Business News

The New York Times Company Reports 2009 First-Quarter Results

Tuesday 21. April 2009 - The New York Times Company announced today a first-quarter 2009 operating loss of $61.6 million compared with operating profit of $6.2 million in the first quarter of 2008. Excluding depreciation, amortization, severance and special items (noted below in this release), first-quarter 2009 operating profit was $16.5 million compared with $77.7 million in the first quarter of 2008.

In the first quarter of 2009 loss per share from continuing operations was $.52, which included a $.07 loss on leases and an $.11 charge for severance, compared with first-quarter 2008 earnings per share of $.00, which included a $.07 non-cash charge for an asset write-down, a $.04 charge for severance and a $.03 gain from a favorable tax adjustment.
“Like many companies across America and in our industry, the challenges we face intensified in the first quarter,” said Janet L. Robinson, president and CEO. “The effect of the global economic downturn, coupled with the secular changes affecting newspapers, resulted in significant declines in revenues. Advertisers pulled back on print placements in all categories – national, retail and especially classified. Digital revenues also declined, although modestly, as a result of the weakening economy. Circulation revenue increased slightly as we benefited from price increases at our newspapers.
“This quarter our operating costs declined 9.5 percent. In the remaining quarters of the year, we believe that our operating profit, excluding depreciation, amortization, severance and special items, will improve relative to this quarter. In large part this is due to the cost reduction measures we have implemented and those we have underway. This year we plan to save more than $330 million in operating expenses.
“During the quarter we took a number of steps to improve our liquidity and extend the maturities of our debt. We completed a private placement of notes, suspended our dividend, completed a sale-leaseback of our headquarters and called for the redemption of notes due early next year. These steps have improved our financial flexibility and materially extended our debt maturities. Nearly three quarters of our debt matures in 2015 or later.
“At this time, and it is early in the quarter, we believe the rate of decline in ad revenues in the second quarter will be similar to that of the first. In time, however, we believe that the economy will grow and the advertising market will improve. While we are looking forward to that day, we are not waiting for it. We have moved aggressively to restructure our cost base in line with our revenues and continue to develop innovative new digital products that enhance our financial performance. When advertising improves, we believe we will be well positioned to meet the needs of the marketplace and to benefit from our restructured cost base.”
Comparisons
City & Suburban (C & S), the Company’s retail and newsstand distribution subsidiary, was closed on January 4, 2009. The operations of C & S are included for the entire first quarter of 2008 and for a few days in January 2009. The effect on the Company’s first-quarter results was a decrease in other revenues of approximately $17 million, circulation revenues of approximately $2 million and operating costs of approximately $28 million.
The first-quarter 2009 results included the following special item:
A loss on leases at C & S of $16.4 million ($9.6 million after tax or $.07 per share).
The first-quarter 2008 results included the following special items:
A non-cash charge for the write-down of assets for a systems project of $18.3 million ($10.4 million after tax or $.07 per share).
A favorable tax reserve adjustment of $4.6 million ($.03 per share).
In addition to the special items above, the Company had severance costs of $25.0 million ($15.3 million after tax or $.11 per share) in the first quarter of 2009, primarily at the New England Media Group, and $11.2 million ($6.4 million after tax or $.04 per share) in the first quarter of 2008.
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 18.6 percent to $609.0 million from $747.9 million. Advertising revenues decreased 27.0 percent. Circulation revenues increased 1.0 percent and other revenues declined 27.7 percent, mainly because of the closure of C & S. Excluding C & S, total revenues decreased 17.4 percent, circulation revenues increased 2.0 percent and other revenues were flat.
Operating Costs
Operating costs decreased 9.5 percent to $654.3 million from $723.3 million. Depreciation and amortization decreased 12.3 percent to $36.8 million from $41.9 million in the first quarter of 2008 when the Company incurred $5.0 million for accelerated depreciation for the shutdown of its Edison, N.J., printing facility in March 2008.
Excluding depreciation, amortization and severance costs, operating costs declined 11.6 percent to $592.5 million from $670.2 million as reductions occurred in nearly all major expense categories as a result of cost-saving initiatives, including the closure of C & S.
Newsprint expense for the first quarter increased 0.9 percent, with a 25.2 percent increase in newsprint prices nearly offset by a 24.3 percent decline in consumption.
First-Quarter Business Segment Results
News Media Group
Total News Media Group revenues decreased 19.1 percent mainly as a result of lower print advertising and the closure of C & S. Excluding C & S, total revenues decreased 17.9 percent, circulation revenues increased 2.0 percent and other revenues increased 1.1 percent.
Advertising revenues in the quarter decreased 28.4 percent due to lower levels of both print and digital advertising.
Circulation revenues increased 1.0 percent primarily because of higher home-delivery and newsstand prices, offset in part by volume declines across the News Media Group and the closure of C & S. Excluding C & S, circulation revenues increased 2.0 percent.
Other revenues decreased 27.7 percent largely because of the closure of C & S. Excluding C & S, other revenues increased 1.1 percent.
Total News Media Group operating costs decreased 9.9 percent to $620.1 million from $688.1 million. Excluding depreciation, amortization and severance, operating costs declined 12.2 percent to $562.3 million from $640.7 million as reductions occurred in nearly all major expense categories as a result of cost-saving initiatives, including the closure of C & S.
The operating loss was $54.3 million compared with operating profit of $13.3 million in the first quarter of 2008, mainly because of significant losses at the New England Media Group, which includes The Boston Globe, the Worcester Telegram & Gazette and their Web sites. Excluding depreciation, amortization, severance and the special items noted above, operating profit was $19.9 million compared with $79.0 million, mainly due to lower print advertising. The closure of C & S favorably affected the first-quarter 2009 operating results by approximately $9 million.
About Group
Total About Group revenues decreased 4.7 percent to $26.8 million from $28.2 million due to lower levels of display advertising partially offset by higher cost-per-click advertising.
Total About Group operating costs decreased 4.1 percent to $17.9 million from $18.6 million. Excluding depreciation, amortization and severance, operating costs decreased 2.8 percent to $14.8 million from $15.2 million mainly due to lower content costs.
Operating profit decreased 6.0 percent to $9.0 million from $9.5 million. Excluding depreciation, amortization and severance, operating profit declined 7.0 percent to $12.0 million from $13.0 million mainly due to lower levels of display advertising.
Other Financial Data
Internet Businesses
Internet businesses include NYTimes.com, About.com, Boston.com and other Company Web sites. Total Internet revenues decreased 5.6 percent to $78.2 million from $82.9 million and Internet advertising revenues declined 6.1 percent to $67.6 million from $72.0 million. Internet advertising revenues at the News Media Group decreased 8.0 percent to $42.2 million from $45.8 million. In total, Internet businesses accounted for 12.8 percent of the Company’s revenues compared with 11.1 percent in the 2008 first quarter.
In addition, The New York Times Company had the 13th largest presence on the Web, with 52.3 million unique visitors in the United States in March 2009 according to Nielsen Online, up about 4 percent from 50.4 million unique visitors in March 2008. Also according to Nielsen Online, NYTimes.com had 20.1 million unique visitors in March 2009 versus 18.9 million in March 2008, up about 7 percent, and was the No. 1 newspaper Web site in the United States, a position it has long held.
Joint Ventures
Net income from joint ventures was $4.4 million compared with a net loss from joint ventures of $1.8 million in the first quarter of 2008. The improvement was mainly due to higher paper prices at the paper mills in which the Company has an investment.
Interest Expense-net
Interest expense-net increased in the first quarter to $18.1 million from $11.7 million, primarily due to higher interest rates on the Company’s debt.
Income Taxes
Income tax benefit was $1.1 million. The tax provision was unfavorably affected by significant losses at the New England Media Group, for which only a minimum state tax benefit is recognized due to a recent Massachusetts law change, and various nondeductible losses. These items were partially offset by a $12 million adjustment to reduce the Company’s reserve for uncertain tax positions.
In the first quarter of 2008, the Company recognized an income tax benefit of $7.7 million. Taxes were affected by a $4.6 million adjustment to reduce the Company’s reserve for uncertain tax positions.
Cash and Total Debt
On March 9, 2009, the Company called for redemption all $250 million of its outstanding aggregate principal amount of 4.5 percent notes due March 15, 2010. The redemption was completed on April 8, 2009. At the end of the quarter, cash and cash equivalents were approximately $294 million, including $260 million of cash held in escrow to complete the redemption of the notes. While at quarter end total debt was approximately $1.3 billion, total debt excluding the $250 million notes then in the process of redemption was approximately $1 billion.
The table below details the maturities and carrying value of the Company’s debt.
(in thousands)
2009 $ 294,500
2011 220,000
2012 75,000
2015 500,000
2019 250,000
Total $ 1,339,500
Unamortized amounts (65,403 )
Carrying value as of the end of the first quarter
$ 1,274,097
Carrying value of notes redeemed
(249,544 )
Debt excluding redeemed notes
$ 1,024,553
Included in 2009 is $250 million of notes redeemed effective April 8, 2009, and included in 2011 is $220 million outstanding under the Company’s revolving credit facility.
In the first quarter, the Company also repurchased approximately $55 million of the medium-term notes due in November 2009. The Company has sufficient capacity under its revolving credit agreement to repay at maturity the $44.5 million in notes due at the end of this year.
Capital Expenditures
In the first quarter, total capital expenditures were approximately $26 million.
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 consolidation of The Boston Globe’s printing plants. 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. Excluding depreciation, amortization and severance, the Company expects operating costs to decrease more than $330 million.
Quarterly interest expense for the remainder of the year is expected to be higher than it was in the first quarter because the sale-leaseback occurred at the end of March. For the year, the Company expects interest expense to be approximately $90 million.