Good morning. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to The New York Times Company's First Quarter 2014 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded today, Thursday, April 24, 2014. Thank you. Ms. Andrea Passalacqua, Director of Investor Relations, you may begin.

Thank you, and welcome to The New York Times Company's first quarter 2014 earnings conference call. Joining me today to discuss our results are Mark Thompson, President and Chief Executive Officer; Jim Follo, Executive Vice President and Chief Financial Officer; Denise Warren, Executive Vice President, Digital Products and Services; and Meredith Kopit Levien, Executive Vice President of Advertising. Before we begin, I would like to remind you that management will make forward-looking statements during the course of this call and our actual results could differ materially. Some of the risks and uncertainties that could impact our business are included in our 2013 10-K. I should also mention that our presentation 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 at investors.nytco.com. With that, I will turn the call over to Mark Thompson.

Thanks, Andrea, and good morning, everyone. So 2014 has got off to a good start with solid revenue performance across-the-board in the first quarter. Both Print and Digital Advertising grew year-on-year in the quarter, the first time we've seen that for a number of years. Print grew nearly 4%, while Digital Advertising was up 2%. We believe we're making meaningful progress on some fundamentals in advertising, including performance and innovation as witnessed by the very successful launch of our native advertising solution Paid Products -- Paid Posts, I'm sorry. However, the strong numbers for Q1 do not mean that we're declaring victory just yet on the advertising front. As Jim will discuss in a moment, we still expect significant variability from month-to-month. This April, for instance, is proving materially tougher than January, February or March. And although the positive momentum of recent quarters is still in evidence, we'll also face tougher comps as we get further into the year. On the consumers side, we added 39,000 net digital subscribers in the first quarter. That brings the total number to approximately 799,000 digital-only subscribers, an increase of 18% year-over-year. Overall, revenues ended up nearly 3% versus last year's quarter, building on the revenue progression we saw in the second half of 2013. The company's operating profit for Q1 2014 was $22 million. That compares to $28 million for the same period of 2013, with the reduction being driven principally by investments in our growth initiatives, as well as by some recent spending in the advertising department as we undergo a restructuring there. We believe that these focused investments are critical to long-term growth and value creation, even as we continue to look for ways to reduce core costs wherever we can. During the quarter, we continue to execute our strategy to…

Thanks, Mark, and good morning, everyone. As Mark noted, we began 2014 on a positive note with a quarter of solid revenue gains and a good start in our effort to scale our audience of paying digital readers. Our first quarter revenue performance reflects steady growth on the circulation side of the business, combined with strong result in the advertising side, leading to our third consecutive quarter of overall revenue growth, excluding the impact of the additional week on Q4 2013. As expected, our costs rose in the quarter as our continued diligence in reducing our core costs was more than offset by investments we were making in our growth initiatives, as well as by higher retirements costs. The growth initiative costs will rise further throughout the remainder of the year as we now must factor in marketing expenses around these new products. Now that NYT Now and Times Premier have launched, we've begun generating revenues for these initiatives, but as Mark noted, it will take some time to scale those revenues. Operating profit before depreciation, amortization, severance and nonoperating retirement costs and a special item of a newly introduced metric that we are calling operating profit, which I will address more later, decreased 1% to $57 million in the quarter. The decline was driven mainly by a $13 million increase in operating expenses compared with the first quarter of 2013, most of which was attributable to our growth initiative spending. We reported GAAP operating profit of $22 million in the quarter. Circulation revenues rose 2% in the first quarter, with our digital subscription revenue stream responsible for the bulk of that increase. We saw an 18% growth on the company's digital subscription base, and also benefited from the 2014 home delivery price increases. In the first quarter, digital-only subscription…

[Operator Instructions] Our first question comes from Alexia Quadrani with JPMorgan. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: A couple of questions. On the digital sub growth, you continue to have, in my view, very good growth again this quarter. Is there -- is anything you can say about how we should think about the digital sub growth going forward, maybe in Q2 in the back half of the year, given how it might be impacted by these changes in the new initiatives? And then I have a follow-up question.

Alexi, it's Denise. I think at this point, we're only 3 weeks in to the launch of 2 of our products. And I think it's pretty challenging for us to determine what the growth pattern is going to be. So -- I mean, I know you're looking for a lot more visibility here, but I think it's just best for us to refrain from giving you any guidance at this stage. I think certainly next quarter, we'll, obviously, be sharing a lot more on this subject. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: And then, I mean -- I'm assuming -- I'm not asking you to share this with us. Can I sort of ask you theoretically? I'm assuming you guys have a benchmark internally in terms of how many people that -- or subscribers of newyorktimes.com that may dumb down to kind of the New York Times Now. Would it be fair to say that you guys internally sort of have a number that you kind of look to, to assume the sort of amount to be expected to move down and that you watch that kind of carefully and if it becomes sort of a lot bigger than that number you sort of have anticipated, you can adjust the program, is that a fair way of looking at it?

It's Mark, did you say dumb down the first time? Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: Yes. That was a bad use of words, I apologize.

If they were doing that, they'll be moving from one great package to another. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: Okay, that's better. You're more eloquent than I am on this front.

Obviously, one of the things that obviously we're following very closely is -- and we'll be following closely is how people move between the different packages. I mean, the point -- one of the points of having a portfolio is you'd like to move people up. I mean, Times Premier is an example of trying to move people up a portfolio. We'll keep a very close eye on movement both ways. And it's certainly -- our modeling has always recognized that there are some movement downwards likely. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: Okay, and then the last question is on the advertising. I know you got it for a bit more cautious outlook in the second quarter. The comps are little bit more difficult in Q2 than they were in Q1, but it looks like March was a strong month. And, I guess, I'm trying to read into is your more cautious commentary on advertising just because of the comps? Or is it also because you're seeing sort of some change in spending patterns that are making a bit more conservative?

I think it's just still the -- this is Meredith. I think it's just still a market with a lot of volatility month-to-month, and that's why the visibility is limited. It's hard to string a lot of information together and call it a pattern yet.

I would say it's hard to believe that something radically has changed in the market between March and April. I think that's just the world we're in. We're constantly facing some pretty significant volatility. Comps do play some part in it, but that's only part of the story. I think it's just a very volatile market, and I think it's likely to continue to be like that for a while. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: Does Easter usually have an impact? I can't remember.

In the past, I think Easter has had a more significant impact than it had this year.

Look, Easter for us -- Easter would normally affect more retail and classified, and those are 2 very small categories for us, minimal. Soft to slight impact on...

Yes. So we're in a different position from some of our competitors. I think Gannett and McClatchy reported very recently where retail is very significant, and therefore, the move of these out of Q1, I think both said had an impact on their -- it's different for us.

Your next question comes from Craig Huber with Huber Research Partners.

I have a few questions. I'll start with 2 housekeeping questions, if I could. Your print daily and Sunday circulation volume in a quarter, what was that percent change year-over-year please?

Craig, it was down 6.5% on the daily and 2.5% on Sunday.

Okay. And then on the cost side for newsprint, please, what was the average price percent change year-over-year, and also in consumption?

The total raw material cost was down about $2 million, a little bit more skewed towards volume than to price. So I would split that $2 million kind of 60-40, with volume having more of an impact. We don't tend to quote our own price per ton, but I would say, generally, on a year-over-year basis, if you look at kind of rizzy, I think, the rizzy numbers were down about $10 a ton year-over-year, or something like 2%.

You think roughly your average price on 2%? Okay.

No. I was quoting rizzy. I'm not quoting our own, but there was a small price benefit in the quarter, but it was more volume-driven than price.

Maybe I missed this, but do the monthly ad revenue percent change year-over-year? What was that for the first 3 months of the year? I'm curious how April is tracking relative to what happened in March.

I did, in my remarks, give the month-to-month volatility. As I said just a few minutes ago, March was up 6%. I believe -- just give me one second. January is up 4% and January is down 1% or something like that.

Sorry, January was up 4%, February was down 1%, and March was up 6%.

That's right. And that's kind of combined...

Yes. And we're not -- we're in the middle of April. We haven't even done anything for April.

But you did say that April is off to a tough start.

Yes we did.

Yes.

And look, it's embedded in our overall guidance. I will say that April is a big month for us. It's a 5-week month. And it doesn't actually close until first week in May.

Yes.

So we still have some time to go before we close the books on that.

Do you guys think that you're being -- your guidance originally for the first quarter for ad revenue turned out to be conservative. Is there any conservativeness in your minds for what your guidance now is down mid-single digits for the second quarter?

Well, look, here's what I would say. March was up 6%. When we were giving guidance, it was either late January or early February, I don't recall. We didn't have a ton of visibility into March. And so that guidance was based upon what we saw in January so...

Yes. And we were looking for the month of February where we were looking at a decline, which ends up being a decline of 1%.

And so, as -- and again, as I said, April is a pretty big month for us and we have some visibility there. That's what's embedded in our guidance for the first -- for the second quarter.

And our guidance is based on trying to -- looking at a mid-case in terms of probability, not a low case. But as Jim said already, even in quarters, the Q1 2014 and some of the quarters, late quarters in 2013 where we've seen the across the quarter, we've seen rather positive trends in advertising. That's still been in the context of significant month-to-month volatility.

My last question or comment, please just forgive the tone on this, has to do with the retirement cost and how you're now presenting adjusted EPS, adjusted cost excluding retirement cost. I'm just curious, I mean, just given the last 20-plus years, your company has always included the retirement costs and all that stuff. All of a sudden now, you're asking investors -- you're presenting to take out the retirement cost. What has changed in your minds to do that? And I also ask that in the context of your severance costs. As you guys know better than I do, in the last 20-plus quarters, every quarter, you guys have booked there are severance charges in there people can take it out if they want or not. I'm just curious, the adjusted EPS number now -- you want people to take out the retirement costs now. What's the big change? Why are you doing that now when you haven't for the last 10-plus years?

Well, a couple of things. First of all, we're simply presenting it as additional information, and investors and analysts can do with it what they like, and we're not suggesting to leave it in or out. You can make that call yourself. I will say though, as the business has gotten smaller and the volatility in the plans has gotten quite significant and we've been -- for example, we've been -- we've taken a different approach to investing within our plan where we're moving much more of our assets away from equities into fixed-income. It has a fairly dramatic impact on the quarterly results. But I think the key issue here is the business gotten smaller, the plans don't get smaller. While they're frozen, they don't go away. When you freeze them they stay the same. And I will point out, just as an example, every quarter in this quarter where -- what's flowing through pension expense is about $7.7 million of amortization of losses that occurred several years ago, and the accounting rules require you to smooth that into the current period. And we think as the base of your EBITDA has gotten smaller, these things tend to have an outsized impact and we don't think actually really relate to the quarter. So I mean, that -- again, we provided a supplemental information. Investors and analysts will use that as they choose and we're not -- that's a call you'll have to make.

My only concern, obviously, I'm sorry, is just in the second sentence of your press release it talks of the $0.07 number, which is the adjusted number which excludes the retirement cost, correct? And that's the number that most people are going to pick up and hone in on and everything. And I like the fact that -- I agree with you 100%. I like the fact that you break out all this retirement costs at the last table in the press release. I appreciate that. It's just that number there, it's just very interesting that I've noticed more and more companies recently recover or sort of take out the so-called bad stuff. Even you could make an argument that...

Oh, by the way, that number could very well go positive as well at a point too. I mean, I can -- you can go with this pretty far. I mean, how much should the asset performance in the pension plan, which is not the company, but the plan, impact reported results in the quarter? People can debate that. We think it has the potential to mask and distort underlying trends. And those trends could go positive or negative for us. It's just, in this quarter, pension expense was higher. Next year, we could get a different conversation.

And it's worth saying that we're not excluding all retirement costs. We're distinguishing between retirement costs which we think are part of the operating business and nonoperating retirement.

That's right. There are -- by the way, yes, retirement costs which are higher embedded in the kind of the GAAP number that is not isolated. Those costs are up as well. Those costs are -- we expect to be up $4 million or $5 million [indiscernible].

Sorry an important clarification is that we're not excluding all retirement costs. We've chosen to distinguish between those retirement costs, which we think you can completely fairly associate with the operating business and those which are financial cost, which we think it's sensible to treat in this way. But with complete disclosure, so if any investor or any analyst want to consider it on a different -- on a GAAP basis, they can do that as Well.

Your next question comes from Doug Arthur with Evercore.

Yes. Denise, the 39,000 increase in digital subs in Q1, I mean, that seems like a pretty big number, particularly because you had telegraphed these new products coming in April. So one would have thought there might have been a slowdown in sort of the traditional tiers in anticipation of the new tiers. So, I guess, the question is what drove the strong growth? And was there any particular incentives in the quarter to drive it? Or was it better than you thought or in line?

Yes. I'd say there are 3 things that drove the performance. One is we did experiment with a number of different promotional offers and had good experience with those. Two is that we saw a really good growth from what I'll just call our emerging segments, international, corporate and education in particular. And then finally, as we've talked about in prior quarters, we've really started to hit our stride with what I call our optimization efforts, be it retention of new customers or our just doubling down on testing and learning around how to optimize our marketing messaging and offers. So I think all of those things really contributed to the growth of the quarter.

And just as a follow-up...

And just to be clear, we're going to go for it on core as well. I mean, we've got new products out there, but it doesn't mean that we're going to stop being aggressive on the core. We still think that there's opportunity there as well, so I think the issue is balancing the portfolio and getting the right message to the right customers at the right time, and that's really the opportunity we have in front of us as we roll up a new product suite.

Great. And then, just as a sort of ripple effect of this and not withstanding your efforts in native advertising, as the digital sub universe grows, does it become a stronger overall sub platform to drive overall Digital Advertising throughout the network? I mean, are the 2 kind of -- do the 2 kind of go hand-in-hand? Or is it not that direct a correlation?

I mean, I'll let Meredith jump in here, but, I guess, in my experience, whenever you have a product that's well-received by a market, advertisers are willing to pay to reach that audience. And I think the fact that we have a highly engaged, very affluent audience across platforms and we know about these people, we have data on the because they are subscribers, puts us in a very differentiated position.

I agree entirely, and a lot of our new ad product development will be around new digital mobile consumer product development.

I mean, NYT Now is a great example. Cartier sponsored the launch of NYT Now. They were excited to get in front of this new product with this new audience so I think there is opportunity for us.

Your next question comes from Kannan Venkateshwar with Barclays.

Just a couple of questions. First on the new product front. International product has now been around for some time in the new branded version and so on. So I just wanted to understand how the underlying trends there look. And you mentioned that there are some strength there, but if you could just quantify what that looks like, that would be great. And the second question...

Kannan, we said in our last earnings call that we're not going to break out International just because our mix is going to change so dramatically with the launch of new products. But we did see growth in the quarter and there's a couple of things that we actually have coming up that we're very excited about. One is what we're calling a Market Domination program, where we go in and actually blitz a market and make sure that consumers really understand what the New York Times is, and we'll evaluative the results of that and determine whether or not that's scalable to other markets. That's rolling out very shortly. As well as Mark mentioned in his comments, we've got the local currency rolling out in a couple of months so we're excited about that and know that, that will absolutely help conversion.

Yes. Okay, so on the local currency front, if you could clarify -- I mean, from a pricing perspective, does this compare in U.S. dollar terms to what you're charging in the U.S. or...

It will, but we will also experiment with differential pricing into new markets. But the first step is right now, we're billing everything in U.S. dollars and we really need to be billing in local currency. So the first step is to do that and then we will start to experiment with differential prices in differential markets.

And just to clarify, when Denise says we'll be launching that in a couple of months, she means something between a couple of mid-single digit month, probably 2.

Okay. And one question, which might sound a little bit repetitive is on the capital returns. Now, in the past, you've said, Jim, that you're looking at the volatility in the ad market and then, of course, the pension on the funding situation was a lot different in the past and so on, and therefore, those are the variables that you wanted some stability in before you guys took a call on it. And now some of those trends seem a lot more stable. So I wanted to get some updated thoughts from you on how you look at capital returns going forward.

Under -- look, under close watch, look, I agree. We've certainly made some progress. We certainly feel good about the business. I think we've pointed to a number of things, including a higher level of leverage that we think is appropriate, given the divestitures we've gone through. I suggested in my remarks that we'll be taking some of that cash and applying it towards a near -- a maturity, that will be -- or about inside a year. So the deleveraging is still one of our top priorities, and look, we'll continue to evaluate. We have just nothing more to share other than what we've said. We feel fairly good where we're at in our transitioning of this business and flexibility that provides us, and we and the board keep it under a very close watch.

Yes. If I can just add to that. I mean, we feel we are making progress. I've mentioned that in my remarks. We also think we're still in the middle of a large scale transformation of a business towards digital and towards new sources of growth for the business. We don't think that we've yet achieved everything we need to achieve. And I'm not ashamed in the slightest that we're continuing to take a relatively conservative view of the balance sheet.

One follow-up question on that, Jim. On the debt side of it, I think in the past, you have mentioned that the goal is not to be debt-free, but is there some kind of a leverage number that you have in your mind at which you think the capital structure looks more optimal?

It is in my mind. Look, I get that...

If you could see him, Kannan, he looks like a man who's pretty determined if you could see in his mind and not to put in his mouth.

Look, I think the flexibility right now is what we feel most comfortable with. And we prefer, just given a host of things that are happening in this business, to retain some flexibility and not -- we're just not prepared, just at this moment, to make that commitment.

And if I can say, we demonstrated last autumn with the return of the dividend that we don't have a -- we actually do not have an aversion to the idea of returning capital to shareholders. And this is one part of the way we think strategically about the business, at the moment, a pretty conservative perspective on the balance sheet, but keeping it under review.

Your next question comes from William Bird with FBR. William G. Bird - FBR Capital Markets & Co., Research Division: A question for Denise. Denise, do you think the 39,000 in digital sub additions for the legacy product is sustainable in Q2? Then I have a follow-up.

Yes. Let me just say this, look, we're not going to -- as we said, we're not going to give guidance on Q2 because there's just a lot of stuff happening in the quarter. One thing I will say is that Q2 is always seasonally our lowest quarter. So I think you should factor that -- for the core product, I think you should factor that into the thinking. And as well as I mentioned, there were -- there was a lot of promotional testing going on in Q1. Some of that will sustain itself, but some of it is onetime efforts that won't repeat. So those two things will have an impact as well. Obviously, the new products will have an impact on a lot of other things, which is why we're not giving guidance on the numbers in the quarter.

Well, we have given our revenue guidance. So that's kind of whatever our use of that is kind of embedded in that number we've given on circ revenue. William G. Bird - FBR Capital Markets & Co., Research Division: And a question for Jim. Just to clarify, is your down mid-single digit ad guidance consistent with the April trend?

I would say it embeds the April trend and it's consistent with what visibility we do have beyond April. I will say, April is challenging; May, less so. I think it's a blend of a number of different factors. And we look at that on a regular basis, and that's our best view at this moment. William G. Bird - FBR Capital Markets & Co., Research Division: I might have missed it, but on the strategic growth initiative cost, how much are still ahead of us?

Well, so here's the way it's going to happen is big -- year-over-year cost growth virtually all our -- I'd say 80% of our cost increase in the first quarter was related to growth initiatives, because we had almost no spending last year in the first quarter related to those. We will see a fairly big bump in spending in the second quarter because we'll be marketing for the first time. So we'll see some pretty big growth year-over-year, and so we gave some guidance around that. Once you get in the back half of the year, that should moderate because you're beginning to comp against spending that took place last year. Although it will be higher, it will be quite a bit more muted. So I would say kind of on a year-over-year growth basis, second quarter should be the highest on a year-over-year basis, and then it will retreat a little bit on a year-over-year basis in the third and go down pretty dramatically in the fourth. But net-net, year-over-year change, somewhere at $25 million or $30 million.

There are no additional questions at this time. I would like to hand the call back to the presenters for any closing remarks.

Yes. Thank you for joining us this morning, and we look forward to talking to you again next quarter.