The New York Times Company Q3 2009 Earnings Call Transcript

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The New York Times Company (NYSE:NYT) Q3 2009 Earnings Call October 22, 2009 11:00 AM ET


Janet Robinson - President & Chief Executive Officer

Jim Follo - Senior Vice President & Chief Financial Officer

Scott Heekin-Canedy - President & General Manager

Denise Warren - Senior Vice President & Chief Advertising Officer

Martin Nisenholtz - Senior Vice President

Paula Schwartz - Investor Relations


Alexia Quadrani - JP Morgan

Craig Huber - Private Investor

John Janedis - Wells Fargo

Edward Atorino - Benchmark


Good day and welcome to The New York Times third quarter 2009 earnings conference. Today’s call is being recorded. A question-and-answer session will follow today’s presentation. (Operator Instructions) For opening remarks and introductions, I’d like to turn the call over to Ms. Paula Schwartz. Please go ahead.

Paula Schwartz

Thank you, [Aajay] and welcome to our third quarter earnings conference call. We have several members of the Senior Management Team here to discuss our results with you. They include Janet Robinson, President and CEO, Jim Follo, Senior Vice President and Chief Financial Officer, Scott Heekin-Canedy, President and General Manager of the New York Times, and Denise Warren, Senior Vice President and Chief Advertising Officer at the New York Times Media Group and General Manager of Martin Nisenholtz, Senior Vice President, Digital Operations is traveling on business today and could not join us.

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

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

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

Janet Robinson

Thank you, Paula and good morning everyone. The third quarter results we’ve reported this morning continued to be driven by affects of the global economic recession and the sustained advertising slowdown it has produced. However, our results also reflect the positive benefits of the sustained actions we have been aggressively pursuing to reposition our businesses for the evolving future of the media industry.

Principle among those actions are continuing to secure strong performance on costs, growing our circulation revenues, which demonstrates continuing study demand for our products, as well as high value on those products that the products command even as the content marketplace becomes increasingly digital. Restructuring our debt with a focus on long term stability and managing and rebalancing our asset portfolio to strengthen our core operations.

Looking at the details, our operating profit, excluding depreciation, amortization, severance and special items grew 30% to $80.6 million in the third quarter from $61.9 million in the third quarter last year. On a GAAP basis, we reported an operating loss of $25.4 million compared with a loss of $150.4 million in the third quarter of 2008.

Earnings per share from continuing operations, excluding severance expense and special items were $0.16 per share compared with $0.05 in the same period last year. On a GAAP basis, we reported a loss per share from continuing operations of $0.25 compared with $0.80 in the third quarter of 2008.

The third quarter results were favorably affected by a gain on the sale of surplus real estate assets of $0.02 per share and unfavorably affected by a charge of $0.33 for estimated pension withdrawal obligations as well as the curtail charge, which Jim will discuss in detail. $0.08 for tax expense due to the reduction of deferred tax balances as a result of lower income taxes and $0.02 per severance.

EPS in the third quarter of last year was unfavorably affected by non-cash charges of $0.78 and $0.07 per share for severance. Strong cost control remained a leading contributor to our improved operating performance in the quarter. We continued to aggressively reduce our expenses and the actions we have taken over the past quarters are evidenced in the 22% decline in operating costs in the third quarter.

With our many initiatives to operate more efficiently and affectively across the company, we expect our cost performance to remain strong and we expect to achieve approximately $475 million in savings this year. An increase of $25 million since we last spoke and we are continuing these efforts with a view towards 2010.

Earlier this week the Times announced that it plans to reduce its news room staffing by 100 jobs and additional business side positions by the end of the year. This move was made with reluctance and only after ensuring we could manage the reduction without damaging the quality of our news report and business operations.

Turning to our balance sheet, which Jim will discuss in greater depth, we have made significant progress in reducing our debt, which declined by over $140 million from its balance at the end of 2008. This has been another area of strategic focus for management that contributes to the improved positioning and financial stability of our company as we look to the future.

The final area of strategic focus, managing and rebalancing our asset portfolio has shown progress in the quarter. Earlier this month, we completed the sale of WQXR-FM, our New York City classical radio station, for growth proceeds of $45 million. The proceeds from this transaction were used to further reduce our outstanding debt balance.

We are also move ago ahead with the potential sale of our interest in the New England Sports Ventures, which includes the Boston Red Sox and approximately 80% of New England Sports Network, a highly rated regional cable channel. The bidding process is progressing and we are pleased with the status.

Last week we announced that after careful consideration and analysis we terminated the process to explore the sale of the Boston Globe, and related businesses and they will remain within the company. We continue to assess strategic alternatives for the Worcester Telegram & Gazette and are determined to reach a conclusion there quickly.

The Globe has significantly improved its financial performance by following the strategic plan it set out at the beginning of this year. The plan has several components that have helped to increase revenues and lower costs. Including consolidated printing facilities, increasing circulation prices reducing compensation for non-union employees and restructuring the Globe’s labor contracts. All along, we explicitly recognized that a careful restructuring of the Globe was one possible route and thanks to the hard work by the Globe staff that is precisely what has been done.

Now let me provide you with more detail on our revenues. Total revenues for the company declined 17% with ad revenues down 20%, circulation revenues up 7% and other revenues down 39%. Excluding the results from city and suburban, the company’s retail and new stand distribution subsidiary, which was closed in early January, total revenues declined 14%, circulation revenues rose 8% and other revenues decreased 11%.

At the News Media Group, which includes the New York Times, New England and Regional Media Groups, ad revenues decreased 30%, primarily because of lower print advertising. By advertising category, national revenues were down 29%; retail was down 25% and classified was down 38%.

Within the classified area, recruitment advertising fell 53%, real estate declined 44% and automotive was down 32%. The News Media Group’s print advertising revenues decreased 31% in the quarter, while digital revenues were down 19% with most of the decline coming from classified advertising.

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

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

Studio entertainment, where there was limited support for new releases and the films released it summer did not match the performance of those in last year’s third quarter and telecommunications, due to reduced spending from the major carriers. The national print ad category where we saw an increased was healthcare, because the pharmaceuticals companies and hospitals increasing their placements.

Although it continues to be a challenging time for luxury advertising, last month we were pleased to celebrate the 5 anniversary of Teen Magazine and commemorate its success with readers and advertisers in the world of fashion, travel and design. Classified advertising at the Times Media Group decreased in all three major categories, real estate, recruitment and automotive. The rate of decline in recruitment and automotive advertising moderated as the quarter progressed.

Retail advertising revenues decreased due to declines in fashion jewelry, home furnishing store, department store and fine arts advertising. At the New England Media Group, advertising revenues declined 27% in the quarter, national ad revenues decreased as declined in entertainment, telecommunications and bank categories more than off-set growth in national automotive, technology, packaged goods and financial service advertising.

Retail advertising revenues were lower as a result of weaknesses in electronics and appliance, home furnishings and sporting goods advertising. Overall, classified advertising at the New England Media Group was soft in all three major areas, recruitment, and real estate and automotive. At the Regional Media Group, advertising revenues decreased 32%, while the rate of decline for advertising revenue in July and August were similar to that of the second quarter it began to moderate in September, primarily due to retail advertising.

Circulation revenues group grew 7% in the quarter, namely because of higher subscription and news stand prices at the Times and the Globe. Excluding C&S, circulation revenues rose 8%; the results from our price increases have been encouraging and indicate that our high quality journalism is valued by our readers. Circulation revenues now represent 42% of the company’s total revenues compared with 33% in the third quarter last year.

This speaks to our continuing effort to build and enhance the quality circulation that is so coveted by our advertisers in every category. In order to get the Times in the hands of even more readers, we continue to work with organizations across the country to print and distribute the paper. In August, we announced a new agreement to print the Times in Nashville, our 25 national print sites.

This arrangement enables us to expand newsstand and home delivery to readers in the Nashville area and to better serve existing markets and surrounding areas of Tennessee and Northern Alabama, Northern Mississippi, Eastern Arkansas and Western Kentucky. We are also looking offer additional quality, local quality, and local content for our readers both in prints and online. Our intent is to rollout expanding reports in key US markets, beginning in San Francisco and then followed by Chicago.

A longer term objective of this initiative is to work with local journalists and news organizations in a collaborative way in major markets around the country. We believe metro news will add another dimension to our coverage. Supplementing the national, international and cultural news and opinion and will help to grow and retain print circulation and expand our regional coverage online.

Extending our national reach is an important component of our multiplatform strategy, which embraces the need to accommodate the growing demand for our world-class journalism. This is why we are forcefully and relentlessly growing our audience in print, online, mobile and on social networking sites, such as Facebook and Twitter and this is why more people now read the Times in more places than at any other point throughout our history.

Moving to the third component of the groups revenues, other revenues decreased 39%, mainly as a result of the closure of C&S. In the third quarter of last year, C&S had other revenues of approximately $19 million. Excluding C&S, other revenues decreased 10% at the News Media Group, mainly because of lower commercial printing and direct mail advertising services at the New England Media Group.

At the same time, that our cost and circulation initiatives are yielding positive results, the Times Company has remained a leader in capitalizing on the values of our core brands to build premier positions in the new digital and multi platform media landscape. While digital businesses in general have not been immune to the advertising downturn, our focus is on creating and expanding platforms that will prosper over the long term.

In the third quarter, digital ad revenues at the News Media Group declined 19% led by classified advertising declines, but the rate of decline on online advertising revenues at the group began to improve modestly towards the end of the quarter, with decreases of 19% in July, 23% in August, and 15% in September and display advertising had difficult comparisons to last year’s third quarter when it had strong double digit gains.

Importantly, I would like to note that, which is the largest newspaper website, remains a premier environment for online brand advertising. In September alone, six major display branding campaigns broke on its home page, including Air France, CBS, HBO and Siemens. For the past several months, we have been exploring new ways to develop alternative revenue streams for We are continuing to evaluate our options and we’ll announce a decision when we believe we have crafted the best possible business approach.

At the About Group, total revenues rose 7% in the quarter to $31 million, due to a higher cost-per-click advertising. Growth in advertising revenues, which were up 10% and strong expanse control enabled the group to increase its operating profit 27% to $13.7 million, the About Group’s operating margin expanded to 45% in the third quarter up from 38% in the third quarter of last year. Over the past 18 months, has taken a number of steps to improve its sales initiatives, including expanding the professional expertise of its sales team, revamping it’s marketing strategy and developing new offerings for marketers.

In total, revenues from our Internet businesses decreased 7% to $78.9 million from $85.1 million. Internet business has accounted for 14% of the company’s revenues in the third quarter, versus 12% in the third quarter of last year. As we continue our transition from a company focused primarily on print, to one that is increasingly digital in focus and multi platform in delivery. Online advertising revenues are an important part of our mix. They made up 23% of our ad revenues in the quarter, up from 19% in the same period a year ago.

Looking ahead, visibility remains limited for advertising in the fourth quarter, but as is the case across the media sector, we have seen encouraging signs of improvement in the overall economy and in discussions with our advertisers. Early in the fourth quarter, print advertising trends in comparison to the third quarter have improved modestly, while digital advertising trends are improving more significantly.

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

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

Jim Follo

Thank you, Janet. Continued our strong expense discipline in the third quarter, furthering the progress we made in the first half of the year and building on our multi year drive to reduce our cost base. Operating cost declined 22%, as reductions occurred in nearly all major expense categories. We remain focused on lowering expenses, and we now expect to achieve approximately $475 million of savings in 2009, while continuing to bolster the quality of our journalism.

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

In addition, salaries were reduced in the second quarter, which has been providing us with savings. Severance costs were $0.02 per share in the quarter or $3.8 million, compared with $0.07 per share or $18.1 million in the same quarter last year. This quarter, we had an estimated charge of $76.1 million for pension withdrawal obligations under several multi-employer pension plans at the Globe and a curtailment loss for the company-sponsored plan also at the Globe.

Last quarter, we restructured several labor contracts at the Globe in order to save $20 million in annual operating costs, which was essential to our plan to put it on better financial footing. The charge was the result of amendments to these various collective bargaining agreements that allowed the withdrawal from these multi employer plans and the freezing of benefits under the company-sponsor plan.

While we are required to record the charge, once an estimate is determined, the withdraw liability will be paid over a period that could extend to 20 years or more. We believe this as an important step we need to take in order to fix an obligation that would have otherwise grown overtime.

Depreciation and amortization decreased 8%, to $31.3 million, from $33.9 million in the third quarter of 2008 primarily, because of lower depreciable assets. Newsprint expense decreased 45%, with 28% from lower pricing and 17% from lower consumption. These print transactions have decreased significantly this year in that peak levels in November 2008.

Current newsprint prices are at historic lows with a majority of North American suppliers losing cash at present levels. Suppliers have recently announced price increases, which forecast as expect will increase newsprint prices in the fourth quarter. Suppliers are expected to continue to reduce capacity in order to balance a downturn in demand.

Interest cost increased in the quarter to $21 million from $11.7 million as a result of higher rates on our debt, offset in part by lower average debt outstanding. For the year, we expect interest expense to be approximately $85 million. At the end of the third quarter, the amount outstanding under our revolving credit declined to approximately $105 million from $200 million at the end of the second quarter. We’ve made significant progress in lowering our total debt level from approximately $1.1 billion at the end of last year, to approximately $910 million at the end of September.

In this month, we used the proceeds from the sale of WQXR-FM to further reduce debt. Next month, we have $44.5 million in medium term notes maturing, because we have restructured our debt, approximately three quarters of it now matured in 2015 or later. We remain comfortably within compliance with our minimum stockholders’ equity covenant in our revolving credit agreement.

In the third quarter, our effective income tax rate was 8.3%, compared with 26% in the same period last year. The tax benefit in this year’s third quarter was unfavorably affected by $11.7 million in tax expense, due to the reduction of the company’s deferred tax balances as a result of lower income tax rates. CapEx in the quarter totaled $3 million, and year-to-date was $38 million. We have taken decisive steps to reduce capital spending and improve liquidity. This year, we expect our capital expenditures will decrease from the 2008 levels of approximately $127 million, to approximately $60 million.

As always, we continue to evaluate our assets to determine if they remain a strategic fit and give any outlook for the business and therefore financial performance makes sense to be part of the company. We have closed on the sale of WQXR-FM, and are pleased by the interest we have seen and that’s taken the New England Sports Ventures. With the moves we have made to refinance and repay debt, our manu cost saving initiatives and our continued evaluation of our portfolio, we believe we have the financial strength to manage in this challenging time.

With that, we’ll be happy to open it up for questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Alexia Quadrani - JP Morgan.

Alexia Quadrani - JP Morgan

You guys have done such an impressive job on the cost side this year. Could you give us any sense of how much of your actions taken in this severance including the most recent announcement this week? Will really contribute to savings in 2010?

Jim Follo

Alexia, we’re still early in the budget and planning process for next year. So I’m not prepared to really give a number for cost guidance next year. However, a couple of things obviously do go in our favor. I think we would still expect to see at least for the first part of the year some favorable trends in newsprint prices year-over-year. So I think that will work well with us for the first part of the year.

Obviously, the announcement that we just made this week on the news room reductions will really benefit us next year. We’re going to continue to be very focused on making sure the cost structure is as efficient as possible. A couple of the actions we’ve taken up in Boston will have a full year effect next year as well as we mentioned both the union negotiations will affect this year. We have half the year this year and the plant consolidation up there as well.

So there are many things that going in our favor. It would be hard to imagine repeating the $475 million, but we’ll really maintain focus on that next year and we’ll certainly be able to drive cost down further.

Alexia Quadrani - JP Morgan

You mentioned paper pricing. Do you have any view on where you think those paper pricing hikes will stick at the year end, and if so, I know it’s probably early, if you have any sense on what pricing for you will look like for you for the full year?

Jim Follo

We think that a good majority of those prices will likely stick in the quarter. That being said, they are still at pretty historically low prices. As far as the balance of the year, it’s hard to imagine prices continuing to move up from that point given the excess capacity and I think their ability to really move quickly to reduce that capacity to bring in one and so I don’t feel there is going to be significant outward pressure beyond this point.

Alexia Quadrani - JP Morgan

Then just one last question, sort of a bigger picture question maybe for Janet, you’ve had such a great perspective being in this industry for a while. Do you have any sense, I love to hear your view on how much of that classified business in the newspaper industry or even in your properties that have fallen off in this downturn, how much of that do you think is maybe a permanent shift away from the paper product or how much may return in a better economic environment?

Janet Robinson

I think there’ll be a modest return in regard to some of the categories, I think particularly in realistic, certainly in our case for the New York Times, because we are for all intents and purposes the MLS in this area, but I think there will be a modest return, when the economic winds blow more in every ones favor, but what you’ve seen not only with those, but throughout the newspaper industry is performing alliances with online not only our own websites pulling in more classified as the economic winds improve.

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


Your next question comes from Craig Huber - Private Investor.

Craig Huber - Private Investor

A few questions, Janet, where is the circulation daily for New York Times and Boston Globe? How much was it down in the third quarter?

Janet Robinson

We don’t announce the percentage declined because the ABC audits are coming out in a few weeks, in fact. We certainly, with our increases in rate structure for both the Globe and the Times. We’ll see declined, but from the standpoint of the projections that we had, we are extremely encouraged, both at the Times and the Globe in regard to the loyalty that’s being shown by our reader base and the loyalty that indeed people are showing even in the face of rate increases.

Craig Huber - Private Investor

Also could you speak if you would about your advertising rates to flagship papers? How much is that perhaps down for the year ago, I know its tough going across categorizes, but I think three months ago you said it was down slightly, like 1% to 3%?

Janet Robinson

You’ve asked this question before, Craig. I think the rate question is very complicated because it’s driven by many factors, certainly by volume and by the mix of advertising. When certain advertisers reduce their volume, they soften pay a much higher rate for their advertising. This is as you well know the structure of a media rate card.

Accordingly, separating rate from volume is not a pre se science and nowadays many contracts and proposals are very customized due to the fact that we are selling multiplatform and certainly because of scheduling and section requests. However, it’s clear that a significant portion of the advertising declines at the New York Times has been driven by volume and at any MG and the regional group rates are lower, yes, year-over-year in the third quarter, although the rate of declines really vary by property and certainly by location and volume is also a major factor in those two Media Groups as well.

Craig Huber - Private Investor

I’m sorry to push this, but do you maybe have a sense on the range of how much is it down? Is it 3% to 7% across your properties, the advertising rate?

Janet Robinson

No. As I said, it’s very complex particularly because our properties are so different, the Times being so different from New England and the regional. So it really, as I said is a complicated factor for both volume and mix. As noted, it is primarily driven by volume declines at the Times in particular.

Craig Huber - Private Investor

Then also just to clarify, we see in your press release and also in your comments Janet, that the trends for early fourth quarter for print are modestly better than you saw in the third. Is that mean its better than just given the fact that the comparisons are easier year-over-year by roughly three to four percentage points? Is it better that you’re trying to see in your investors?

Janet Robinson

We’re seeing improvement, a modest improvement. We’re seeing certainly more requests for proposals across the board. We’re seeing a modest growth in regard to commitment. We still are seeing just in time commitments, so the visibility continues to be cloudy, but I think we are encouraged that indeed we see advertisers telling us that their business is improving and consequently requesting more information from us in regard to rates and placement and certainly customized programs.

I’ll give you an example. The retailers in September as noted in my remarks, we started to see a little bit of a pickup. We have had in depth conversations with them in regard to their improvement. So we do see traffic improvement in regard to the stores and consequently when that’s the case, they tend to want to do more in regard to building even more traffic.

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

Classified, as noted earlier, continues to be a difficult category of business, but we are seeing some modest improvement in regard to those other two categories. I did state too, Craig that we’re seeing more of an up tick in digital advertising and maybe I’ll just have Denise, to give you a little bit of color in regard to what we’re seeing on the digital front.

Denise Warren

As Janet mentioned, there are some sectors of the digital marketplace that are showing an improved growth. Just to call out a couple, financial, automotive, corporate, healthcare, just to name a few. I think what we’re really seeing on the digital side for is that marketers are responding to as the premier environment online to launch and how their branding message is. Janet calls this out, in her remarks about homepage part units that we ran from several premium marketers in September and that continues and it’s boding very, very well for

Janet Robinson

I would just add Craig, one more thing in regard to about we have been pleased and encouraged with the above performance, both in regard to cost-per-click advertising, but also in improving trend regard to display advertising. As I noted, we made a very deliberate upgrade in regard to the professional expertise in regard to display sales talent at about and that is beginning to reach some benefits for us.

Craig Huber - Private Investor

Then lastly if I could few pension. What is the move should be made and what is your update on the underfunded status, if you have that, your obligations there?

Jim Follo

We have not updated that number publicly. Obviously, we’ve gotten the benefit from a strong equity market performance throughout the year. So while the assets are up, we’ll update that number in our next filing, but on the opposite side, interest rates have come down, so we’ve had some offset from the asset performance, but I would expect that number will be real positive, but not as positive as you would think given the equity market performance because of interest rates.


Your next question comes from John Janedis - Wells Fargo.

John Janedis - Wells Fargo

I know Martin isn’t there, but could help us a little bit more at The sequential improvement as you mentioned, Janet, was really notable and I’m wondering to what extent that continues and really maybe more detail on what’s driving there? Thanks.

Janet Robinson

As I said, John, it’s really both. It’s both display, showing signs of improvement with the investment that we’ve made. Specifically in regard to packaged goods, travel, retail, the healthcare. Those are the categories that seem to be showing some good trends and certainly cost-per-click.

We’ve certainly benefits by our acquisition of about in regard to their expertise, in regard to cost-per-click advertising and search engine optimization across the entire company, but we certainly have seen an update in regard to cost-per-click for them in this quarter. They have done a very good job as well in regard to cost reduction. They have been very careful in regard to their spending during the course of the year, particularly as the recessionary factors were affecting them as well.

So the combination really of improved performance on the top line and certainly careful expense reduction reaped a very strong benefit of growth for them. They’re traffic continues to be very strong, so that of course attracts a lot of advertisers. There are 40 million unique users per month in the U.S. and 60 million worldwide. They are continuing to invest in their product in regard to the quality of the content. So I think that where we have a very strong acquisition in about and getting stronger.

John Janedis - Wells Fargo

You alluded to this as well, Janet, but as I look at the News Media segment revenue buckets, circulation represented about 45% in the third quarter versus about 30% historically. I’m wondering if you can help us think about what that means longer term for the margin structure of the segment if that trend continues.

Scott Heekin-Canedy

This is Scott, John. Our circulation revenue base is strong and stable. That percentage he cited is somewhat of a function of the seasonality. The circulation revenue is pretty stable and steady through the year whereas advertising fluctuates through the season, but we believe that our CIRC revenue gives us a strong contributed to over a margin performance upside and revenue in future is all upside.

Janet Robinson

I think the same holds true in regard to the Globe. There was a very decided increase, as you know, John, in regard to Boston. With the circulation increases in May and June, both single copy and home delivery, but at the same time a decrease in regard to the footprint. So we have benefited that needless to say, from those increases and the balancing between the advertising revenue and the circulation revenue is an important one for us to continue to look at, but we feel very confident that we can continue to look at strong circulation revenue flow as we go forward up there as well.

Jim Follo

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

John Janedis - Wells Fargo

Jim, one quick last one for you, I think as you mentioned, your pro forma cash operating cost I think pre-newsprint were up about 19%. As you look to the fourth quarter directionally, can that get above 20% or do you believe we’ve reached the peak here?

Jim Follo

I mean just we did the math of that $475 million would imply a number less than 20%. The $475 million, if you subtract it out, what we did to-date probably end up in the 16% or 17% range, all in. I think we’ve historically done well relative to our guidance. So I’m comfortable at that level. I think you may have asked me the same question on the last call and I gave a similar answer.

We do face stiffer comps, no doubt about it, I think as we met through end of last year, given everything that was going on economy that way more aggressive on cost. There was a comp issue that has to be accounted for here as well, but again you could do the math for that $475 million to get something in the 17% range

John Janedis - Wells Fargo

To your point, I mean you started the year, I think at a 330 number, so you’ve been doing a great job. Thanks.


Your final question comes from Edward Atorino - Benchmark.

Edward Atorino - Benchmark

Jim, on the $76 million pension withdrawal and curtailment, is some of that sort of a retroactive catch up and that’s a third quarter number, but is it sort of a nine months item, if you know what I mean? Did that sort of play catch up on that at all?

Jim Follo

No, that was the result of the negotiations that took place in June and essentially what that represents is at the point in time, our share of the unfunded balance of all of the multiemployer plans that we withdrew from, essentially at a point in time. So that’s our best guess as to what that was at that time. Once you’re out of it, that number doesn’t grow. So it’s a more important in 49 numbers.

Edward Atorino - Benchmark

Does it reflect sort of a catch up on, I mean could some of that be allocated mentally or mathematically, that’s part of that cost could have been reflecting what happened during the year as opposed just in the third quarter?

Jim Follo

Certainly not attributable to our performance in the third quarter, I’m not going to try to answer that, but I don’t believe it’s a catch up against the 49 number.


That does conclude our question-and-answer session at this time. Ms. Schwartz, I’ll turn things back to you for any additional or closing remarks.

Paula Schwartz

Thank you very much for joining us today. Please call us if you have any further questions.


Again, that does conclude today’s call. Thank you all for your participation.

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