Back in the days when banking analysts were asking questions about the impact of increased oil prices on delivery costs (HA!!! - wrong question dudes and btw, it was only about a couple of million bucks.)
Denise Warren
At NYTimes.com, about 50% of our overall revenue is priced on a CPM basis and we have seen increases year-to-date year over year in the CPM price business. In addition, as Martin alluded to, we try to maximize all of our revenue and all of our inventory, so we do sell some of our inventory out at the networks and we’ve seen substantial increases in the CPM that we’ve been able to generate from the ad networks.
And the fixed price units that we saw, which account for about 30% of our overall revenue, we’ve also seen rate increases in as well this year.
Craig Huber - Lehman Brothers
Just to be a little clearer, your July comments for your newspapers, are the trends there -- I know we’re not done with the month -- are the trends there looking worse than what you saw in June for your two flagship papers on a percentage basis year over year?
Janet L. Robinson
We really can’t give you the specifics, but I think from the standpoint of what we’ve said, Craig, it really is the case. We see some tightening up in a variety of categories. I think the economy certainly has many of the major category clients very concerned and I think that you are going to see some softness across the board at all media companies in regard to the spending patterns, the newspaper media companies.
Peter Appert - Goldman Sachs
Thanks. Janet, you gave us some color on categories that are stronger and weaker, but I’m noticing a pretty significant deterioration in the ad revenue trends at the New York Times over the last several months, so at the margin, which of the categories or which of the major advertisers that really cut back most substantially to drive that?
Denise Warren
We did have a weakness in entertainment because of the tough comps that Janet referenced, so I think that’s probably impacting the June performance in a big way. Otherwise the trends are fairly similar to what they have been.
Peter Appert - Goldman Sachs
Okay, and my recollection is entertainment is maybe something like 10%, is that right?
Denise Warren
Yeah, just about -- a little bit higher, actually.
Peter Appert - Goldman Sachs
Fair enough, and Janet, this is a tough one but as you think preliminarily about 2009, I’m wondering how you think the ad cycle goes in the context of a macro environment that maybe is more or less the same as what we are seeing now. Can you get back to positive revenue comps next year, you think?
Janet L. Robinson
I think we certainly see a tough second half, if indeed the economy continues to act the way it’s acting right now. I think it’s very early for us to be looking at 2009. I think that there are signs certainly from some sources that say that the housing market will not improve until the latter part of 2009 at the earliest, so I think that there is still increased difficult in regard to the ad market going forward, but I think it’s very early for us to be projecting our thoughts regarding that, Peter.
David Clark - Deutsche Bank
Okay, and then I’m just curious, how much subscriber or reader overlap is there between the New York Times and the Wall Street Journal? Is that something you guys know?
Janet L. Robinson
It’s relatively small, David. I would say that it’s around 11% or so.
David Clark - Deutsche Bank
Okay, so 11% of your circulation area also subscribers to the Journal?
Janet L. Robinson
That’s correct.
David Clark - Deutsche Bank
Okay, and then just one final circulation question -- how many subscriptions roughly have you sold through the Amazon Kindle? Is it a meaningful amount? Is the trend there good?
Denise Warren
It’s a small amount but we are under the terms of a confidentiality agreement, so we are not allowed to disclose it.
Roland Caputo
But the -- I’d say that the trends are good.
David Clark - Deutsche Bank
I guess following on that, do you see that, either the Kindle or other potential e-readers, do you see a meaningful opportunity there for increasing circulation?
Roland Caputo
These are R&D efforts. I think that it’s very early days on e-readers. Certainly the Kindle seems to be attracting a lot of attention. We are the number 11th or 12th most purchased product I believe on the Kindle these days, and that I think you can see by simply going into most popular. You can see that on whisper net.
But I think it’s safe to say that it’s very early days for e-readers and I would characterize this more as an R&D effort than a meaningful revenue contributor.
Scott Marchakitus - Goldman Sachs
This is Scott Marchakitus. I’m on the credit research side. I just have two quick questions for you. First of all, I just want to talk about the liquidity position. You have an $800 million revolver, half of which expires in mid-2009. I’m just wondering if you could tell us what’s drawn under the total revolver and if you are in negotiations with the banks to extend that facility, for at least the next year’s [debt maturing] for future years.
And then secondly, there’s one financial covenant in the bank facility with regard to shareholder equity being $950 million. Can you talk about the add backs to get back to that number and where you stand related to that covenant today? Thanks a lot.
James M. Follo
As far as the borrowings under our revolver, we’re out about $375 million out of a total capacity of $800 million. We are in discussions with our banks that one of our lines, revolvers expires in May of next year. We’re in discussions right now. Those discussions are [inaudible].
Roland Caputo
And regarding the covenant, we have a lot of room relative to that minimum stockholders equity covenant. We’ve [slowed] non-cash impairment charges, so if you add back the charges we had in ’06 and ’07, we’re well ahead of that minimum [inaudible] requirement.
Scott Marchakitus - Goldman Sachs
Are the add backs $800 million in nature, or [that number you’ve disclosed]?
Roland Caputo
If you look at the 2006 impairment, it was about $814 million. In 2007, it was much smaller but we would add those back to our book equity, [the total equity].
Scott Marchakitus - Goldman Sachs
And just a quick follow-up; we’ve seen a lot of downgrades by the agencies in the newspaper sector, particularly among some of the higher yielding names. Now, you stand at low Triple B. I’m just wondering if it’s really important for you to keep an investment grade rating in light of the shareholder demands for enhancing shareholder value, whether it’s restructuring the portfolio or buy-backs or that nature. Is keeping your investment grade rating critical anymore?
James M. Follo
It’s historically been important to us and we consider -- it is the balance between increasing share value and cost of debt borrowing. We balance those two but we’ve historically enjoyed investment grade rating and we expect to do that in the future.
Scott Marchakitus - Goldman Sachs
Thank you very much.
Scott Marchakitus - Goldman Sachs
And just a quick follow-up; we’ve seen a lot of downgrades by the agencies in the newspaper sector, particularly among some of the higher yielding names. Now, you stand at low Triple B. I’m just wondering if it’s really important for you to keep an investment grade rating in light of the shareholder demands for enhancing shareholder value, whether it’s restructuring the portfolio or buy-backs or that nature. Is keeping your investment grade rating critical anymore?
James M. Follo
It’s historically been important to us and we consider -- it is the balance between increasing share value and cost of debt borrowing. We balance those two but we’ve historically enjoyed investment grade rating and we expect to do that in the future
Those Goverment Sachs boys sure were well ahead of the game as judged by the various analysts questions.
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