Newspaper & Mailroom

The New York Times Company Reports 2014 Second-Quarter Results

Friday 01. August 2014 - The New York Times Company (NYSE: NYT) announced today second-quarter 2014 diluted earnings per share from continuing operations of $.06 compared with $.11 in the same period of 2013. Adjusted diluted earnings per share from continuing operations (defined below) were $.07 in the second quarter of 2014 compared with $.13 in the second quarter of 2013.

The Company had an operating profit of $16.5 million in the second quarter of 2014 compared with $46.2 million in the same period of 2013, with the decline mainly resulting from investment spending associated with the Company’s strategic initiatives. Adjusted operating profit (defined below) was $55.7 million in the second quarter of 2014 compared with $70.7 million in the second quarter of 2013.
“We saw continued growth in digital advertising and circulation revenues during the quarter,” said Mark Thompson , president and chief executive officer, “but know that we still have more work to do to transform our business and deliver long-term sustainable revenue growth for the Company. We grew our digital subscriber total by 32,000 in the quarter, 39 percent more additions than in the same quarter of 2013, with our newly released products – including NYT Now, NYT Opinion and Times Premier – contributing the majority of that total. We’re encouraged by the reaction of users to the products, especially the high consumer satisfaction levels we’re seeing with the NYT Now app. But, while we expected the portfolio to take time to build, we want to accelerate the rate of growth in subscription sales, so over the coming months, we will refine some of the offers and the way we market the portfolio to accomplish this.
“We also know that long-term digital revenue growth depends on the reach and depth of engagement of our digital audience. This was one of the key recommendations of our recently completed Innovation Report on the future of Times journalism. We plan to implement the recommendations of the report across the Company and believe that we can significantly grow our digital audience, which in turn will contribute to improved digital subscription and advertising monetization.
“We are very pleased to have delivered a second consecutive quarter of positive growth in our digital advertising revenue, which increased more than 3 percent in the quarter, ending the first half of the year on a solid note for this important long-term growth driver of our business. We are particularly encouraged by the growing success of Paid Posts, our native advertising solution, which we launched in January.”
Comparisons
Unless otherwise noted, all comparisons are for the second quarter of 2014 to the second 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 and 2014.
This release presents certain non-GAAP financial measures, including diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and special items (or adjusted diluted earnings per share from continuing operations); operating profit before depreciation, amortization, severance, non-operating retirement costs and special items (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.
Second-quarter 2014 results included the following special items:
A $9.5 million ($5.7 million after tax or $.03 per share) pension settlement charge in connection with a one-time lump sum payment offer to certain former employees.
A $9.5 million ($.06 per share) income tax benefit primarily due to a reduction in the Company’s reserve for uncertain tax positions.
There were no special items in the second quarter of 2013.
The Company had severance costs of $2.2 million ($1.3 million after tax or $.01 per share) and $2.9 million ($1.7 million after tax or $.01 per share) in the second quarters of 2014 and 2013, respectively.
Results from Continuing Operations
Revenues
Total revenues decreased 0.6 percent to $388.7 million from $391.0 million. Circulation revenues increased 1.4 percent and other revenues increased 7.7 percent, while advertising revenues declined 4.1 percent.
Circulation revenues rose as revenues from the Company’s new and existing digital subscription initiatives and this year’s increase in home-delivery prices at The New York Times more than offset a decline in print copies sold. Circulation revenues from the Company’s digital-only subscription products, e-readers and replica editions were $41.7 million in the second quarter of 2014 and $82.0 million in the first half of 2014, each up 13.5 percent versus the same periods in 2013.
Paid subscribers to the Company’s digital-only subscription products, e-readers and replica editions totaled approximately 831,000 as of the end of the second quarter of 2014, an increase of 32,000 subscribers compared with the end of the first quarter and an increase of 19 percent compared with the end of the second quarter of 2013. This quarter, for the first time, the total digital-only count also includes paid subscribers to the Company’s newest digital products: NYT Now, Times Premier and NYT Opinion.
Print advertising revenue decreased 6.6 percent while digital advertising revenue increased 3.4 percent. Digital advertising revenue increased to $41.5 million from $40.1 million in the second quarter, and increased to $79.3 million from $77.1 million in the first half of the year.
Operating Costs
Operating costs increased 5.2 percent to $362.7 million from $344.7 million. Costs rose mainly due to higher compensation and benefits expenses and marketing costs associated with the strategic initiatives as well as higher retirement costs, partially offset by efficiencies in customer care and print distribution. Adjusted operating costs increased 4.0 percent to $333.0 million from $320.3 million.
Raw materials costs decreased to $21.6 million from $22.1 million due to newsprint price declines.
Other Data
Interest Expense, net
Interest expense, net decreased to $13.2 million from $14.6 million due to a lower level of debt outstanding as a result of debt repurchases made in 2013 and higher interest income.
Income Taxes
The Company had an income tax benefit of $5.7 million in the second quarter of 2014 and income tax expense of $13.8 million in the second quarter of 2013. The income tax benefit in the second quarter of 2014 was primarily due to a reduction in the Company’s reserve for uncertain tax positions.
Liquidity
As of June 29, 2014, the Company had cash and marketable securities of approximately $972 million (excluding restricted cash of approximately $29 million primarily to collateralize certain workers’ compensation obligations). Total debt and capital lease obligations were approximately $686 million.
Capital Expenditures
Capital expenditures totaled approximately $7 million in the second quarter of 2014 and approximately $13 million in the first six months of 2014.
Outlook
In the third quarter of 2014, total circulation revenues are expected to be flat compared with the third quarter of 2013.
Total advertising revenues in the third quarter of 2014 are expected to decrease in the mid-single digits compared with the third quarter of 2013.
Operating costs and adjusted operating costs are each expected to increase in the low- to mid-single digits in the third quarter of 2014 compared with the third quarter of 2013.
In addition, the Company expects the following on a pre-tax basis in 2014:
Results from joint ventures: loss of $1 to $3 million,
Depreciation and amortization: $75 to $80 million,
Interest expense, net: $53 to $57 million, and
Capital expenditures: $40 to $50 million.