The New York Times Company (NYT) Q4 2014 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to The New York Times Company Q4 and Full-Year 2014 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note that this call is being recorded today, Tuesday, February 3, 2015 at 11 a.m. Eastern Time. I would now like to turn the meeting over to your host for today’s call, Ms. Andrea Passalacqua, Director of Investor Relations of The New York Times. Please go ahead, Ms. Passalacqua.

Thank you, and welcome to The New York Times Company’s fourth quarter and full-year 2014 earnings conference call. On the call today we have, Mark Thompson, President and Chief Executive Officer; Jim Follo, Executive Vice President and Chief Financial Officer; 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. In addition, our presentation will include non-GAAP financial measures, and we have provided reconciliation’s 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. Before I turn to the detail of Q4, I would like to offer a few observations about 2014 as a whole. This was an encouraging year for The New York Times Company, we made enough progress with our digital revenues to more than offset the secular pressures on the print side of our business and to deliver modest overall revenue growth, especially pleasing with the progress on digital advertising. When I arrived to the company just over two years ago, digital advertising was in decline. In 2014, we reversed that with digital ad growth in all four quarters, which became double-digit growth in the second half with a 19% year-over-year gain in the fourth quarter. That great digital story meant that despite continued secular headwinds in print advertising total advertising revenue for the year was within a percentage point of flat. The decline was 0.7% compared to 2013. This was the most encouraging year-over-year trend for our advertising business since 2005. The digital growth came from the launch of Paid Posts, our native advertising solution, as well as strong growth in mobile and video. The digital advertising market continues to evolve rapidly with great new opportunity is alongside pressure on some existing parts of the business. That means that we do not currently expect 2015 to deliver quarterly year-on-year gains as high as some of those we enjoyed in 2014, but we have a strong team in place, we are actively developing further new ad solutions including in mobile and around sponsorship. And we believe there is immense further potential in Paid Posts both in terms of media revenue and the growing additional revenue, we are driving from T Brand Studio, the creative services team who produced much of the branded content for the peers under the Paid Posts name. For all these reasons we are confident, we can maintain significant growth in digital advertising and we also saw progress in the digital consumer revenue business. Overall, we continue to build our digital subscriber total in 2014 and finish the year with 910,000 paid digital subscribers, an increase of 150,000 from the previous year beating our tally of new additions in 2013 by 25%. In particular, we saw growth during the year among international subscribers. Late in 2014, we introduced the ability to new customers to subscribe in their own currency to boost international growth further. We are now well on track to exceed the 1 million digital subscriber milestone in 2015. But we don’t believe we’ve yet fully exploited the full potential of our digital subscription business. There were many achievements in 2014. We showed that we have the journalistic design and product talent and capability to reach and satisfy new customers with great Times journalism packaged in new ways. NYT now has demonstrated an ability to engage a young audience which is new to the Times, and both it and our cooking products remained amongst the best apps of the year by Apple. But we’ve also learned some lessons about the need to spend sufficient time building the audience for new product before full monetization. This is how we are approaching our cooking product and we are seeing very healthy audience growth as a result. Also about the marketing challenge involved in presenting a bigger portfolio of products clearly to consumers, something that was certainly an issue for us with the launch of NYT now. We will continue to develop our thinking about the portfolio over the early part of 2015, and will involve our marketing and product technology EVPs that we are currently recruiting, as soon as they arrive and we will have more to say about this later in the year. As with our digital advertising business though, we believe there is a real opportunity to scale the business more quickly than we are at the moment. We also believe the both digital revenue streams will benefit from the focus on fundamental audience development that was inspired by last year’s innovation report and which is now fully engaging our news room and product teams. Targeted investment in print was also part of the story of 2014 and will be again in 2015. You will see some of the fruits of those efforts in the first half of this year beginning with the relaunch of The New York Times magazine later this month followed by the launch of the new men's fashion and lifestyle section in April. This will be our first new print section in 10 years and when we feel we will be well-positioned to thrive given our success to-date within luxury advertising category. We have a very strong presence in this category and advertisers are eager to tap into our brand given our visibility and influence in the market. Recognizing the core strength of our brand, in 2014 we deepened our newsroom coverage on a variety of topics such as would be April launch of the Upshot which provides news analysis, data visualizations commentary and historical context from the staff led by Pulitzer Prizes winner David Leonhardt. After less than the year this scientist already won critical claim. In addition, I’ll first draw sight in daily newsletter, which provides one-stop coverage in an analysis in U.S. politics and elections is off to a great start. New venture such as these solidify the engagement of times readers drive new traffic and create coveted new destinations for our advertisers. Let me turn now to the financial results to Q4 2014. The Company’s operating profit was $62.4 million that compares to $69 million for the same period in 2013 and the decrease was principally the result of severance expense booked in the quarter. Adjusted operating costs were roughly flat in the quarter. For full-year 2014, the Company had an operating profit of $92 million compared to $156 million in 2013 with the decline primarily resulting from investment spending related to our strategic initiatives as well as severance expense. Adjusted operating profit in 2014 was $256 million, compared to $277 million in 2013. Total revenues grew slightly for the quarter which was the result of growth in both our digital subscriber base and digital advertising revenue. Overall advertising revenues ended down 2% in the fourth quarter, which was better than we had anticipated. Print advertising did not see the late quarter rally that is enjoyed in the third quarter and with the fourth quarter as a whole print decreased 9% year-over-year a decline largely offset by that 19% growth in digital advertising. Print advertising is expected to face continuing headwinds in 2015. Circulation revenue performed in line with what we expected during the quarter as the combination of 2014 increase in home-delivery prices and continued growth in the number of digital subscribers more than offset a decline in print copy sold. The overall increase in the circulation revenues was 1.4%. In the quarter we added 35,000 net new digital subscribers which is a 20% increase from the fourth quarter in 2013. The bulk of the growth again came from our core packages including from international consumers as well as from corporate and education group subscriptions. The relative improvement in advertising revenue trends, circulation revenue growth and cost management initiatives drove our performance in the quarter. Despite an increase in operating cost in the quarter and year we will ensure expense control to remain tight in 2015. We need to reduce legacy cost wherever we can to supplement our diversified efforts on the revenue side. Let me turn now to Jim Follo for more detailed financial review.

Thank you, Mark and good morning everyone. As Mark highlighted, we closed 2014 on a solid note with notable digital revenue growth on both the advertising and consumer sides of the business. We’re beginning to see the benefits of our strategic initiatives insurance forming our organization although there was much to accomplish in the coming year. Despite print decline to both our advertising and circulation revenue streams in the fourth quarter the momentum in our digital business led to revenues that were up slightly overall. Expenses rose in the fourth quarter driven by severance expense related to workforce reductions announced in the quarter, as well as retirement costs. Costs related to our strategic initiatives are beginning to flatten out according to plan as we are now cycling a full-year of that spending. Our focus on reducing core costs remains a top priority. The cost reduction initiatives we recently implemented across the company should allow us to maintain stable or slightly lower costs in 2015 relative to 2014 levels. Adjusted operating profit was roughly flat in the quarter at a $104 million. We reported GAAP operating profit of approximately $62 million impacted by the severance expense and retirement cost I just referenced compared with operating profit of $69 million in the same period of 2013. Growth in digital advertising and digital subscription revenues helped total revenues finish up slightly for both the quarter and the full-year. Circulation revenues increased 1% in the fourth quarter, with our digital subscription revenue stream more than offsetting print declines. We benefited from 2014’s home-delivery price increases although higher revenue from the new rates was outweighed by overall volume declines. In the fourth quarter, digital only subscription revenue were approximately $44 million, an increase of 14% from the same quarter in 2013. We did put through a New York Times home-delivery price increase of approximately 5% at the start of 2015. Newstand and digital prices were not affected. Advertising accelerated its momentum on the digital platform in the quarter, finishing up 19% which despite a print loss of 9% limited the advertising decline in the quarter to 2%. Digital advertising continues to see a boost from Paid Posts as well as mobile and video. Moving on overall advertising revenue in the quarter continue to exhibit month-to-month volatility and reflect short-term buying decisions, demonstrated by an October decline of 5%, flat performance in November and a 1% decline in December. Print advertising revenue was down across the board, while digital was consistently strong. During the fourth quarter 2014 the company began reclassifying advertising revenue, by a slightly different set of categories. In today's earnings release you will see that Display now includes a combination of the prior national and retail categories. Classified now includes only agate listings and the new other advertising category include such items as pre-prints and production fees generated from our brand new content studio. The release also provides a Q4 and full-year growth rates, based upon similar prior year comparisons. We’ve decided to make these changes as the lines between National and retail continues to blur. Other revenues grew 10% in the quarter driven by higher revenues from our online store and content licensing. The expense management efforts remain an intense focus in Q4, as we moved ahead with plans to lower core costs while maintaining critical investment spending. Thoroughly in the fourth quarter, we announced a cost cutting plan that involve headcount reductions across the company. We believe that we achieved these reductions without impacting our world-class journalism. This plan reflects our commitment to strengthening our operating efficiencies while safeguarding our long-term profitability. We remain committed to investing in certain areas of growth. Costs are up 3% on a GAAP basis in the quarter and reported diluted earnings per share of $0.22 costs rose due to severance expense related to headcount reductions as well as higher retirement costs partially offset by distribution efficiencies. Adjusted diluted earnings per share was $0.26 in the fourth quarter, compared to $0.29 in the prior year. Our non-operating retirement costs increased by nearly $4 million in the quarter and retirement costs are expected to flatten out in 2015. We expect non-operating retirement costs in the first quarter to be approximately $10 million versus $9 million in Q1 2014, due to higher multi-employer pension withdrawal costs. In the quarter we also completed the rental of an additional floor of our headquarters building, which makes up a total of 31,000 square feet. We will begin recording the associated rental income in the first quarter and this will bring us to a total of seven leased floors. During the fourth quarter we recognized an impairment charge of $9.2 million for our joint venture Madison Paper Industries. The company’s proportionate share of the after-tax loss was $4.7 million, after adjusting for the allocation of a loss to the non controlling interest. Moving to the balance sheet, our strong liquidity position remain intact in the fourth quarter, our cash and marketable securities balance was $981 million and our total cash position exceeded total debt and capital lease obligations by approximately $331 million. During the fourth quarter, we repurchased approximately 20 million principal amount of our 5% senior notes due in March. If you likely saw at the beginning of the first quarter that is part of a warrant exercise, we announce the intention to make share repurchases for approximately $101 million equal to the proceeds we received from the warrant transaction. We believe a repurchase program is the best use of cash in this instance since it will largely neutralize the transactions impact on our diluted share counts. The impact of the warrant exercise was to increase our diluted share count by approximately $8 million based upon current stock price. I do want to emphasize that this is a one-off program that should not be viewed as a change in our capital allocation process. For accounting purposes on a GAAP basis, based upon preliminary results the under funded status of our qualified pensions plans at December 20, 2014 was approximately $264 million, that compares to $80 million at the end of 2013. The funded status of the company’s qualified plans was negatively impacted in 2014 by interest rates and as we’ve previously disclosed the adoption of new mortality tables issued by the society of actuaries partially offset by strong asset performance. Also in the fourth quarter, the company offer participants for various define benefit plans, the option to immediately received lump some payments or to immediately begin receiving a reduced monthly annuity. We will begin making settlement distributions of approximately $98 million on an offer in the first quarter all of which will come from pension assets. The purpose of this after was to reduce the overall size and inherent risk of our plans as well as the modestly improved our funded status. We also expect to book a especial charge of approximately $40 million in Q1 as a result. Moving to our outlook, first quarter circulation revenues are expected to increase at a rate similar to the fourth quarter trend, driven by the benefit from our digital subscription revenue stream and January’s home-delivery price increase, despite continued challenges particularly for newsstand volume. We expect the total number of net new digital subscriber additions in the first quarter to be in the mid-30 thousands. Advertising revenues are currently expected to be down in the mid-single digits, driven by print declines partially resulting from challenging year-over-year comparisons. You will recall that amortizing revenues increased more than 3% in the first quarter of 2014, including growth and print advertising of nearly 4%. Due to strength associated with a strong Oscar race in the New York area Super Bowl. As Mark mentioned, print will face ongoing headwinds and continued volatility in 2015. Digital is expected to main positive growth in the low double-digits in the first quarter and other revenues are expected to increase in the mid single-digits. And first quarter operating costs and adjusted operating costs are expected to be roughly flat as we have now cycled the start of our strategic initiative spending and we get the benefit of linked 2014 cost reduction initiatives. And with that we would be happy to take your questions.

[Operator Instructions] Your first question comes from the line of Doug Arthur with ISI Evercore. Your line is open.

Yes, thank you. Mark I think the last time you’ve guided on digital for the fourth quarter advertising, you said somewhat tougher comp and somewhat of a de-sell from the growth rate, the strong growth rate of the Q3, obviously that didn’t happen. So you accelerated. So I guess what cause that and I guess by turn as your Q1 guidance on digital, therefore positively conservative. And then a second question just I’m wondering if you can elaborate on the relaunch plans for sort of the desktop version of the low price digital sub package, thanks.

Okay, let me - Doug, good morning. Let me deal with the second one first and say that we are still working and are continuing to test options around the expression of the local cost offer in the kind of non-app environments desktop and also essentially mobile web as well. I mean that’s part of a broader look at our digital portfolio with a focus both on that, but also a focus on optimizing the way our products play out in mobile as well. As I said we’ll come back to you later in the year with some fresh thinking about that. On advertising, I mean I’ll let Meredith answer the question, but just to say, we are - the way we go about our guidance is to genuinely aim for a mid-case projection for the quarter that’s what we did in Q4. We outperformed that, we saw some real success both in the Paid Posts and elsewhere in our digital offering and we did better. Our guidance for Q1 2015 is absolutely a not to be artificially conservative for the mid-case projection, as our guidance was in Q4, but Meredith do you want to add any color to that.

Yes, I would agree with that and I would say, we did see in Q4, we saw Paid Posts continue to grow, we saw mobile and video continue to grow, we also had the benefit of some very large enterprise deals where a lot of the revenue was particularly in Q4. So I’m with Mark I stand by the guidance for Q1.

Okay, thank you.

Your next question comes from the line of Bill Bird with FBR. Your line in open.

Good morning, I was wondering if you could talk a bit about the digital subscription game plan for the year ahead, what are some of the things that you are looking to do to sustain your digital sub gains? Thank you.

Thanks, Bill. I mean you’ve heard us talking about them. We have a plan which we’re rolling out to boost international subscriptions that in currency capability is part of that. We’re also experimenting with other ways, which we’re going to be doing some experiments with in language versions of the times to see whether we can exploit that. We think there is considerable further development potential in both our corporate and educational businesses, we are exploring that. As I’ve said already, we’re looking fundamentally optimizing the core digital portfolio of products and services and we think that although as I said I think we’ve shown and we showed in 2014 an ability to continue to grow this business. We don’t yet think we’ve achieved its full potential.

And just a follow-up on the Paid Posts business, where do you think you are kind of a in a progression of developing that business, as your ad inventory at a fully distributed level where you feel that you are striking the right balance for the consumer.

Very good question. I think we’re still early days in the business, we’ve a lot of demand and we’re continuing to fulfill that demand, we’ve staffed up in T Brand Studio, which is where we produced a lot of the Paid Posts content and we’ll keep staffing up as that demand grows. We are also going to see Paid Posts grow in mobile and in video that will be a major components of the mobile and video ad solution and we’re generally optimistic about it in one sense to your inventory question Paid Posts are self generative of inventory. So they’re creating new inventory as they go.

It’s a really important point Meredith made that they’re additive to the existing digital advertising inventory. We think there is immense further potential…

Yes.

Immense further potential.

Absolutely.

Great, thank you. And just a follow-up for Jim, just point of clarification. Does your pension under funding necessitate a pension contribution this year?

No, it is not. We don’t anticipate any sort of discretionary contributions actually that probably holds for several years now, we’re well ahead of any required funding.

Okay, thank you.

Your next question comes from the line of Craig Huber with Huber Research Partners. Your line is open.

Yes, good morning, thank you. So few question, my first one, can you give us a sense please of the percent of our digital ad revenue I guess the fourth quarter that was Paid Posts mobile and video combined, just give us a sense?

I’ll say broadly we’re pleased with the trend so we said that mobile for the year is now slightly more than 10% of our digital ad revenue, video is a growth business smaller number, but had a similar growth trajectory and Paid Posts was inside of 10% of the overall business, but has a very strong growth trajectory. So we expect these to be three of the four, five things that will keep driving digital growth in 2015.

Yes, it’s fair to say on Paid Posts we expect to more at double, well all capability in T brand studio to make Paid Posts.

Exactly. And I’ll add to that, we expect to the creative work to be a meaningful line of that business.

Yes, so with Paid Posts is obviously there is a block of revenue which is associated with the media by and then in addition at those the revenue against the production fees we get for making the content in almost all the campaigns.

Right, for selling the creative work.

And then also the cost front as we look out beyond the first quarter through remaining part of the year, can you just maybe just help us give us some idea what to sort of think about this projection here for expenses for the second, third and fourth quarter year-over-year please?

Yes, well as I said in my remarks we expect cost to be kind of flat to slightly down that’s kind of a net number we’ll be investing as we said in some of the areas that Meredith talk about Paid Posts is dollars we’ve put against that audience development efforts and growing our digital audience cost against that but we’ll be taking cost out of kind of what we consider the core business, print will continue to see opportunity to reduce cost, reduce print we think will be favorable for us next year on the price basis. G&A will come down, but on the net-net basis we think flat to slightly down just probably good way to think about cost for the full-year.

And my last question, please just the housekeeping issue, for daily and Sunday print circulation volume what’s the present change there in the quarter year-over-year please?

In the fourth quarter our daily circulation was down about 6.7%, Sunday was down about 4.5%.

Great, thank you.

Your next question comes from the line of Alexia Quadrani with JP Morgan. Your line is open.

Thank you. Just two quick questions. One, thank you for giving the detail on the ad number by month in the fourth quarter. I assume that was total advertising, do you have those October, November, December just for print as well?

You just give us a second we’ll pull back.

Yes.

And then my second question as far as I guess you’re looking at up is really just a broader question on, we saw an impressive growth I think if you highlighted in the international digital sub growth in the quarter. I guess anyway you can size how significant opportunity that could be either longer-term registered in 2015?

Alexia, I don’t have much to answer to what I said in previous calls I mean the, around the third well traffic comes in your times from users outside the U.S. the kind of the base case two years ago in terms of the percentage of international subscribers was around 10%. So I think the one way of thinking about the opportunity is the delta between 10% and I feel like 33%. I am not suggesting that you can necessarily close that gap completely. But we’re very interested in – what we as you know now really since the middle of 2014 we’ve been very focused on audience development. And I think one thing I want to say is that we are very focused on international audience development and figuring out what combination of better tools to developing audience and figuring out ways algorithmically. But also with human editorial engagement we can make news report more relevant to users in different countries as a way of driving usage and not just overall reach, our unique users but also engagement. So, that you begin to drive those subscriptions. I think we have an answer on advertising.

The print number for October was – were down about 12.5%, November was down 6%, December was down 8%.

And any early readings of January or?

Yes, I think Jim already gave some guidance for Q1. I’ll just say its one of our hardest comps for the year. So we are…

We have these one-off events last year.

Super Bowl city in our city, a very strong Oscar race for the times and then some big corporate campaigns that aren’t repeating.

Okay. All right thank you very much.

Your next question comes from the line of John Janedis with Jefferies LLC. Your line is open.

Hi, thanks good morning. Just a couple of follow up, first on digital. To what extent have you been able to broaden your base of advertisers and what are you seeing on the pricing front in digital broadly and maybe Paid Post specifically now you have been selling them for a few quarters?

Sure. So on the first question I am happy to say I think we have a very broad base of advertising. So we get advertising from a lot of different categories. And we actually I think you will see in 2015, we will break into some new categories that we haven’t necessarily played in a meaningful way before. So that will continue to improve. On Paid Posts specifically I’m not sure if you are asking the same question, but you will see in the coming months, Paid Posts from new categories. So we have some stuff in the works coming from categories that haven’t been out there yet. But in Paid Posts generally one of the things that’s gone well, we are probably 40 advertisers and I want to say 50 or 51 campaigns in and they come from many different sectors luxury, financial services, corporate, automotive and so forth and that will continue to broaden that. And I think you had a third question in there as well.

Just on the pricing environment broadly speaking.

Pricing, so we are - in general we have not seen tremendous pressure on CPM and we remain confident that particularly – actually in both Print and Digital our product is sufficiently differentiated that we should be able to maintain that CPM.

Okay, thanks Meredith. And maybe Mark, you referenced corporate and education packages, has there been any change in promotions for the core digital subscription offering, rather maybe 1Q of this year, 4Q of last year relative to the prior year and as subs have increased has there been any change in churn?

Well, I mean there is a constantly kind of shifting set of promotional offers that we use. Our tactics change quarter-by-quarter. I think the ARPU number which you can derive from the numbers we give, gives you a sense of that overall track of the business. There was a slight decline in ARPU in 2014 as you would expect with the launch of lower priced offers and with success in corporate and educational sales, but we remain very pleased with ARPU, our ARPU remains higher than the sticker price as it were the main core digital subscription at somewhat over $15.

Yes I think on the churn side, look the DPU get into marketing products you see slight declines kind of retention rates, four months retention rates something we look at pretty carefully, but its very modest. And I would say it’s a consistent trend you’ve seen something in the model as the DPU get it kicks down just a little bit, we are still at a very healthy pretty good four months retention rate, we feel pretty good about it.

It’s fair to say we’ve done some experimentation in 2014 around pricing outside the U.S. in terms of promotions. Price sensitivity, you would expect to and indeed it doesn’t – did appear to vary by territory, so that’s been one feature of 2014.

Thank you.

Your next question comes from the line of Kannan Venkateshwar with Barclays. Your line is open.

Thank you. Just a couple of questions. The first is on Jim, I think you made – one of the comments you made was it the price increase overall had a negative impact on revenue on the Print side. Is there any way to get a sense of the transition between print and digital as you increase prices and what kind of an impact it has on contribution margins overall on the circulation side and the second question is in terms of frequent visitors, I think when you had launched the digital plan you had given us some sense of how many of your unique visitors are frequent visitors and so on. If you could just update us on that number that would be pretty useful and how the conversion rate on those frequent visitors incur?

The first question – I’m not sure, you have misread what I had said about price increase. We put through a price increase fairly beyond home-delivery about 5% that’s consistent with the pricing course you put in place for many years now, we're seeing kind of similar performance, so net-net those price increase have allowed us to maintain essentially a kind of a flat print consumer revenue line, this year was down a little bit, but mainly because of single copy sale, but we expect similar performance from the home delivery price increase, it has meaningful – it doesn’t just allow you to kind of keep constant – at least constant maybe a little growth in home-delivery, but you are also – there is a little bit of a benefit on copies produced, but the loss from a price increase we still feel is quite manageable I think that’s a good tactic for us.

Well let me struggle to answer the second question, I believe at the time that we launched the Digital subscription back in 2011 before my time, we said something like but 10% to 15% of unique users were in “heavy users.” I mean what is definitely true about nytimes.com and are the digital assets is in terms of engagement time spent across the board even with as it were an average of unique users, we do extremely well both in terms of time spent on individual articles and I believe also in terms of repeat business across the month. And we think the one of the reason we are both a strong advertising platform and have shown the ability to move more engaged users toward subscription is because the levels of engagement. I mean a large part of what were times do with audience development is to grow the breadth of the audience i.e. to increase the number of unique users in the U.S. and beyond, but without reducing the levels of engagement we’ve seen and I think one of the things that you can expect to see us doing in 2015 is looking quite closely at each stage as it were the funnel in terms of how you encourage already fairly engaged users to become more engaged and get them to the point where the value to derive from consumption of our digital assets is such that they think it make sense to subscribe. I don’t know if that helps still.

Could you give us some sense of the conversion rates on some of these visitors in terms of the frequent visitors that you’ve add in the past?

We’ve not, again we’ve not typically disclosed the final points of conversion.

Okay, all right. Thank you.

But its fair to say that there this no - I’m not aware any kind of as it were a decline in conversation rates at the point of gate as it were, when we can get engaged users to the movement when there are to subscribe conversion rates remind very steady over the course of the model.

All right. Thank you.

Your next question comes from the line of Edward Atorino with Benchmark. Your line is open.

Good morning. Did you talk about where the cost reductions have been concentrated, was it in the sales force, in a press room, et cetera. And secondly regarding the circulation trend, is there been such a – that’s been fairly static I guess in terms of this conversion and is there a difference much of a difference between let’s say the New York of pricing and circulation versus the rest of the country.

The pricing, the 5% price increase is pretty much across the board for all frequencies both kind of in market and out of market. You asked a question about where kind of the cost reductions were, they were broadly across the board. I think it was well reported, there was physicians coming out the News Room, we’ve had a 100 gross although we’ve added a number of physicians as well on that area around audience development for example and the launch of some magazine have added some resources there as well. Advertising has taken some physicians out of - we’ve invested elsewhere, but its pretty – as usual it’s pretty broad-based but it’s pretty strategic, we don’t take kind of a blunt instrument, we try to do it in the best way possible.

And really an important thing to say is that we are very aware that have to be incredibly mindful of the quality of the journalism we offer our users and although we have to look at every single part of the cost structure. We are anxious team and his colleagues in the newsroom and all of us are very anxious to make sure we are properly investing in Times journalism.

I think a year or so ago, you started a program of special content sections, I don’t know what you can call them, has that been maintained and can you give us an update on how it has been received by the readers.

So I’m assuming you are asking about the PAID POST business are the Branded Content business. And I would say that has been - it was definitely one of the big growth areas of 2014. And we expect it to continue to be.

Is there a separate circulation price to people to sort of take advantage of that program, is that sold separately?

Well I mean that the Paid Post are available to everyone who comes to digital assets anyone who comes to nytimes.com and to the apps can look at Paid Post. They are not part of the - they are behind the pay wall, obviously advertising partners who wants to take advantage of the program, have to pay us both to displayed that’s the media revenue and also most of them are paying us additional money to actually make the content which appears under that brand.

Thank you.

Your next question comes from the line Doug Arthur with ISI Evercore. Your line is open.

Yes, Jim just a clarification, you reported $0.26 from continuing ops which takes out a lot of these charges that includes the impairment change at the Madison plant.

Excludes it, we see that as a special non-recurring item, the $0.26 is kind of a pro forma number that would exclude, I’ll give you the component that it largely excludes, it largely excludes that item impairment charge, it largely excludes a fairly large tax benefit in the tax rate that we’ve gotten through a reversal of certain tax reserves, it excludes severance and it also excludes non-operating retirement cost, those are the exclusions to get to that number.

So what is the imputed normalized tax rate than excluding all these items?

Well, it’s always complicated, we still say for dollar we earn basically a tax of somewhere around 41%, 42% that tends to be quite lumpy but that’s the rate that we’ve largely guided to and we’ve done that for a while. I think when you back out all these things for a whole host of reason you actually get to a number which is probably close to about 45% rate.

Okay, all right thank you.

I would say on every incremental dollar its 42%.

Okay, thanks. End of Q&A

I will now turn the call back over to Ms. Andrea Passalacqua for any closing comments.

Thank you for joining us and we look forward to talking to you again next quarter.

Thank you everyone, good bye.

Ladies and gentlemen this concludes today’s conference call. You may now disconnect.