Newspaper & Mailroom

The New York Times Company Reports 2014 First-Quarter Results

Friday 25. April 2014 - The New York Times Company (NYSE:NYT) announced today first-quarter 2014 diluted earnings per share from continuing operations of $.02 compared with $.04 in the same period of 2013. Adjusted diluted earnings per share from continuing operations (as discussed below) were $.07 in the first quarter of 2014 compared with $.08 in the first quarter of 2013.

The Company had an operating profit of $22.1 million in the first quarter of 2014 compared with $28.1 million in the same period of 2013, with the decline mainly resulting from investments associated with the Company’s strategic growth initiatives. Adjusted operating profit was $56.6 million in the first quarter of 2014 compared with $57.1 million in the first quarter of 2013.
Total revenues increased 2.6 percent in the first quarter of 2014, with advertising revenues up 3.4 percent and circulation revenues up 2.1 percent. The Company added more net digital subscribers in the first quarter of 2014 than in any quarter in 2013. The total number of paid digital-only subscribers at the end of the first quarter was approximately 799,000, an increase of 39,000 compared with the end of the fourth quarter of 2013.
“2014 is off to a good start, with revenue growth across the board in the first quarter followed by the launch of new digital subscription products at the beginning of April,” said Mark Thompson , president and chief executive officer. “For the first time in several years, we saw quarterly growth in both print and digital advertising revenues, with total advertising revenues increasing by more than 3 percent year-over-year. We’re pleased with this result, which we believe demonstrates the progress we are making in both performance and innovation in advertising. Paid Posts, our native advertising initiative, launched very successfully during the quarter. However, we are certainly not claiming victory in advertising yet; we expect continued month-to-month volatility and recognize that we will face some significantly tougher year-on-year comparisons as the year goes on.
“Just after the quarter’s end we began the rollout of NYT Now and Times Premier, expanding the target market for our digital products and increasing our ability to monetize our unparalleled journalism and features across a more comprehensive spectrum of current and potential subscribers. Our new mobile product, NYT Now, in particular is being embraced by the market. As we have said previously, we expect these products to take some time to ramp up, but we are pleased with the reception thus far and by the continued strength of our core digital subscription packages, which grew by 18% year-over-year in Q1.”
Comparisons
Unless otherwise noted, all comparisons are for the first quarter of 2014 to the first quarter of 2013. The results of the New England Media Group (NEMG), which was sold at the beginning of the fourth quarter of 2013, are reported within discontinued operations in 2013.
This release presents certain non-GAAP financial measures, including diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and a special item (or adjusted diluted earnings per share from continuing operations); operating profit before depreciation, amortization, severance, non-operating retirement costs and a special item (or adjusted operating profit); and operating costs before depreciation, amortization, severance and non-operating retirement costs (or adjusted operating costs). The exhibits include a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures, as well as an explanation of non-operating retirement costs, which is presented for the first time in this release.
First-quarter 2014 results included the following special item:
A $2.6 million ($1.5 million after tax or $.01 per share) charge for the early termination of a distribution agreement, which will result in distribution cost savings for the Company in future periods.
There were no special items in the first quarter of 2013.
The Company had severance costs of $3.1 million ($1.8 million after tax or $.01 per share) and $4.9 million ($2.9 million after tax or $.02 per share) in the first quarters of 2014 and 2013, respectively.
Results from Continuing Operations
Revenues
Total revenues increased 2.6 percent to $390.4 million from $380.7 million. Circulation revenues increased 2.1 percent, advertising revenues were up 3.4 percent and other revenues increased 1.4 percent.
Circulation revenues rose as the Company’s digital subscription initiatives and the 2014 increase in home-delivery prices at The New York Times more than offset a decline in print copies sold. Revenues from the Company’s digital-only subscription packages, e-readers and replica editions were $40.3 million in the first quarter of 2014, up 13.6 percent from the first quarter of 2013.
Print and digital advertising revenues increased 3.7 percent and 2.2 percent, respectively. Digital advertising revenues were $37.8 million compared with $37.0 million in the 2013 first quarter.
Operating Costs
Operating costs increased 3.8 percent to $365.8 million from $352.5 million. Costs rose mainly due to higher compensation and benefits expenses associated with the strategic growth initiatives as well as higher retirement costs, partially offset by cost savings in printing and distribution. Adjusted operating costs increased 3.2 percent to $333.8 million from $323.5 million.
Raw materials costs declined to $22.0 million from $23.8 million due to both newsprint volume and price declines.
Other Data
Interest Expense, net
Interest expense, net decreased to $13.3 million from $14.1 million due to a lower level of debt outstanding as a result of repurchases made in 2013 and higher interest income.
Income Taxes
The Company had income tax expense of $3.8 million (effective tax rate of 56.9 percent) in the first quarter of 2014 and income tax expense of $5.1 million (effective tax rate of 45.4 percent) in the first quarter of 2013. The foregoing tax rates were impacted by adjustments to the Company’s reserve for uncertain tax positions.
Liquidity
As of March 30, 2014, the Company had cash and marketable securities of approximately $973 million (excluding restricted cash of approximately $29 million that is mainly subject to certain collateral requirements for workers’ compensation obligations). Total debt and capital lease obligations were approximately $685 million.
Capital Expenditures
Capital expenditures totaled approximately $6 million in the first quarter of 2014.
Outlook
Total circulation revenues are expected to increase in the low-single digits in the second quarter of 2014 compared with the second quarter of 2013.
Total advertising revenues in the second quarter of 2014 are expected to decrease in the mid-single digits compared with the second quarter of 2013 in part because year-over-year comparisons will become more challenging.
The Company expects second-quarter 2014 operating costs and adjusted operating costs to each increase in the low- to mid-single digits compared with the second quarter of 2013 as investments associated with 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: breakeven,
Depreciation and amortization: $75 to $85 million,
Interest expense, net: $53 to $57 million, and
Capital expenditures: $35 to $45 million.