Business News

The New York Times Company Reports 2008 First-Quarter Results

Monday 21. April 2008 - The New York Times Company announced today first-quarter 2008 earnings per share (EPS) from continuing operations of $.00, including a $.07 per share non-cash charge for the write-down of assets and a $.03 per share favorable tax adjustment, compared with EPS of $.14 in the first quarter of 2007, which included an unfavorable tax adjustment of $.03 per share. Excluding the charge and the adjustments, EPS from continuing operations was $.04 in the first quarter of 2008 compared with $.17 in the first quarter of 2007.

First-quarter 2008 operating profit was $6.2 million compared with $54.5 million in the first quarter of 2007. Excluding depreciation and amortization and the non-cash charge for the write-down of assets, operating profit was $66.4 million compared with $98.9 million in the first quarter of 2007.
“Advertising revenues decreased in the quarter as weaker economic conditions compounded the effects of secular change in our business,” said Janet L. Robinson, president and CEO. “While this is a challenging time for the media industry, we are diligently managing our business for the long term. Continuing our transition into the digital era, online advertising revenues grew 16 percent, due in part to new offerings and ad formats. At the same time, circulation revenues also showed gains in the quarter, up approximately 2 percent.
“Our disciplined approach to expense management resulted in a 1 percent decrease in operating costs. For the fifth consecutive quarter, operating costs, excluding depreciation and amortization, declined. As we have said before, we expect to achieve cost savings of approximately $130 million in 2008.
“In April, the rate of decline in advertising revenues is expected to be in the mid-single digits. This is an improvement from our performance in March and is due mainly to shifts in the timing of Easter and in the publication of KEY Magazine. During the balance of the year, we plan to stay focused on what we do best – producing high-quality journalism, introducing new products in print and online, and stringently managing our costs.”
Comparisons
The first-quarter 2008 results included the following special items:
— A non-cash charge for the write-down of assets for a systems project, which amounted to $18.3 million ($10.4 million after tax or $.07 per share). To decrease capital spending, the Company reduced the scope of a major advertising and circulation project, which resulted in the write-down of previously capitalized costs.

— A favorable tax reserve adjustment of $4.6 million ($.03 per share).
The first-quarter 2007 results included the following special item:
— An unfavorable tax adjustment of $4.5 million ($.03 per share) primarily from a change in New York state tax law that was effective January 1, 2007.
All quarterly comparisons exclude the results of the Broadcast Media Group, which was sold in May 2007. This release includes non-GAAP financial measures, and the exhibits include a discussion of management’s use of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.
First-Quarter Results from Continuing Operations

Revenues
Total revenues decreased 4.9 percent to $747.9 million from $786.0 million. Advertising revenues decreased 9.2 percent. Circulation revenues increased 1.9 percent and other revenues rose 7.2 percent.
Operating Costs
Operating costs decreased 1.1 percent to $723.3 million from $731.5 million. Depreciation and amortization declined 5.6 percent to $41.9 million from $44.4 million, mainly because of lower accelerated depreciation expense for the assets at the Edison, N.J., printing facility, which was closed last month.
Excluding depreciation and amortization, operating costs declined 0.8 percent to $681.4 million from $687.1 million mainly due to lower newsprint expense, outside printing and distribution costs, and benefits expense. The cost decline was partially offset by increased stock-based compensation, buyouts and the effect of foreign currency translation because of the Euro-dollar relationship.
Newsprint expense for the first quarter decreased 23.4 percent, with 17.0 percent of the decline resulting from lower consumption and 6.4 percent from lower prices.
Stock-based compensation expense increased $6.2 million in the first quarter primarily because of a shift in the timing of the Company’s annual equity awards. Historically equity awards were made in December of each year. In early 2007, the Board elected to make annual equity awards in February of each year, beginning in February 2008, to better enable it to evaluate performance during the most recently completed fiscal year.
Buyout costs totaled $11.2 million in the first quarter of 2008 and $7.8 million in the same period a year earlier.
While foreign currency translation had a favorable effect on revenues, it increased expenses by $2.4 million in the quarter.
First-Quarter Business Segment Results

News Media Group
Total News Media Group revenues decreased 5.7 percent mainly as a result of lower print advertising.
Advertising revenues in the quarter decreased 10.6 percent due to lower print advertising.
Circulation revenues increased 1.9 percent primarily because of higher home-delivery and newsstand prices. The New York Times increased its prices in the third quarter of 2007. The Globe increased its newsstand price in February of 2008.
Other revenues rose 6.0 percent largely because of rental income from the lease of five floors in our new headquarters, and increased commercial printing. The increase was partially offset by lower subscription revenues for TimesSelect, an online product offering that was discontinued in September 2007.
Total News Media Group operating costs decreased 2.2 percent to $688.1 million from $703.8 million. Excluding depreciation and amortization, operating costs declined 1.9 percent to $651.2 million from $664.1 million mainly due to lower newsprint expense, outside printing and distribution and promotions costs offset in part by increased staff reduction costs and stock-based compensation expense.
Operating profit decreased to $13.3 million from $59.6 million. Operating profit before depreciation and amortization and excluding the non-cash charge for the write-down of assets was $68.5 million compared with $99.4 million in 2007, mainly due to lower print advertising.
About Group
Total About Group revenues increased 25.0 percent to $28.2 million from $22.5 million due to higher cost-per-click advertising and acquisitions.
Total About Group operating costs increased 31.2 percent to $18.6 million from $14.2 million. Excluding depreciation and amortization, operating costs increased 40.9 percent to $15.6 million from $11.1 million because of the acquisition of ConsumerSearch, Inc. in May 2007 and investments in new revenue initiatives that resulted in higher content and compensation costs.
Operating profit grew 14.3 percent to $9.5 million from $8.3 million. Operating profit before depreciation and amortization grew 9.5 percent to $12.6 million from $11.5 million.
Other Financial Data

Internet Revenues
Total Internet revenues grew 11.6 percent to $82.9 million from $74.3 million. Internet advertising revenues increased 16.0 percent in the quarter. Internet businesses include our digital archives, NYTimes.com, Boston.com, About.com and the Web sites of our other newspaper properties. In total, Internet businesses accounted for 11.1 percent of our revenues in the 2008 first quarter versus 9.5 percent in the first quarter of 2007.
Joint Ventures
Net loss from joint ventures was $1.8 million compared with a net loss of $2.2 million in the first quarter of 2007. The improvement was mainly due to better performance at a paper mill in which the Company has an investment.
Interest Expense-net
Interest expense-net increased in the first quarter to $11.7 million from $11.3 million. The Company had lower interest expense primarily due to reduced debt, which was more than offset by a decrease in interest income.
Income Taxes
Income taxes in the quarter benefited from a $4.6 million reserve adjustment for uncertain tax positions. In the first quarter of 2007, the Company recorded an unfavorable tax adjustment of $4.5 million from a change in New York state tax law that was effective January 1, 2007.
Cash and Total Debt
At the end of the quarter, our cash and cash equivalents were approximately $47 million and total debt was approximately $1.1 billion.
Capital Expenditures
In the first quarter, total capital expenditures were approximately $33 million.
Expectations
The following expectations are for 2008 with the exception of cost savings and productivity gains, which are for 2008 and 2009.
— Cost savings and productivity gains – The Company believes that it can achieve a reduction in costs from its year-end 2007 cash cost base of a total of approximately $230 million in 2008 and 2009, excluding the effects of inflation, buyout costs and one-time costs. About $130 million of these savings are expected in 2008.

— Depreciation and amortization – $160 to $170 million, which includes approximately $5 million of accelerated depreciation expense in the first quarter of 2008 associated with the New York area plant consolidation project. Depreciation for the new headquarters building is expected to be $8 million per quarter.

— Income from joint ventures – $16 to $20 million. Previous guidance of $12 to $16 million was increased mainly due to the expectation of better operating results at the paper mills in which the Company has an interest.

— Interest expense – $50 to $60 million.

— Capital expenditures – $150 to $165 million, including approximately $42 million for the consolidation of the Company’s New York area plants and about $22 million for its new headquarters. The top end of the range for capital expenditures was lowered to $165 million from $170 million as a result of the reduction in scope of a major systems project.

— Income tax rate – 40% to 43%. There are many factors that can result in significant volatility quarter to quarter.