Newspaper & Mailroom

The New York Times Company Reports 2013 Third-Quarter Results

Tuesday 05. November 2013 - The New York Times Company (NYSE:NYT) announced an operating profit of $12.9 million in the third quarter of 2013 compared with $8.9 million in the same period of 2012. Excluding depreciation, amortization, severance and a special item, operating profit rose 35.1 percent to $39.9 million from $29.6 million in the third quarter of 2012.

There was a third-quarter 2013 diluted loss per share from continuing operations of $.03 compared with a loss of $.02 in the same period in 2012. Excluding severance and a special item, there was a diluted loss per share from continuing operations of $.01 in the third quarter of 2013 compared with a loss of $.02 in the third quarter of 2012.
Total revenues increased 1.8 percent in the third quarter of 2013, with circulation revenues up 4.8 percent. In the third quarter, the Company added more net digital subscribers than in the second quarter of 2013. The total number of digital subscribers at the end of the third quarter was approximately 727,000, a 28 percent year-on-year increase. Total advertising revenues declined 2.0 percent in the quarter – the lowest quarterly year-on-year decline in advertising in three years.
“The third quarter of 2013 was a strong one for the Company,” said Mark Thompson , president and chief executive officer. “We increased our revenue, decreased our costs and, as a result, significantly increased our operating profit compared with the same quarter last year.
“We also made significant progress on our strategic initiatives. But we recognize that, despite these positive developments, we still have a great deal of work to do to transform our business model and to achieve our goal of long-term sustainable growth.
“In the third quarter we also announced the initiation of a 4-cent quarterly dividend. This allows us to return capital to our shareholders while maintaining a prudent view of both our balance sheet and free cash flow.”
Sale of New England Media Group – Discontinued Operations
On October 24, 2013, the Company completed the sale of its New England Media Group (NEMG) – 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. The Company recorded an impairment in the third quarter of 2013 in the amount of $34.3 million to reflect assets held for sale at fair value less costs to sell.
Comparisons
Unless otherwise noted, all comparisons are for the third quarter of 2013 to the third quarter of 2012. The results of NEMG, which was sold at the beginning of the fourth quarter of 2013, are reported within discontinued operations in 2013 and 2012; and the results of the Regional Media Group, which was sold in the first quarter of 2012, and the About Group, which was sold in the fourth quarter of 2012, are reported within discontinued operations in 2012.
This release includes non-GAAP financial measures, a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.
Third-quarter 2013 results included the following special item:
A $6.2 million ($3.7 million after tax or $.02 per share) charge for a partial withdrawal obligation under a multiemployer pension plan.
There were no special items in the third quarter of 2012.
In addition, the Company had severance costs of $0.6 million ($0.4 million after tax or $.00 per share) and $1.0 million ($0.6 million after tax or $.00 per share) in the third quarters of 2013 and 2012, respectively.
Third-Quarter Results from Continuing Operations
Revenues
Total revenues increased 1.8 percent to $361.7 million from $355.3 million. Circulation revenues increased 4.8 percent, while advertising and other revenues decreased 2.0 percent and 0.8 percent, respectively.
Circulation revenues rose as digital subscription initiatives and the increase in print circulation prices at The New York Times earlier this year offset a decline in print copies sold. Revenues from the Company’s digital-only subscription packages, e-readers and replica editions were $37.7 million in the third quarter of 2013, up 29.0 percent from the third quarter of 2012, and in the first nine months of 2013 totaled $110.0 million, up 42.4 percent from the same period in 2012.
Paid subscribers to The Times and International Herald Tribune digital-only subscription packages, e-readers and replica editions totaled approximately 727,000 as of the end of the third quarter of 2013, an increase of more than 28 percent compared with the end of the third quarter of 2012.
Print and digital advertising revenues decreased 1.6 percent and 3.4 percent, respectively, largely due to ongoing secular trends and an increasingly complex and fragmented digital advertising marketplace. In the third quarter of 2013, digital advertising revenues were $32.8 million compared with $33.9 million in the 2012 third quarter. Digital advertising revenues as a percentage of total Company advertising revenues were 23.8 percent in the third quarter of 2013 compared with 24.1 percent in the third quarter of 2012.
For the first nine months of 2013, print and digital advertising revenues decreased 7.3 percent and 3.2 percent, respectively. Digital advertising revenues were $109.9 million during that period compared with $113.6 million in the first nine months of 2012. Digital advertising revenues as a percentage of total Company advertising revenues were 24.2 percent in the first nine months of 2013 compared with 23.4 percent in the first nine months of 2012.
Operating Costs
Operating costs decreased 1.1 percent to $342.7 million from $346.4 million. Excluding depreciation, amortization and severance, operating costs decreased 1.2 percent to $321.8 million from $325.8 million mainly due to lower pension expense and raw materials expense, as well as printing and distribution efficiencies.
Other Data
Joint Ventures
Loss from joint ventures was $0.1 million compared with income of $1.0 million in the prior-year period largely due to lower results for the paper mills in which the Company has investments.
Interest Expense, net
Interest expense, net was unchanged at $15.5 million. Payment at maturity on September 26, 2012 of all $75 million aggregate principal amount of the Company’s 4.610 percent senior notes that benefited interest expense was offset by a charge related to the repurchase of approximately $12 million principal amount of the Company’s 6.625 percent senior notes due 2016.
Income Taxes
The Company had 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 percent) in the first nine months of 2013. Included in the tax expense for the third quarter of 2013 is a charge of $1.5 million related to the remeasurement of deferred tax assets in connection with the sale of NEMG.
The Company had an income tax benefit of $3.2 million (effective tax rate of 51.7 percent) in the third quarter of 2012 and income tax expense of $28.4 million (effective tax rate of 38.4 percent) in the first nine months of 2012.
Liquidity
As of September 29, 2013, the Company had cash and marketable securities of approximately $938 million (excluding restricted cash of approximately $22 million that is subject to certain collateral requirements). Total debt and capital lease obligations were approximately $683 million. During the third quarter of 2013, the Company repurchased approximately $12 million principal amount of its 6.625 percent senior notes due 2016.
Capital Expenditures
Capital expenditures totaled approximately $5.0 million in the third quarter of 2013 and approximately $9.2 million in the first nine months of 2013.
Outlook
The following guidance on revenue trends for the fourth quarter of 2013 compared to the fourth quarter of 2012 is based on a 13-week comparison, excluding the impact of the additional week in the fourth quarter of 2012. Fourth-quarter 2013 circulation revenues are expected to increase in the low single digits, as the Company expects to see continued benefit from its digital subscription initiatives, as well as from print price increases at The Times in early 2013. Advertising revenue trends remain subject to significant month-to-month volatility and are expected to decrease in the low single digits in the fourth quarter of 2013.
Operating costs for the fourth quarter of 2013 compared to the fourth quarter of 2012, including the additional week, are expected to increase in the low single digits as investments around the Company’s strategic growth initiatives accelerate.
In addition, the Company expects 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.