Good day, everyone, and welcome to the New York Times Company Q3 2006 earnings conference call. (Operator Instructions) For opening remarks and introductions, I would like to turn conference over to Ms. Catherine Mathis. Please go ahead.

Thank you and good morning, everyone. Welcome to our 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; Len Forman, Executive Vice President and Chief Financial Officer; Scott Heekin-Canedy, President and General Manager of The New York Times; Martin Nisenholtz, who is our Senior Vice President of Digital Operations; Jim Lessersohn, Vice President of Finance and Corporate Development; Stu Stoller, Vice President of Process Engineering and Corporate Controller; and Tony Benten, our Vice President and Treasurer. Our discussion today 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 2005 10-K. Our presentation today will 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 website, www.nytco.com. This conference call is being webcast and an archive will also be available on our website, as will a transcript and a version that is downloadable to an MP3 player. An audio replay will also be available and the directions for it are included in our earnings press release. We will try to conclude our conference call by noon today so that everyone can get on with their day. With that, I am going to turn the call over to Janet Robinson.

Thank you, Catherine, and good morning, everyone. This has been a very busy quarter for us. Given the challenges we face, we have been moving quickly to execute our strategy. During the third quarter, we announced a number of steps to strengthen the Company, including our plan to sell our Broadcast Media Group, which will help us focus more on our print and online properties; the sale of our investment in the Discovery Times Channel; the consolidation of our two New York-area printing facilities into one plant; and a web width reduction at The New York Times newspaper, which are part of our continued drive to reduce costs and to adapt to the changing needs of our readers. The acquisition of Baseline StudioSystems, a leading online database and research service for information on the film and television industries and Calorie-Count, a site offering weight loss tools and nutrition information that complements About.com. Both of these are part of our strategy to build out key components of our online offerings. Lastly, we introduced a significant number of innovative print and online products that we expect will generate new revenues. We believe these measures will better position our Company as we move into an increasingly digital environment. Turning now to the results of the quarter. Today we reported third quarter earnings per share of $0.10 based on GAAP compared with $0.16 in the same period a year ago. Included in our GAAP EPS is a charge of $0.03 per share for staff reductions compared with $0.05 in the third quarter of last year. The staff reduction cost of $0.03 per share was $0.01 higher than the $0.01 to $0.02 we had anticipated because some buyout expense originally expected to be recorded in the fourth quarter was included in the third quarter. We…

Thanks, Janet. The Company was very disciplined on costs in the quarter. Total costs from continuing operations rose just 0.1%. Excluding those related to staff reductions, total costs rose 0.8%. The increase includes 0.4% attributable to increased compensation-related expenses and 0.3% attributable to higher distribution expense. Our focus on finding innovative ways to reduce costs is paying off and we are aggressively looking for ways to streamline our operations and improve the performance of our businesses. This year, we expect to save approximately $55 million to $60 million from our process engineering and other cost reduction efforts. That is $10 million to $15 million higher than we had anticipated at the beginning of the year. Newsprint expense declined 2.2% as a result of lower consumption, which was partially offset by higher prices. As we announced in July, the web width reduction at the New York Times will help us continue to decrease newsprint consumption. We now expect the web width reduction to be completed in the third quarter of 2007, about six months earlier than we originally planned. On an annualized basis, we expect to achieve around $12 million a year in newsprint savings from the web width reduction. As Janet mentioned, in the third quarter we announced that we planned to consolidate our New York Metro area printing into our newest facility in College Point, Queens and to sublease our older Edison, New Jersey facility. We are now able to estimate that it will cost $104 million to $128 million to close Edison. The breakdown of this estimate is as follows: $78 million to $90 million is for accelerated depreciation over the next six quarters, beginning in the fourth quarter of 2006 and ending in the first quarter of 2008; $12 million to $16 million for one-time staff reduction…

Thank you. (Operator Instructions) We will go to Paul Ginocchio of Deutsche Bank Securities.

I think on the last call you just talked about showing operating leverage and margin improvement. Just wondering what the revenue trends need to be to show that? When do you think you can start showing operating leverage? Thank you.

Paul, I think it has been very clear that there has been a decided effort within the last two years in particular, but even a little bit before that, that the Company has been extremely focused in regard to cost reduction to the thought that indeed we could improve margins. We are still looking at that as an extremely important goal for us, going forward. Because of the weakness in the ad environment and certainly the weakness that we have seen in the third quarter, that goal has become much more difficult for us. But we are intent on reaching that goal as soon as we possibly can. The progress we have made on the cost side, we are very proud of. But we definitely need to see more of an increase in regard to what we do in regard to the advertising, both in print and online, in order for us to reach the margin improvement that we strive to reach.

Great, thank you.

We will go to Brian Shipman of UBS.

Can you please detail where you have allocated the staff reduction charges? Does it all apply to the News Media Group? Or is part of it applicable to the corporate expenses? If you could just drill down a little bit more in terms of your expectations for national advertising in the fourth quarter. Thank you.

Brian, this is Len. On your first question, most of that charge is in the News Media Group.

I will address the fourth-quarter question and I will give you the broad answer. We expect to see continuing strength as we have all year in the fashion luxury categories. We expect the department stores to be strong and real estate, though it is slowing down because of difficult comps as well as the marketplace, we will expect to see continued growth in real estate. The challenge side of the equation, studio entertainment will continue to be a difficult category for us. We are up against some pretty stiff comps in October, in particular. Other national categories that have challenging comps for us include automotive. Last year the automotive industry was winding down but continuing its family and friends type discounting. We saw a lot of corporate advertising last year from Katrina and we don't expect to repeat that. So that is going to be a challenge category. Financial services experienced just incredible growth last year, in excess of 50%. We are up against comps there and banking as well. So those will be challenging categories for us in light of the trends that we have seen in the third quarter.

We will go next to Lauren Fine of Merrill Lynch.

Thank you. A couple of quick ones. Scott, you just mentioned auto category. Are you seeing any benefit from the GM warranty program or any other positives that you can note? Then I am wondering if you can update us on the TV sale process: if you have had much interest and whether is it likely to go as a group or individual sales?

I will answer the broadcast sale, Lauren We are in the early process of this divestiture. Our banker, Goldman Sachs, expects a broad range of strategic buyers and private equity prospects. We are in the process of gathering early indications of interest. At this point, we would say that we are extremely pleased with the level of interest. It is too early to tell whether or not this will be an individual property sale or group. We are getting interest in both ways. But we will do whatever is in the best interest of our shareholders. The potential sale, needless to say, is a few months off, but we are hopeful that, indeed, we can conclude this process as quickly as possible.

With regard to automotive, we are not particularly seeing benefit from the GM warranty program. The challenge is coming primarily from the domestics. The international automotive manufacturers are staying strong with us. We are in discussions with all of our advertisers about 2007. They are looking particularly for multimedia programs, print and online. So we think we are well-positioned to capture those dollars.

Okay just two quick ones. Your estimate of the incremental revenues on the circulation price increases, I just want to double check you have taken into account a certain level of churn there? I know it is probably too early to give us any update on what you are seeing. Secondly, any update on the CFO search?

The circ revenue estimates do recognize and include whatever copy losses might be associated with the price increases. Is that your question, I believe?

It is. And if there any kind of real-time observation on how that's going?

It takes several weeks for the returns to cycle through the system for us to be able to say definitively what the impact of a price increase is. But we do have some early field intelligence, if you will, and the early signs are that the price increase is going well.

And in regard to the CFO effort, we are in the middle that process. Heidrick & Struggles is the firm we have engaged to help with us this. And internal and external candidates are being considered.

Great, thank you.

You are welcome.

We will go next to Alexia Quadrani of Bear Stearns.

Thank you. Just a couple of questions. First, on the New England marketplace. Janet, you gave us some great color of why the retail side of the business should hopefully improve in 2007. Could you talk a bit about the classified side, which has been very weak? Do you see any reason to assume any relief on that side of the business in New England? At some point, I guess if the business does stay fairly weak, would you consider divesting that property? And then I've got a follow-up.

In regard to the divestiture, you know that it is our policy not to comment on potential acquisitions and divestitures. But we constantly review our portfolio as evidenced, certainly, by our decision to divest of the Broadcast Group. But that said, we view The Globe as an extremely important aspect of our overall portfolio and we have taken great steps to improve its performance. As many of you know, we have many talented executives in key positions, some newly promoted and some new, in fact, to the New England Media Group with very proven track records. Most recently, with the retirement of Richard Gilman, we've placed Steve Ainsley, who has been President of our Regional Group, into the position of publisher of The Globe and head of the New England Media Group. He comes to The Globe with a proven track record, and I know that he is very pleased with certainly the welcome that he is getting in New England, but also the team that he has inherited. So I think that we have taken steps in regard to looking at improved performance in New England. In the classified area, they are challenged categories, there is no doubt; help wanted, real estate and automotive, as I noted earlier. That said, there is a very strong focus in regard to not only what we can do to garner more business on the agate side and the print paper but also to make Boston.com more part of a must buy in regard to our classified focus on ad revenues in New England. Michael Zimbalist is overseeing Boston.com now and has taken a very proactive role in looking at not only sales improvement there, but also improving page views and traffic to the site, which we think will have a direct correlation also to improvement in regard to revenues across the board, including classified.

On your online businesses with About.com, should we assume that growth rate, sort of in the high 20s that you mentioned you are seeing in September and October, including that one-time tough comps, is that a good number to assume for going forward, in terms of a longer term growth rate? On your online business aside from About.com, could you just give us a sense of what percentage of that online revenue is from the classified area?

The range that you alluded to on the About business is probably a pretty good range. With respect to the percentages of classified, as you know one of the strengths of the NYTimes.com business is that it is dominated by display advertising. For this quarter of 2006, classified was only 28% of the base, which is a very, very healthy number in comparison with most newspaper companies. Now in Boston, of course, which is more typical of a metropolitan newspaper, the base is at 70%. But we know from our peers, that that is actually on the low side in some cases. So I think if you look at that NYTimes.com number, you have to be impressed by our diversity of revenues.

Thank you.

We will go next to Craig Huber of Lehman Brothers.

Yes, good morning. Thank you. Could you just preview the ABC September circulation numbers for your two flagship papers? Second question, movie ads. What percentage of your flagship paper advertising base comes from movies? And also, how did it perform in the quarter? Thirdly, can you just address this talk on the marketplace in recent days and weeks about the ability of your Company to buy a third party or family led?

With regard to the studio question, year-to-date, it is tracking at about 11% to 12% of our revenue base. And in the third quarter, it was down in the double digits.

In regard to the ABC, the fast facts are going to be out the very end of this month. And when indeed they are announced, we will be in a better position to really outline what the numbers are and also, indeed, the steps we have taken in regard to circulation generation and focus in regard to quality circulation as well. In regard to the question regarding possibility of an LBO. We have been a public company since 1969. During that time, there have been significant viscidities in the stock market. Our dual class structure provides us with the benefits of public ownership, the financial demanded of publicly traded enterprises. At the same time, the editorial independence and integrity of the New York Times is protected. Only the Ochs - Sulzberger family, which collectively owns approximately 20% of the equity of The Times Company, can change the capital structure. They have given no indications that they plan to do so.

Thank you for that. And lastly, non-newsprint for your newspaper division. What was the percent change there for cash cost, adjusting for the one-time item?

Non-raw material cash costs were up about 0.7%.

In the newspaper division?

For the total company which is essentially the newspaper division.

Okay. Thank you.

We will go next to Frederick Rick Searby of JP Morgan.

Yes, thank you. Could you give us some idea what the tax leakage or tax rate should be on the Broadcast sale? Thank you.

Well we'll have a substantial gain on the sale. However, we are not in a position yet, until we know the price, to really be able to estimate that.

I assume it will be close to 40%?

Not quite that high.

It will be substantial because of the low basis. But it is too early to estimate, given that the structure of the deal might dictate what the tax payments look like.

Great.

And in the states that the deal gets done.

Okay, thank you.

We will go next to Christa Sober Quarles at Thomas Weisel Partners.

Just a couple quick ones at About. First, I was wondering whether if could highlight whether remnant display ad pricing has contracted in the fall here? The second question is just on the yield on your search text ads; if that's improving? Or is most of the revenue gains volume related? Thanks.

The yields on cost-per-click advertising have been actually increasing over the past several years, certainly since we bought the business. So the answer to the question is, no, the yields are not decreasing. I guess you are asking because of the large amount of inventory that is being poured on the marketplace, at this point, by --

Exactly, your generated content inventory there.

The reason is it is an auction-based pricing system, right. So the yields are dependent upon the categories that the auctions that you are in. So if you look at the About business, it is basically in categories that are not in a lot of the categories that are being poured onto the market. So it is not a social networking or community site. It is highly verticalized. So, for example, the cost-per-click around health links would be different than the cost-per-click prices of other categories of links. Do you follow me?

Yes. So just on the remnant display ad, though, is that seeing any of the increasing inventory that's out there?

Remnant, yes. Remnant has been softer, although the way that we handle remnant is we handle remnant through third parties at About. The special relationship that we have with some of our partners at this point, particularly our largest partner, has actually allowed us to increase the yield of our remnant inventory. So at this stage at About.com, we are actually optimizing that remnant inventory, I think in a very positive way. That's all about what I would like to say about remnant inventory.

That's actually helpful, thanks.

We will go next to Steven Barlow, Prudential Equity Group.

Thank you. Len, can you comment on any union contracts that you have upcoming? It appears that some things were settled in Boston, recently. Related to that, how is the process of the personnel going from Edison to College Point? Are all the employees coming over, some being offered deals? I guess all the delivery is going to happen from the one central point but I don't know whether there is another mini distribution center for south of New York City.

At least I will start on the union question. We are currently in negotiations with our mailers. They are particularly affected by the consolidation of the two plants into a single plant. Those discussions are going well. There are also aspects of the contracts that we have to discuss and negotiate with our pressman and those are under discussion. So far our discussions I would characterize as good. I am not sure how to answer your question about consolidating Edison into College Point. Obviously, the dominant portion of the staff at College Point will remain as part of that facility. There will be some people relocating from Edison to College Point, but that depends a lot on their personal circumstances and whether they are willing to relocate. Those are questions that we are not going to get into in any sort of detailed way for a good year.

Just a little bit more color on that. Our press release noted this morning, we built in severance costs to deal with that, and we expect the FTE savings in the consolidation. So a considerable number of those positions will go away.

250.

So the exact make-up and distribution is way too early for us to figure at this point.

What would be the contract dates for the mailers and pressman?

Well the pressman, we have a contract that goes through 2018. We just have to negotiate some of the terms that are allowed for in the existing contract. With regard to the mailers, we have an open contract with them now but we expect to get to a satisfactory resolution of a new contract.

All the other contracts at the Times are extended well beyond 2006.

Anything short term on Boston?

In regard to Boston, the two conversations that are taking place right now at the bargaining table are with The Guild and with the mailers. We are in the process of talking to The Guild in regards to their acceptance of the contract, which we believe will happen some time this fall. We are at the table right now with the mailers.

Both of those open at this point then?

Yes, they have been open for a while. The Boston has been on a different cycle than the New York Times. And unfortunately, the pattern up there has been serious discussions don't begin until contracts expire.

All right, thanks very much.

We will go next to Lisa Monaco of Morgan Stanley.

Yes. Can you just elaborate a little bit on what you are seeing in October relative to the performance in September? And then just on the labor point. What percentage of your employee base is unionized? Thanks.

About half of our employee base is unionized, Lisa. In regard to October, I will let Scott give you an overview in regard to the Times. I will handle The Regionals and The Globe.

To reiterate my comments about the fourth quarter outlook as a whole, October I think I mentioned is particularly challenging. Last year we experienced growth in October in very high single-digits. So we are up against some very difficult comps as well as seeing some continuing trends from the third quarter carrying over into October. But the categories I cited as sources of strength and challenge for the fourth quarter are definitely at play, in a significant way, in October. I would reiterate something that Janet said in her remarks. And that is that the overall performance that The Times is reflecting this year, is very much dominated by a small handful of categories. If you put aside studio, automotive, tech and recruitment, where all the other categories are showing growth in the mid to high single digits. About half of that can be explained by real estate, but the balance is from the portfolio of remaining categories. So the challenges we are seeing are primarily coming from four or five categories.

At The Globe, we are continuing to see the kind of challenges that we have had year-to-date. We are seeing discount stores, home improvement show some strength, but we are challenged, certainly, in the classified area. At The Regionals, we are seeing strength in real estate and home improvement and in home furnishings, but again there is some weakness in regards to classified and in department stores. But it will certainly be an opportunity for us to hopefully see some improvement because of some strong online activity, both at The Globe and at The Regional group.

Okay. Can you just remind us how much department store advertising is as a percentage of total newspaper ad revenue? Thanks.

At the Globe, it is 5%; just department stores, not full retail but just department stores.

And at The Times, it is about 4%.

Okay. Thank you.

We will go next to Debra Schwartz of Credit Suisse.

Thank you. Just a quick question on costs. You have, clearly, a lot of cost initiatives in place that came through this quarter. I was just wondering, can you give us a sense of how costs trended in Boston versus New York for the quarter?

Both organizations were trending down in costs. Clearly, the situation on the revenue side is more difficult in Boston. They have been taking costs out of the system in a significant way for a long period of time. But the trend has been down for both organizations.

Len, do you have a sense of how much it was down in Boston?

We don't get into that level of details, ever.

Okay. Thank you.

It is important to note, though, within the last two years with process reengineering, both at The Times and The Globe, we have taken and we expect to as the year goes on, to take about $110 million worth of costs out of the properties. This has been an effort that has been underscored by all of the leadership here at the Company, primarily in regard to our striving for margin improvement. That will continue, certainly, during this year and for many, many years to come. This year we said that we would take about $55 million to $60 million of costs out and that we seem to be on track to do just that. There also is a concerted effort on our part to look at productivity and efficiency, particularly as it relates to use of technology, which we expect to do even more of going forward.

Great, thank you.

At this time, I will turn the conference back to Catherine Mathis for any additional remarks.

Thank you all for participating today. If you have any other questions, please don't hesitate to call. Take care. Bye now.

That concludes today's conference call. We thank you for your participation. You may disconnect at this time.