Business News

The New York Times Company Reports 2008 Fourth-Quarter and Full-Year Results

Wednesday 28. January 2009 - The New York Times Company announced today fourth-quarter 2008 earnings per share from continuing operations (EPS) of $.19, including $.10 per share for severance costs and a non-cash charge totaling $.07 per share for the write-down of assets, compared with $.37 EPS in the fourth quarter of 2007, which included $.07 per share for severance costs and non-cash charges totaling $.07 per share for the write-down of assets.

Fourth-quarter 2008 operating profit from continuing operations decreased to $63.3 million from $101.5 million in the 2007 fourth quarter. Excluding depreciation and amortization and the special items noted below, operating profit from continuing operations decreased to $118.5 million from $159.2 million in the 2007 fourth quarter.
“The disruptions of the global economy are affecting all businesses and industries, especially companies, such as ours, that generate a significant portion of their revenues from advertising,” said Janet L. Robinson, president and CEO. “In this time of unprecedented change, we are responding strategically and creatively to manage our businesses and prepare for our future, while preserving the flexibility to navigate this difficult period. You have seen that in our decisions to restructure our cost base, to preserve capital by reducing our dividend, and to improve our financial position by completing the transaction announced last week. And you see that daily in how we are responding to the present realities of our markets.
“As the economy deteriorated in the quarter, advertisers significantly reduced their spending. After growing almost 15 percent in the first nine months of last year, digital advertising decreased 3.5 percent in the fourth quarter as online marketers cut back on display ads in response to worsening business conditions. Despite the deepening recession, our circulation revenues increased 3.7 percent as a result of higher prices at The New York Times, The Boston Globe and our smaller newspapers. This is a testament to the value our readers believe we bring to them.
“Our cost performance was exceptional in the quarter, as operating costs fell 8.5 percent. For the year, operating costs dropped 4.7 percent or approximately $136 million, despite significantly higher newsprint prices. Earlier this month, we completed the closure of our retail and newsstand distribution business in the New York metropolitan area. This is expected to improve operating results by approximately $27 million on an annual basis, excluding one-time costs. Many other expense reduction initiatives, such as the consolidation of our Boston printing facilities, are planned for 2009.
“As we look ahead, we believe advertisers will continue to be cautious with their budgets, particularly in the early part of this year. To date in January the rate of decline in print advertising revenue has accelerated from what we saw in December, while that of digital is similar to last month. During this difficult time in our business and the economy, executing well on our strategy of providing outstanding journalism, developing new revenue streams, restructuring our cost base and improving our financial flexibility will help us meet the challenges we face.”
Special Items
Fourth-quarter 2008 results from continuing operations included:
— A non-cash charge of $19.2 million ($10.7 million after tax, or $.07 per share) for the write-down of an intangible asset at The International Herald Tribune, whose results are included in The New York Times Media Group.
Fourth-quarter 2007 results from continuing operations included:
— A non-cash charge of $11.0 million ($6.4 million after tax, or $.04 per share) for the write-down of an intangible asset at the Worcester Telegram & Gazette, whose results are included in the New England Media Group, and
— A non-cash charge of $7.1 million ($4.1 million after tax, or $.03 per share) for the write-down of our 49 percent investment in Metro Boston LLC, which publishes a free daily newspaper in the Greater Boston area. This charge is included in “Net income/(loss) from joint ventures” in our Condensed Consolidated Statements of Operations.
These items total a loss of $18.1 million ($10.5 million after tax, or $.07 per share) in the fourth quarter of 2007.
Comparisons
Unless otherwise noted, all comparisons are for the fourth quarter of 2008 to the fourth quarter of 2007. The results of the Broadcast Media Group, which was sold in the second quarter of 2007, are reported within discontinued operations.
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.
Fourth-Quarter Results from Continuing Operations
Revenues
Total revenues decreased 10.8 percent to $772.1 million from $865.8 million. Advertising revenues decreased 17.6 percent; circulation revenues increased 3.7 percent; and other revenues declined 2.5 percent. Revenues decreased mainly due to lower print advertising.
Operating Costs
Operating costs decreased 8.5 percent to $689.6 million from $753.2 million. Depreciation and amortization decreased 23.0 percent to $36.0 million from $46.7 million primarily because certain assets at The New York Times Media Group reached the end of their depreciation period during the first nine months of 2008.
Severance costs were $24.1 million ($13.7 million after tax, or $.10 per share), which included $19.9 million for the closure of City & Suburban (C & S), the Company’s retail and newsstand distribution subsidiary that was closed in early January. In the fourth quarter of 2007, the Company had $17.8 million ($10.1 million after tax, or $.07 per share) in severance costs.
Excluding depreciation and amortization and severance costs, operating costs decreased 8.6 percent to $629.5 million from $688.8 million, mainly due to lower compensation costs and benefits expense. At year-end 2008, the number of full-time equivalent employees at the Company was down approximately 9 percent from the prior year.
Newsprint expense increased 11.0 percent, stemming from a 33.3 percent increase in prices, offset in part by a 22.3 percent decrease in consumption.
Fourth-Quarter Business Segment Results
News Media Group
Total News Media Group revenues decreased 11.1 percent to $742.2 million from $835.0 million.
Advertising revenues decreased 18.4 percent, mainly due to weakness in print advertising at all of the Company’s major properties.
Circulation revenues increased 3.7 percent, primarily because of higher prices at each of the Company’s media groups, partially offset by volume declines.
Other revenues decreased 2.9 percent primarily due to lower direct mail advertising services and lower commercial printing revenues at the New England Media Group.
Total News Media Group operating costs decreased 8.0 percent to $657.9 million from $714.9 million. Excluding depreciation and amortization and severance costs, operating costs decreased 8.1 percent to $603.3 million from $656.2 million, mainly as a result of the items noted in the operating costs section above.
Operating profit for the News Media Group decreased 40.3 percent to $65.2 million from $109.1 million. Excluding special items, operating profit before depreciation and amortization decreased 28.7 percent to $114.8 million from $161.0 million.
About Group
Total About Group revenues decreased 2.9 percent to $29.8 million from $30.7 million, due to a decrease in display advertising.
Total About Group operating costs increased 3.6 percent to $19.8 million from $19.1 million. Excluding depreciation and amortization, operating costs increased 8.9 percent to $16.6 million from $15.3 million, mainly because of investments in new revenue initiatives that resulted in higher marketing costs. Depreciation and amortization was lower, primarily because an asset reached the end of its amortization period in the second quarter of 2008.
Operating profit declined 13.8 percent to $10.0 million from $11.6 million. Operating profit before depreciation and amortization decreased 14.6 percent to $13.2 million from $15.4 million, mainly due to lower display advertising revenue.
Corporate
Corporate costs were $11.8 million compared with $19.2 million in the prior-year fourth quarter mainly due to lower stock-based compensation and benefits expense.
Other Financial Data
Internet Revenues
Internet businesses include NYTimes.com, About.com, Boston.com and other company Web sites. In the fourth quarter, the Company’s Internet revenues decreased 2.9 percent to $92.5 million from $95.2 million in the fourth quarter of 2007, and Internet advertising revenues declined 3.5 percent to $81.9 million from $84.9 million.
For the year, the Company’s Internet revenues increased 6.5 percent to $351.7 million from $330.2 million in 2007, and Internet advertising revenues increased 9.3 percent to $308.8 million from $282.5 million.
In total, Internet businesses accounted for 12.0 percent of the Company’s revenues in the fourth quarter versus 11.0 percent in the 2007 fourth quarter. For the year, Internet businesses accounted for 11.9 percent of the Company’s revenues versus 10.3 percent of total revenues in 2007.
Joint Ventures
Net income from joint ventures was $1.8 million in the fourth quarter of 2008 and $17.1 million for the full year of 2008 compared with a net loss from joint ventures of $10.6 million in the fourth quarter of 2007 and $2.6 million for the full year of 2007. In 2008, the paper mills in which the Company has equity interests benefited from higher paper prices. The third quarter of 2008 included a charge of $5.6 million and the fourth quarter of 2007 included a charge of $7.1 million for the write-down of the Company’s 49 percent investment in Metro Boston LLC.
Interest Expense-net
Interest expense-net increased to $12.3 million from $10.9 million, primarily as a result of less capitalized interest.
Income Taxes
The Company had income tax expense of $25.1 million for the fourth quarter of 2008 and an income tax benefit of $5.7 million for the full year of 2008. In 2007, the Company had income tax expense of $27.4 million for the fourth quarter and $76.1 million for the full year. The Company’s effective income tax rate was 47.4 percent in the fourth quarter and 8.0 percent for the full year of 2008 compared with 34.3 percent in the fourth quarter and 41.2 percent for the full year of 2007.
The fourth-quarter effective income tax rate was unfavorably affected by non-deductible losses on investments in corporate-owned life insurance policies. For the full year, the effective income tax rate was unfavorably affected by non-deductible losses on investments in corporate-owned life insurance policies and a non-deductible goodwill impairment charge.
Cash and Total Debt
At the end of the quarter, cash and cash equivalents were approximately $57 million and total debt was approximately $1.1 billion. The Company’s current sources of short-term funding are its revolving credit agreements under which it had approximately $380 million in borrowings outstanding at the end of the quarter.
Capital Expenditures
In the fourth quarter, total capital expenditures were approximately $32 million and for the full year, capital expenditures totaled approximately $127 million.
Pension Obligations
Due to significant declines in the equity markets in 2008, the Company’s funded status of its qualified pension plans has been adversely affected. At the end of 2008, the Company’s underfunded pension obligation is estimated to be approximately $625 million. Assuming the equity markets do not sufficiently recover, the discount rate does not increase and there is no further legislative relief, the Company will be required to fund this deficiency over a seven-year period. The Company expects there will be no contributions required in 2009 because of its pension funding credits. The Company will also continue to assess whether to make discretionary contributions after considering the funded status of its plans, movements in the discount rate, investment performance and other factors.
Expectations
For 2009, the Company expects depreciation and amortization to be $140 to $150 million, which includes accelerated depreciation of approximately $5 million related to the closing of its printing plant in Billerica, Mass. It projects capital expenditures to be approximately $80 million, including about $27 million for a plant consolidation and a systems project at the News Media Group.