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The New York Times Company Reports 2013 Fourth-Quarter and Full-Year Results

Monday 10. February 2014 - The New York Times Company (NYSE:NYT) announced today fourth-quarter 2013 diluted earnings per share from continuing operations of $.24 compared with $.76 in the same period of 2012. Excluding severance and special items, diluted earnings per share from continuing operations decreased to $.26 in the fourth quarter of 2013 compared with $.31 in the fourth quarter of 2012. The fourth quarter and full year of 2012 included an additional week compared with 2013.

The Company had an operating profit of $68.9 million in the fourth quarter of 2013 compared with $35.4 million in the same period of 2012, largely due to a special item in the fourth quarter of 2012, which is discussed below. Excluding depreciation, amortization, severance and special items, operating profit declined to $96.6 million from $110.0 million in the fourth quarter of 2012, due principally to the extra week in 2012 and the impact of significant investment in the Company’s growth strategy.
For full-year 2013, the Company had an operating profit of $156.1 million compared to $103.7 million in 2012. Excluding depreciation, amortization, severance and special items, operating profit in 2013 grew to $256.3 million from $245.2 million in 2012.
“2013 was a busy year for the Company,” said Mark Thompson , president and chief executive officer. “We launched a new strategy, reorganized the Company, reenergized our advertising department under new leadership, rebranded our international newspaper as the International New York Times and sold the New England Media Group. In 2014, we will build on those efforts with new digital consumer product launches beginning in the spring, new digital advertising products and a continued focus on international growth.
“Our 2013 results reflect progress in some of the fundamentals of our business. Advertising revenue showed notable improvement in the second half of the year. Advertising revenues in the fourth quarter were down 1 percent on a like-for-like basis, excluding that extra week in 2012, the best quarterly performance in more than three years. With approximately 33,000 net additional digital subscribers, the fourth quarter saw more growth in our digital subscription business than either the second or third quarters. Total revenues for the Company would have grown slightly year-over-year had it not been for the extra week in 2012.
“Throughout the year, we continued to make progress in solidifying our balance sheet and in significantly improving the underfunded status of our qualified pension plans.”
Sale of New England Media Group – Discontinued Operations
In the fourth quarter of 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 – and its 49 percent interest in Metro Boston for approximately $70 million in cash, subject to customary adjustments. The net after-tax proceeds from the sale, including a tax benefit, were approximately $74 million.
As a result of the sale, the Company recorded a $49.1 million post-retirement curtailment gain in the fourth quarter of 2013. After-tax net income from discontinued operations was $26.9 million in the quarter, including the post-retirement curtailment gain.
Comparisons
Unless otherwise noted, all comparisons are for the fourth quarter of 2013 to the fourth 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 also reported within discontinued operations in 2012.
Due to the Company’s fiscal calendar, the 2012 fourth-quarter and full-year results included an additional week (14 weeks and 53 weeks) compared with the 2013 fourth quarter and year (13 weeks and 52 weeks). A reconciliation of revenues excluding the estimated effect of the additional week to revenues with the additional week is included in the exhibits to this release.
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.
Fourth-quarter 2013 results included the following special item:
A $3.2 million ($1.9 million after tax or $.01 per share) non-cash settlement charge in connection with the Company’s immediate pension benefit offer to certain former employees.
Fourth-quarter 2012 results included the following special items:
A $164.6 million ($102.4 million after tax or $.66 per share) gain on the sale of the Company’s ownership interest in Indeed.com, a search engine for jobs.
A $47.7 million ($27.7 million after tax or $.18 per share) non-cash settlement charge in connection with the Company’s immediate pension benefit offer to certain former employees.
A $2.6 million ($1.5 million after tax or $.01 per share) charge in connection with a legal settlement.
In addition, the Company had severance costs of $4.0 million ($2.4 million after tax or $.01 per share) and $5.9 million ($3.5 million after tax or $.02 per share) in the fourth quarters of 2013 and 2012, respectively.
Results from Continuing Operations
Revenues
Total fourth-quarter revenues decreased 5.2 percent to $443.9 million from $468.1 million. Circulation revenues decreased 3.9 percent, advertising revenues were down 6.3 percent and other revenues decreased 5.6 percent.
Excluding the additional week in 2012, estimated total revenues increased 0.4 percent, with circulation revenues up 2.7 percent and advertising and other revenues down 1.3 percent and 4.4 percent, respectively. Circulation revenues rose as the Company’s digital subscription initiatives and the 2013 increase in print home-delivery prices at The New York Times more than offset a decline in print copies sold.
Paid subscribers to the Company’s digital-only subscription packages, e-readers and replica editions totaled approximately 760,000 as of the end of the fourth quarter of 2013, an increase of 19 percent compared with the end of the fourth quarter of 2012.
Revenues from the Company’s digital-only subscription packages, e-readers and replica editions were $39.1 million in the fourth quarter of 2013, up 13.7 percent from the fourth quarter of 2012, and for the full year of 2013 totaled $149.1 million, up 33.5 percent from 2012. Excluding the additional week in 2012, estimated digital-only subscription revenues increased 22.1 percent in the fourth quarter of 2013 and 36.4 percent for full-year 2013.
Fourth-quarter print and digital advertising revenues decreased 6.3 percent and 6.5 percent, respectively. Digital advertising revenues were $53.0 million compared with $56.7 million in the 2012 fourth quarter. Excluding the additional week, estimated print and digital advertising revenues decreased 1.6 percent and 0.2 percent, respectively.
For the full year of 2013, print and digital advertising revenues decreased 7.0 percent and 4.3 percent, respectively. Digital advertising revenues were $162.9 million in 2013 compared with $170.3 million for the full year of 2012. Excluding the additional week, estimated print and digital advertising revenues decreased 5.6 percent and 2.3 percent, respectively.
Operating Costs
In the fourth quarter, operating costs decreased 2.8 percent to $371.8 million from $382.4 million. Excluding depreciation, amortization and severance, operating costs decreased 3.0 percent to $347.2 million from $358.1 million. In addition to the effect of the additional week in 2012, costs declined mainly due to printing and distribution efficiencies as well as lower professional fees and raw materials expense.
Other Data
Joint Ventures
Income from joint ventures was $0.2 million compared with $0.8 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 decreased to $13.9 million from $16.4 million due to a lower level of debt outstanding as a result of repurchases and, in the fourth quarter of 2012, a charge associated with the termination of the Company’s $125.0 million revolving credit facility.
Income Taxes
The Company had income tax expense of $16.4 million (effective tax rate of 29.8 percent) in the fourth quarter of 2013 and income tax expense of $66.2 million (effective tax rate of 35.9 percent) in the fourth quarter of 2012. The fourth-quarter 2013 tax rate was favorably affected by strong returns on corporate-owned life insurance investments and the reversal of reserves for uncertain tax positions due to the lapse of applicable statutes of limitations. The Company’s effective tax rate in the fourth quarter of 2012 was favorably affected by a lower income tax rate on the sale of the Company’s ownership interest in Indeed.com.
The Company had income tax expense of $37.9 million (effective tax rate of 40.0 percent) for the full year of 2013 and income tax expense of $94.6 million (effective tax rate of 36.6 percent) for the full year of 2012.
Liquidity
As of December 29, 2013, the Company had cash and marketable securities of approximately $1.0 billion (excluding restricted cash of approximately $28 million that is mainly subject to certain collateral requirements). Total debt and capital lease obligations were approximately $684.2 million.
Capital Expenditures
Capital expenditures totaled $13.1 million in the fourth quarter of 2013 and $22.3 million for the full year of 2013.
Pension Obligations
For accounting purposes on a GAAP basis, based on preliminary results, the underfunded status of the Company’s qualified pension plans as of December 29, 2013, was approximately $80.0 million compared with approximately $350.0 million as of December 30, 2012. The funded status of the Company’s qualified pension plans was favorably impacted from a higher discount rate and strong pension asset performance in 2013.
Outlook
Total circulation revenues are expected to increase in the low single digits in the first quarter of 2014 compared with the first quarter of 2013 as the Company expects to continue to benefit from its digital subscription initiatives as well as from the print home-delivery price increase implemented in January.
Total advertising revenue trends in the first quarter of 2014 are expected to be similar to the level experienced in the fourth quarter of 2013 based on a 13-week comparison.
The Company expects first-quarter 2014 operating costs to increase in the low to mid-single digits compared with the first quarter of 2013 as investments around the Company’s strategic growth initiatives accelerate.
In addition, the Company expects the following on a pre-tax basis in 2014:
Results from joint ventures: loss of $1 million to $0,
Depreciation and amortization: $75 to $85 million,
Interest expense, net: $55 to $60 million, and
Capital expenditures: $35 to $45 million.