more share and benefit from that. And I think that would bodes well for stronger third and fourth quarter, and certainly what we may see going into 2010. But I think there will economic conditions and the unpredictability of what we are dealing with. It's very difficult for anyone to predict what an advertiser is going to do right now. But we do see signs and we hear comments from advertisers that lead us to believe that they are saving dollars in the first half to do possibly more in the second half if indeed they are able to. But they will be utilizing a variety of streams and advertising options in doing some.

Edward Atorino - Benchmark Company

Thank you very much. I appreciate that.

Operator

There are no further questions at this time. Ms. Mathis, I'd like to turn the conference back over to you for any additional or closing remarks.

Catherine Mathis

Thank you all for joining us today. And if there any other questions, please give me a call.

Operator

Thank you for joining The New York Times conference call. That does conclude our presentation. Have a nice day.

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Source: The New York Times Company Q4 2008 Earnings Call Transcript
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