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 7-Nov-2013All Recent SEC Filings

Show all filings for NEW YORK TIMES CO

Form 10-Q for NEW YORK TIMES CO


7-Nov-2013

Quarterly Report


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

We are a global media company that includes newspapers, digital businesses, investments in paper mills and other investments. Our current businesses include The New York Times ("The Times"), the International New York Times, NYTimes.com, international.nytimes.com and related businesses. We generate revenues principally from circulation and advertising. Other revenues primarily consist of revenues from news services/syndication, rental income and digital archives. 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 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 third quarter and first nine months of 2013, total revenues increased 1.8% and 0.5%, respectively, compared with the same prior-year periods, driven primarily by growth in circulation revenues, partially offset by declines in advertising revenues.
Compared with the prior-year periods, circulation revenues increased 4.8% in the third quarter and 6.5% in the first nine months of 2013, mainly as digital subscription initiatives and the increase in print circulation prices at The Times in early 2013 offset a decline in print copies sold. Revenues from our digital-only subscription packages, e-readers and replica editions increased 29.0% in the third quarter of 2013 and 42.4% in the first nine months of 2013 compared with prior-year periods. We expect circulation revenues to increase in the low single digits in the fourth quarter of 2013 compared with the fourth quarter of 2012 (excluding the impact of the additional week in the fourth quarter of 2012), as we expect to see continued benefit from our digital subscription initiatives as well as from the 2013 print price increases at The Times.
Paid subscribers to digital-only subscription packages, e-readers and replica editions of The Times and the International Herald Tribune totaled approximately 727,000 as of the end of the third quarter of 2013, an increase of approximately 28,000 subscribers from the end of the second quarter of 2013 and an increase of more than 28% year-over-year from the end of the third quarter of 2012. We expect the number of net new additions of digital-only subscribers in the fourth quarter of 2013 to be approximately in line with the third quarter of 2013. Compared with the prior-year period, total advertising revenues decreased 2.0% in the third quarter of 2013, as print and digital advertising revenues declined 1.6% and 3.4%, respectively. In the first nine months of 2013, advertising revenues decreased 6.3% compared with the same prior-year period, as print and digital advertising revenues declined 7.3% and 3.2%, respectively. While the decline in total advertising revenues continued to moderate in the third quarter relative to the second quarter of 2013 due to a sequential improvement in print advertising revenue trends, 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. During the third quarter of 2013, total advertising revenues decreased 15.0% in July, and increased 0.2% in August and 6.7% in September, compared with the same prior-year periods in 2012. We expect advertising revenue trends to remain subject to significant month-to-month volatility and to decrease in the low single digits in the fourth quarter of 2013 compared with the fourth quarter of 2012 (excluding the impact of the additional week in the fourth quarter of 2012).
Operating costs decreased 1.1% in the third quarter of 2013 compared with the same period in 2012 primarily due to lower pension expense, raw materials expense, distribution costs and outside printing costs, offset in part by higher professional fees. Operating costs decreased 1.8% in the first nine months of 2013 compared with the same prior-year period primarily due to lower compensation and benefits costs, and raw materials expense, offset in part by higher professional fees. 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. We expect operating costs to increase in the low single digits in the fourth quarter of 2013 compared with the fourth quarter of 2012 (including the impact of the additional week in the fourth quarter of 2012), as investments around our strategic growth initiatives accelerate.
As of September 29, 2013, we had cash, cash equivalents and short- and long-term marketable securities of approximately $938 million and total debt and capital lease obligations of approximately $683 million. Accordingly, our cash, cash equivalents and marketable securities exceeded total debt and capital lease obligations by approximately $255 million. Our cash, cash equivalents and marketable securities decreased since the end of 2012, due in part to contributions of approximately $71 million to certain qualified pension plans and income tax payments of approximately $50 million during the first nine 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 that was completed in the fourth quarter of 2013. See "Recent Developments" below.
In September 2013, we announced the initiation of a quarterly dividend in the fourth quarter of $0.04 per share on our Class A and Class B common stock. We believe this allows us to return capital to our stockholders while also maintaining the financial flexibility necessary to continue to invest in our transformation and growth initiatives. Given current conditions and the expectation of continued volatility in advertising revenue, as well as the early stage of our growth strategy, we believe it is in the best interests of the Company to maintain a conservative balance sheet and a prudent view of our cash flow going forward.
We do not plan to make any further contributions to our qualified pension plans in 2013 beyond mandatory requirements. Including the $71 million in contributions we made during the first nine months of 2013, we expect to make contributions of approximately $75 million in total to our qualified pension plans in 2013.
We expect the following on a pre-tax basis in 2013:
Results from joint ventures: loss of $2 to $4 million,

Depreciation and amortization: $75 to $80 million,

Interest expense, net: $55 to $60 million, and

Capital expenditures: $15 to $20 million.

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. We launched the International New York Times on October 15, 2013, and we plan to execute on the other strategic initiatives in 2014. We estimate that our strategic initiatives will negatively affect our operating profit by $10 million in the fourth quarter of 2013 and $15 to $20 million for the full year 2013 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.
Sale of the New England Media Group
On October 24, 2013, we completed the sale of substantially all of the assets and operating liabilities of the New England Media Group, consisting of The Boston Globe, BostonGlobe.com, Boston.com, Worcester Telegram & Gazette, Telegram.com and related properties, for approximately $70 million in cash, subject to customary adjustments. We expect the net after-tax proceeds from the sale, including a tax benefit, will be approximately $75 million.
We retained the pension assets and liabilities (including multiemployer pension liabilities) and postretirement obligations related to employees of the New England Media Group. The transaction will trigger an adjustment in the accounting for these obligations. In the fourth quarter of 2013, 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.
In the third quarter of 2013, we recorded an impairment in the amount of $34.3 million to reflect assets held for sale at fair value less cost to sell. We triggered complete or partial withdrawal obligations under several multiemployer pension plans. Accordingly, we recorded a pension withdrawal expense estimated to be approximately $8 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 us.
The results of operations of the New England Media Group have been classified as discontinued operations for all periods presented. Pension Withdrawal Expense

In the third quarter of 2013, we recorded a $6.2 million charge related to a partial withdrawal obligation under a multiemployer pension plan.


RESULTS OF OPERATIONS

The following table presents our consolidated financial results.

                                        For the Quarters Ended                     For the Nine Months Ended
                               September 29,   September 23,               September 29,   September 23,
(In thousands)                     2013            2012        % Change        2013            2012        % Change
Revenues
Circulation                    $  204,156      $  194,739          4.8     $  616,603      $  578,914          6.5
Advertising                       138,018         140,880         (2.0 )      454,595         485,368         (6.3 )
Other                              19,564          19,718         (0.8 )       62,172          62,945         (1.2 )
Total revenues                    361,738         355,337          1.8      1,133,370       1,127,227          0.5
Operating costs
Production costs:
Raw materials                      21,064          24,343        (13.5 )       66,913          75,963        (11.9 )
Wages and benefits                 82,387          80,696          2.1        247,199         242,742          1.8
Other                              49,144          52,331         (6.1 )      148,286         155,173         (4.4 )
Total production costs            152,595         157,370         (3.0 )      462,398         473,878         (2.4 )
Selling, general and
administrative costs              169,824         169,459          0.2        519,610         524,611         (1.0 )
Depreciation and
amortization                       20,293          19,594          3.6         57,981          60,488         (4.1 )
Total operating costs             342,712         346,423         (1.1 )    1,039,989       1,058,977         (1.8 )
Pension withdrawal expense          6,171               -          N/A          6,171               -          N/A
Operating profit                   12,855           8,914         44.2         87,210          68,250         27.8
Gain on sale of investment              -               -          N/A              -          55,645            *
Impairment of investments               -             600            *              -           5,500            *
(Loss)/income from joint
ventures                             (123 )         1,010            *         (3,398 )         2,089            *
Interest expense, net              15,454          15,490         (0.2 )       44,169          46,406         (4.8 )
(Loss)/income from
continuing operations before
income taxes                       (2,722 )        (6,166 )      (55.9 )       39,643          74,078        (46.5 )
Income tax expense/(benefit)        2,578          (3,187 )          *         21,473          28,446        (24.5 )
(Loss)/income from
continuing operations              (5,300 )        (2,979 )       77.9         18,170          45,632        (60.2 )
(Loss)/income from
discontinued operations, net
of income taxes                   (18,987 )         5,703            *        (18,995 )       (88,007 )      (78.4 )
Net (loss)/income                 (24,287 )         2,724            *           (825 )       (42,375 )      (98.1 )
Net loss attributable to the
noncontrolling interest                61              21            *            304             101            *
Net (loss)/income
attributable to The New York
Times Company common
stockholders                   $  (24,226 )    $    2,745            *     $     (521 )    $  (42,274 )      (98.8 )


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


Revenues

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, and digital subscriptions packages at the International Herald Tribune.

Circulation revenues increased in the third quarter and first nine 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 in 2013, offset by a decline in print copies sold. Revenues from our digital-only subscription packages, e-readers and replica editions were $37.7 million in the third quarter of 2013 and $110.0 million in the first nine months of 2013, an increase of 29.0% and 42.4%, respectively, compared with prior-year periods.

Advertising Revenues
Advertising revenues are primarily determined by the volume, rate and mix of advertisements. During the third quarter and first nine 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.
Advertising revenues (print and digital) by category were as follows:

                                          For the Quarters Ended                             For the Nine Months Ended
                               September 29,       September 23,                   September 29,        September 23,
(In thousands)                     2013                2012          % Change           2013                2012          % Change
National                     $       108,920     $       107,034         1.8     $        355,419     $       371,597        (4.4 )
Retail                                15,186              17,874       (15.0 )             52,612              61,665       (14.7 )
Classified                            13,085              14,836       (11.8 )             43,226              48,541       (10.9 )
Other                                    827               1,136       (27.2 )              3,338               3,565        (6.4 )
Total Company                $       138,018     $       140,880        (2.0 )   $        454,595     $       485,368        (6.3 )

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

                                       Classified
               Retail                                                               Other
                and        Help-     Real      Auto-                 Total       Advertising
 National     Preprint    Wanted    Estate    motive     Other    Classified      Revenues      Total
    78 %         12 %       2 %       4 %       - %       3 %         9 %            1 %         100 %

Total advertising revenues decreased 2.0% in the third quarter of 2013 and 6.3% in the first nine 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 76% of total advertising revenues, declined 1.6% in the third quarter of 2013 and 7.3% in the first nine months of 2013. The decline in print advertising revenue in the third quarter of 2013 was mainly due to declines in spending in the retail and classified advertising categories, offset by higher spending in the national advertising category, compared with the same prior-year period. The decline in print advertising revenue in first nine months of 2013 was mainly due to lower spending in the national and retail advertising categories, compared with the same prior-year period, 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 3.4% in the


third quarter of 2013 and 3.2% in the first nine months of 2013, primarily due to declines in the real estate classified advertising and national display advertising categories, compared with the same prior-year periods.
In the third quarter of 2013, advertising revenues were affected by declines in total retail and classified advertising revenues, offset in part by higher national advertising revenues. In the first nine months of 2013, advertising revenues were affected by declines in total national, retail and classified advertising revenues. In the third quarter of 2013, total national advertising revenues increased mainly driven by growth in the media, luxury and corporate categories, partly offset by declines in the hotel and studio entertainment categories. During the first nine months of 2013, national advertising revenues decreased mainly driven by declines in the studio entertainment, financial services and hotel categories, 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 and fashion jewelry categories. 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 automotive categories in the third quarter of 2013 and help-wanted and real estate categories in the first nine months of 2013.

Other Revenues

Other revenues primarily consist of revenues from news services/syndication, rental income and digital archives. Other revenues decreased in the third quarter and first nine months of 2013 compared with the same periods in 2012 mainly due to our exit from the education business at the end of 2012, offset in part by increases in digital archives revenues.

Operating Costs

Operating costs were as follows:
                                            For the Quarters Ended                             For the Nine Months Ended
                                 September 29,       September 23,                   September 29,       September 23,
(In thousands)                       2013                2012          % Change          2013                2012          % Change
Production costs:
Raw materials                  $        21,064     $        24,343       (13.5 )   $        66,913     $        75,963       (11.9 )
Wages and benefits                      82,387              80,696         2.1             247,199             242,742         1.8
Other                                   49,144              52,331        (6.1 )           148,286             155,173        (4.4 )
Total production costs                 152,595             157,370        (3.0 )           462,398             473,878        (2.4 )
Selling, general and
administrative costs                   169,824             169,459         0.2             519,610             524,611        (1.0 )
Depreciation and
amortization                            20,293              19,594         3.6              57,981              60,488        (4.1 )
Total operating costs          $       342,712     $       346,423        (1.1 )   $     1,039,989     $     1,058,977        (1.8 )

Production Costs

Production costs decreased in the third quarter of 2013 compared with the same period in 2012 mainly due to lower raw materials expense (approximately $3 million), primarily newsprint, outside printing costs (approximately $2 million) and benefits expense (approximately $1 million), offset in part by higher compensation costs (approximately $3 million) due to new hires and annual salary increases. Newsprint expense declined 14.6% in the third quarter of 2013 compared with the same period in 2012, with 8.0% from lower pricing and 6.7% from lower consumption. Cost savings from contract negotiations primarily contributed to the decline in outside printing costs. Benefits expense was lower mainly due to a decline in pension expense.

Production costs decreased in the first nine months of 2013 compared with the same period in 2012 primarily due to lower raw materials expense (approximately $9 million), primarily newsprint, outside printing costs (approximately $6 million), benefits expense (approximately $2 million) and various other costs, offset in part by higher compensation costs (approximately $6 million) due to new hires and annual salary increases. Newsprint expense declined 13.7% in the first nine months of 2013 compared with the same period in 2012, with 8.1% from lower consumption and 5.7% from lower pricing. Cost savings from contract negotiations primarily contributed to the decline in outside printing costs. Benefits expense was lower mainly due to a decline in pension expense.


Selling, General and Administrative Costs Selling, general and administrative costs increased in the third quarter of 2013 compared with the same period in 2012 primarily due to higher professional fees (approximately $4 million), from an increased use of consulting services, benefits expense (approximately $2 million) and various other costs (approximately $3 million), offset in part by lower distribution costs (approximately $3 million). Distribution costs decreased mainly due to volume declines and transportation efficiency.

Selling, general and administrative costs decreased in the first nine months of 2013 compared with the same prior-year period primarily due to lower benefits expense (approximately $6 million), compensation costs (approximately $7 million) and distribution costs (approximately $4 million), offset in part by higher professional fees (approximately $8 million) from an increased use of consulting services, and various other costs. Benefits expense was lower mainly due to a decline in pension expense. Compensation costs decreased mainly due to lower salary and staffing levels. Lower distribution costs mainly resulted from a decline in print copies sold.

Other Items

Pension Withdrawal Expense

In the third quarter of 2013, we recorded a $6.2 million charge related to a partial withdrawal obligation under a multiemployer pension plan.

Non-Operating Items

Joint Ventures

Loss from joint ventures was $0.1 million in the third quarter of 2013 compared with income from joint ventures of $1.0 million in the third quarter of 2012 primarily due to lower results for the paper mills in which we have an investment.

Loss from joint ventures was $3.4 million in the first nine months of 2013 compared with income from joint ventures of $2.1 million in the same period of 2012 primarily due to lower results for the paper mills in which we have an investment.

Gain on Sale of Investment

In the second quarter of 2012, we sold 210 units in Fenway Sports Group, resulting in a pre-tax gain of $37.8 million. In the first quarter of 2012, we sold 100 of our units in Fenway Sports Group, resulting in a pre-tax gain of $17.8 million. The sales resulted in a pre-tax gain of $55.6 million in the first nine months of 2012.

Impairment of Investments

In the first nine months of 2012, we recorded a non-cash impairment charge of $5.5 million to reduce the carrying value of certain investments to fair value. The impairment charge was primarily related to our investment in Ongo Inc., a consumer service for reading and sharing digital news and information from multiple publishers.

Interest Expense, Net

"Interest expense, net" in our Condensed Consolidated Statements of Operations
was as follows:
                                             For the Quarters Ended               For the Nine Months Ended
                                        September 29,       September 23,     September 29,       September 23,
(In thousands)                              2013                2012               2013                2012
Cash interest expense                 $       14,494       $      14,453     $      41,635       $       43,249
Non-cash amortization of discount
on debt                                        1,355               1,129             3,622                3,386
Capitalized interest                               -                   -                 -                  (14 )
Interest income                                 (395 )               (92 )          (1,088 )               (215 )
Total interest expense, net           $       15,454       $      15,490     $      44,169       $       46,406


"Interest expense, net" decreased in the third quarter and first nine months of 2013 compared with the same prior-year periods mainly due to the payment at maturity on September 26, 2012, of all $75.0 million outstanding aggregate principal amount of our 4.610% senior notes, offset in part by a charge related to the repurchase of $12.4 million principal amount of our 6.625% senior notes due December 15, 2016 ("6.625% Notes") in the third quarter of 2013 and $17.4 million principal amount of our 6.625% Notes in the first nine months of 2013.

Income Taxes
We had an income tax expense of $2.6 million on a pre-tax loss of $2.7 million in the third quarter of 2013 and income tax expense of $21.5 million (effective tax rate of 54.2%) in the first nine months of 2013. Included in the tax expense . . .

  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.