Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
NYT > SEC Filings for NYT > Form 10-Q on 8-Aug-2013All Recent SEC Filings

Show all filings for NEW YORK TIMES CO

Form 10-Q for NEW YORK TIMES CO


8-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

We are a leading global, multimedia news and information company that currently includes newspapers, digital businesses, investments in paper mills and other investments.
We currently have two divisions: The New York Times Media Group, which includes The New York Times ("The Times"), the International Herald Tribune (the "IHT"), NYTimes.com, and related businesses; and the New England Media Group, which includes The Boston Globe (the "Globe"), BostonGlobe.com, Boston.com, the Worcester Telegram & Gazette (the "T&G"), Telegram.com, and related businesses. These divisions generate revenues principally from circulation and advertising. Other revenues primarily consist of revenues from news services/syndication, commercial printing and distribution, rental income, digital archives and direct mail advertising services. Our main operating costs primarily consist of employee-related costs and raw materials, primarily newsprint. Joint Ventures Our investments accounted for under the equity method are currently as follows:
? a 49% interest in Metro Boston LLC ("Metro Boston"), which publishes a free daily newspaper in the greater Boston area;

? a 49% interest in a Canadian newsprint company, Donohue Malbaie Inc.; and

? a 40% interest in a partnership, Madison Paper Industries, operating a supercalendered paper mill in Maine.

During the second quarter and first six months of 2013, total revenues decreased 0.9% and 1.4%, respectively, compared with the same prior-year periods, driven primarily by declines in advertising revenues, partially offset by growth in circulation revenues.
Compared with the prior-year periods, circulation revenues increased 5.1% in the second quarter and 5.8% in the first six months of 2013, mainly as digital subscription initiatives and the increase in print circulation prices at The Times and the Globe in 2013 offset a decline in print copies sold. Revenues from our digital-only subscription packages, e-readers and replica editions increased 44.1% in the second quarter of 2013 and 51.7% in the first six months of 2013 compared with prior-year periods.
Paid subscribers to digital-only subscription packages, e-readers and replica editions of The Times and the IHT totaled approximately 699,000 as of the end of the second quarter of 2013, an increase of approximately 23,000 subscribers from the end of the first quarter of 2013 and an increase of more than 35% year-over-year from the end of the second quarter of 2012. Paid digital subscribers to BostonGlobe.com and the Globe's e-readers and replica editions totaled approximately 39,000 as of the end of the second quarter of 2013, an increase of approximately 7,000 subscribers from the end of the first quarter of 2013 and an increase of nearly 70% year-over-year from the end of the second quarter of 2012. While the growth in the number of net new digital-only subscribers moderated in the second quarter of 2013, in total, paid subscribers to our digital products across our Company were approximately 738,000 as of the end of the second quarter of 2013, an increase of nearly 40% year-over-year. Compared with the prior-year period, total advertising revenues decreased 5.8% in the second quarter of 2013, as print and digital advertising revenues declined 6.8% and 2.7%, respectively. In the first six months of 2013, advertising revenues decreased 8.5% compared with the same prior-year period, as print and digital advertising revenues declined 10.0% and 3.3%, respectively. While the decline in advertising revenues moderated in the second quarter relative to the first quarter of 2013, the advertising marketplace remained challenging. Advertising revenues continue to be affected by ongoing secular trends, economic factors and an increasingly complex and fragmented digital advertising marketplace, particularly as the abundance of available inventory and a shift toward advertising networks and exchanges, real-time bidding and other programmatic buying channels to buy audience at scale have led to downward pricing pressure.
Operating costs decreased 3.1% in the second quarter of 2013 compared with the same period in 2012 primarily due to lower compensation and benefits costs and raw materials expense. Operating costs decreased 3.7% in the first six months of 2013 compared with the same prior-year period primarily due to lower compensation and benefits costs, depreciation and amortization expense and raw materials expense. We will continue to be diligent in reducing expenses and managing legacy costs going forward, but will also remain prepared to invest where appropriate, especially in light of our strategic initiatives. As of June 30, 2013, we had cash, cash equivalents and short- and long-term marketable securities of approximately $918 million and total debt and capital lease obligations of approximately $694 million. Accordingly, our cash, cash equivalents and marketable securities exceeded total debt and capital lease obligations by approximately $224 million. Our cash, cash equivalents and marketable securities decreased since the end of 2012, due in part to contributions of approximately $68 million to certain qualified pension plans and income tax payments of approximately $50 million during the first six


months of 2013, offset by cash from our current operations. We expect our cash position to improve with the proceeds from the sale of the New England Media Group and our equity interest in Metro Boston. See "Recent Developments" below. Taking into account an adjustment that reduced our pension benefit obligation, related to an error in the actuarial valuation of accrued benefits, as described below, as well as the recent developments in the interest rate environment, year-to-date asset performance and the pension contributions we made earlier in 2013, we believe that our underfunded status for the qualified plans has improved from the end of 2012 and, as of June 30, 2013, we estimate it to be approximately $150 million on a pre-tax basis. As a result, we do not plan to make any further contributions in 2013 beyond mandatory requirements. Including the $68 million in contributions we made during the first six months of 2013, we expect to make contributions of approximately $75 million in total to our qualified pension plans in 2013.
Our main priorities in 2013 in evaluating our uses of cash will be investing to grow our business, returning to sustainable growth in revenue and profitability and finding opportunities to further de-leverage our balance sheet. Until we have made progress in these areas, we believe it is in the best interests of the Company to maintain a conservative balance sheet and, therefore, we do not believe that this is the appropriate time to restore a dividend.
RECENT DEVELOPMENTS
Strategic Initiatives
In April 2013, we announced plans for certain strategic initiatives, including the next phase in The Times's digital subscription and paid products strategy, The Times's international expansion under a new unified brand, and a renewed emphasis on both video production and brand extensions, which we will roll out in the fourth quarter of 2013 into 2014. We estimate operating profit will be negatively affected by $20 to $25 million in 2013 as a result of these initiatives with a modest contribution to revenues while we make significant investments in the growth initiatives. Investments will largely be for product development and subscriber acquisitions, along with new capabilities in product management, customer management and distribution. We expect that the contribution to operating profit connected to these initiatives will become positive in late 2014 and for the full-year 2015. Prior Period Adjustments
During the second quarter of 2013, we determined that due to an error in the actuarial valuation of accrued benefits for approximately 800 participants primarily in The New York Times Companies Pension Plan, our pension benefit obligation was overstated by approximately $50.4 million as of December 31, 2012 and $50.9 million as of March 31, 2013. The New York Times Companies Pension Plan (which was frozen as of December 31, 2009) provides for certain offsetting credits for plan participants who are also entitled to benefits under another qualified pension plan to which we contribute, primarily from The New York Times Newspaper Guild Pension Plan or the Boston Globe Retirement Plan for employees represented by the Boston Newspaper Guild. We determined that those offsetting credits were not properly recorded in prior interim and annual periods, on our balance sheet from December 30, 2007 through March 31, 2013 and on our income statement from the fiscal year ended December 28, 2008 through the quarter ended March 31, 2013.
In accordance with the provisions of SEC Staff Accounting Bulletin No. 108, we assessed the impact of these adjustments on prior period financial statements and concluded that these errors were not material individually or in the aggregate to any of the prior reporting periods from an income statement and balance sheet perspective. However, the correction of the error in the current period would be considered material and would impact comparisons to prior periods.
Accordingly, we have adjusted our consolidated financial statements for the periods ended December 25, 2011 through March 31, 2013 to correct the errors and will make adjustments for future Form 10-Q and 10-K filings that include financial statements for the periods affected. The adjustment primarily resulted in a reduction in pension expense, other comprehensive income and pension liability in each of the periods presented.
New England Media Group and Our Equity Interest in Metro Boston On August 3, 2013, we entered into an agreement to sell the New England Media Group and our 49% interest in Metro Boston to an acquisition company owned by John W. Henry for $70 million in cash, subject to customary adjustments. We expect the transaction to close in 30 to 60 days. Upon completion of the sale, we expect to record an after-tax loss in the range of $15 to $25 million on the sale. We estimate that the net after-tax proceeds from the sale including a tax benefit will be approximately $70 to $80 million, which we plan to use for general corporate purposes.


We will retain the pension assets and liabilities and postretirement obligations related to employees of the New England Media Group. The transaction will trigger two adjustments in the accounting for these obligations. First, we will record an estimated pre-tax $50 million gain resulting from a remeasurement and curtailment of postretirement benefits, primarily retiree medical obligations. This gain is primarily related to an acceleration of prior service credits from plan amendments announced in prior years, and is due to a reduction in the expected years of future Company service for employees at the New England Media Group. Second, we expect to withdraw from several multi-employer pension plans, which we expect will trigger withdrawal liabilities that we estimate will result in a charge of approximately $10 to $20 million on a pre-tax basis. The actual liability will not be known until each plan completes a final assessment of the withdrawal liability and issues a demand to the Company.

As a result of the pending sale of the New England Media Group and our equity interest in Metro Boston, we are not updating our third-quarter and full year 2013 guidance.


RESULTS OF OPERATIONS

The following table presents our consolidated financial results.

                                           For the Quarters Ended                           For the Six Months Ended
(In thousands)                  June 30, 2013      June 24, 2012     % Change     June 30, 2013      June 24, 2012     % Change
Revenues
Circulation                    $      245,132     $      233,291         5.1            486,921            460,285         5.8
Advertising                           207,454            220,228        (5.8 )   $      398,621     $      435,462        (8.5 )
Other                                  32,777             36,283        (9.7 )           65,754             69,487        (5.4 )
Total revenues                        485,363            489,802        (0.9 )          951,296            965,234        (1.4 )
Operating costs
Production costs:
Raw materials                          28,854             33,596       (14.1 )           58,947             66,959       (12.0 )
Wages and benefits                    106,090            107,153        (1.0 )          215,219            215,786        (0.3 )
Other                                  57,452             61,829        (7.1 )          114,496            122,540        (6.6 )
Total production costs                192,396            202,578        (5.0 )          388,662            405,285        (4.1 )
Selling, general and
administrative costs                  217,928            220,236        (1.0 )          442,131            449,360        (1.6 )
Depreciation and
amortization                           21,608             22,920        (5.7 )           43,408             53,036       (18.2 )
Total operating costs                 431,932            445,734        (3.1 )          874,201            907,681        (3.7 )
Operating profit                       53,431             44,068        21.2             77,095             57,553        34.0
Gain on sale of investment                  -             37,797         N/A                  -             55,645         N/A
Impairment of investments                   -                  -         N/A                  -              4,900         N/A
(Loss)/income from joint
ventures                                 (459 )            1,079           *             (3,399 )            1,050           *
Interest expense, net                  14,646             15,464        (5.3 )           28,720             30,916        (7.1 )
Income from continuing
operations before income
taxes                                  38,326             67,480       (43.2 )           44,976             78,432       (42.7 )
Income tax expense                     18,189             29,440       (38.2 )           21,516             31,233       (31.1 )
Income from continuing
operations                             20,137             38,040       (47.1 )           23,460             47,199       (50.3 )
Loss from discontinued
operations, net of income
taxes                                       -           (125,689 )       N/A                  -            (92,298 )       N/A
Net income/(loss)                      20,137            (87,649 )         *             23,460            (45,099 )         *
Net (income)/loss
attributable to the
noncontrolling interest                    (6 )               27           *                243                 80           *
Net income/(loss)
attributable to The New York
Times Company common
stockholders                   $       20,131     $      (87,622 )         *     $       23,703     $      (45,019 )         *


* Represents an increase or decrease in excess of 100%.


Revenues

Circulation, advertising and other revenues were as follows:

                                        For the Quarters Ended                 For the Six Months Ended
                                  June 30,      June 24,                  June 30,      June 24,
(In thousands)                      2013          2012       % Change       2013          2012       % Change
The New York Times Media Group
Circulation                      $ 206,965     $ 194,208         6.6     $ 412,447     $ 384,175         7.4
Advertising                        163,040       171,129        (4.7 )     316,578       344,488        (8.1 )
Other                               20,953        22,503        (6.9 )      42,608        43,226        (1.4 )
Total                            $ 390,958     $ 387,840         0.8     $ 771,633     $ 771,889           -
New England Media Group
Circulation                      $  38,167     $  39,083        (2.3 )   $  74,474     $  76,110        (2.1 )
Advertising                         44,414        49,099        (9.5 )      82,043        90,974        (9.8 )
Other                               11,824        13,780       (14.2 )      23,146        26,261       (11.9 )
Total                            $  94,405     $ 101,962        (7.4 )   $ 179,663     $ 193,345        (7.1 )
Total Company
Circulation                      $ 245,132     $ 233,291         5.1     $ 486,921     $ 460,285         5.8
Advertising                        207,454       220,228        (5.8 )     398,621       435,462        (8.5 )
Other                               32,777        36,283        (9.7 )      65,754        69,487        (5.4 )
Total                            $ 485,363     $ 489,802        (0.9 )   $ 951,296     $ 965,234        (1.4 )

Circulation Revenues

Circulation revenues are based on the number of copies of the printed newspaper (through home-delivery subscriptions and single-copy and bulk sales) and digital subscriptions sold and the rates charged to the respective customers. Total circulation revenues consist of revenues from our print and digital products, including digital subscription packages on NYTimes.com and across other digital platforms, BostonGlobe.com and digital subscriptions packages at the IHT.

Circulation revenues increased in the second quarter and first six months of 2013 compared with the same prior-year periods mainly due to digital subscription initiatives and the increase in print circulation prices at the Times and the Globe in 2013, offset by a decline in print copies sold. Revenues from our digital-only subscription packages, e-readers and replica editions were $38.3 million in the second quarter of 2013 and $75.1 million in the first six months of 2013, an increase of 44.1% and 51.7%, respectively, compared with prior-year periods.

Advertising Revenues
Advertising revenues are primarily determined by the volume, rate and mix of advertisements. During the second quarter and first six months of 2013, advertising revenues remained under pressure due to ongoing secular trends and economic factors. In addition, the increasingly complex and fragmented digital advertising marketplace contributed to declines in digital advertising revenues. The market for standard Web-based digital display advertising continues to experience challenges due to the abundance of available advertising inventory and a shift toward digital advertising networks and exchanges, real-time bidding and other programmatic buying channels that allow advertisers to buy audience at scale, causing downward pricing pressure.
Total advertising revenues decreased 5.8% in the second quarter of 2013 and 8.5% in the first six months of 2013 compared with the same prior-year periods due to lower print and digital advertising revenues across most advertising categories. Print advertising revenues, which represented approximately 75% of total advertising revenues, declined 6.8% in the second quarter of 2013 and 10.0% in the first six months of 2013, mainly due to lower national and retail advertising revenues, compared with the same prior-year periods. Digital advertising revenues declined 2.7% in the second quarter of 2013 and 3.3% in the first six months of 2013, primarily due to declines in the real estate and help-wanted classified advertising categories and in national, compared with the same prior-year periods. During the second quarter of 2013, total


advertising revenues decreased 2.3% in April, 12.0% in May and 3.5% in June compared with the same prior-year periods in 2012.
Advertising revenues (print and digital) by category were as follows:

                       For the Quarters Ended               For the Six Months Ended
                  June 30,     June 24,                 June 30,     June 24,
(In thousands)      2013         2012      % Change       2013         2012      % Change
National         $ 142,284    $ 147,486       (3.5 )   $ 272,389    $ 292,883       (7.0 )
Retail              31,332       35,971      (12.9 )      60,494       70,272      (13.9 )
Classified          27,869       30,484       (8.6 )      54,870       60,777       (9.7 )
Other                5,969        6,287       (5.1 )      10,868       11,530       (5.7 )
Total Company    $ 207,454    $ 220,228       (5.8 )   $ 398,621    $ 435,462       (8.5 )

Below is a percentage breakdown of advertising revenues in the first six months of 2013 (print and digital) by division.

                                                                    Classified
                                        Retail                                                                       Other
                                         and         Help-       Real       Auto-                    Total        Advertising
                          National     Preprint     Wanted      Estate      motive      Other      Classified      Revenues      Total
The New York Times
Media Group                  78 %         12 %         2 %         4 %         - %        3 %           9 %             1 %       100 %
New England Media
Group                        32 %         28 %         6 %         5 %        12 %        7 %          30 %            10 %       100 %
Total Company                68 %         15 %         3 %         4 %         3 %        4 %          14 %             3 %       100 %

The New York Times Media Group

Total advertising revenues decreased in the second quarter and the first six months of 2013 compared with the same periods in 2012 due to lower print and digital advertising revenues. Print advertising revenues were affected by declines in advertiser spending in several advertising categories, reflecting the secular transformation of our industry and the uncertain economic environment. These market factors, in addition to an increasingly competitive landscape, also contributed to reduced spending on digital platforms and pricing pressure in digital advertising. Digital advertising revenues declined primarily in the real estate and help-wanted classified advertising categories, offset in part by higher national display advertising revenues during the second quarter of 2013.

During the second quarter and first six months of 2013, advertising revenues were affected by declines in total national, retail and classified advertising revenues. In the second quarter of 2013, total national advertising revenues decreased mainly driven by declines in the corporate, advocacy and studio entertainment categories, partly offset by growth in the luxury category. During the first six months of 2013, national advertising revenues decreased mainly driven by declines in studio entertainment, financial services and hotels, partly offset by growth in the luxury category. The uncertain national and local economic conditions continued to negatively affect total retail advertising revenues, as retailers cut spending mainly in the department stores category. Secular changes in our industry coupled with the uncertain economic environment contributed to declines in total classified advertising revenues, primarily in the real estate and help-wanted categories.

New England Media Group

Total advertising revenues declined in the second quarter and first six months of 2013 compared with the same periods in 2012 due to declines in both print and digital advertising revenues. The decline in print advertising revenues was driven by lower advertising in most categories, reflecting secular forces in our industry and the uncertain national and local economic environment. The decrease in digital advertising revenues was mainly due to reduced spending in the national, retail and real estate classified advertising revenues, partially offset by higher automotive classified advertising revenues.

During the second quarter and the first six months of 2013, total advertising revenues declined primarily due to lower national, retail and classified advertising revenues. Total national advertising revenues decreased primarily due to declines in the corporate and travel categories. The uncertain national and local economic conditions continued to


negatively affect total retail advertising revenues, as retailers cut spending mainly in the department stores category. Secular changes in our industry, coupled with the uncertain economic environment, contributed to declines in total classified advertising revenues, primarily in the real estate and other categories.

Other Revenues

Other revenues primarily consist of revenues from news services/syndication, commercial printing and distribution, rental income, digital archives and direct mail advertising services. Other revenues decreased in the second quarter and first six months of 2013 compared with the same periods in 2012 mainly due to our exit from the education business at the end of 2012 and decreases in commercial printing and distribution revenues.

Operating Costs

Operating costs were as follows:
                                   For the Quarters Ended                 For the Six Months Ended
                             June 30,      June 24,                  June 30,      June 24,
(In thousands)                 2013          2012       % Change       2013          2012       % Change
Production costs:
Raw materials               $  28,854     $  33,596       (14.1 )   $  58,947     $  66,959       (12.0 )
Wages and benefits            106,090       107,153        (1.0 )     215,219       215,786        (0.3 )
Other                          57,452        61,829        (7.1 )     114,496       122,540        (6.6 )
Total production costs        192,396       202,578        (5.0 )     388,662       405,285        (4.1 )
Selling, general and
administrative costs          217,928       220,236        (1.0 )     442,131       449,360        (1.6 )
Depreciation and
amortization                   21,608        22,920        (5.7 )      43,408        53,036       (18.2 )
Total operating costs       $ 431,932     $ 445,734        (3.1 )   $ 874,201     $ 907,681        (3.7 )

Production Costs

Production costs decreased in the second quarter of 2013 compared with the same period in 2012 mainly due to lower raw materials expense (approximately $5 million), primarily newsprint, benefits expense (approximately $2 million)and outside printing costs (approximately $2 million). Newsprint expense declined 14.9% in the second quarter of 2013 compared with the same period in 2012, with 9.9% from lower consumption and 5.1% from lower pricing. Benefits expense was lower mainly due to a decline in pension costs. Cost-savings from contract negotiations primarily contributed to the decline in outside printing costs.

Production costs decreased in the first six months of 2013 compared with the same period in 2012 primarily due to lower raw materials expense (approximately $8 million), primarily newsprint, benefits expense (approximately $4 million), outside printing costs (approximately $4 million) and various other costs, offset in part by higher compensation costs (approximately $3 million) due to new hires and annual salary increases. Newsprint expense declined 13.1% in the first six months of 2013 compared with the same period in 2012, with 8.7% from lower consumption and 4.4% from lower pricing. Benefits expense was lower mainly due to a decline in pension costs. Cost-savings from contract negotiations primarily contributed to the decline in outside printing costs.

Selling, General and Administrative Costs . . .

  Add NYT to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for NYT - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.