The New York Times Company Reports 2012 Third-Quarter Results
The New York Times Company Reports 2012 Third-Quarter Results
NEW YORK--(BUSINESS WIRE)-- The New York Times Company (NYS: NYT) announced today a 2012 third-quarter diluted loss per share from continuing operations of $.02 compared with diluted earnings per share from continuing operations of $.04 in the same period of 2011. Excluding severance and the 2011 special items discussed below, diluted loss per share from continuing operations was $.01 in the third quarters of each of 2012 and 2011.
The Company had an operating profit of $8.5 million in the third quarter of 2012 compared with $21.0 million in the same period of 2011. Excluding depreciation, amortization and severance, operating profit was $34.0 million in the third quarter of 2012 compared with $47.7 million in the third quarter of 2011.
"While our results for the third quarter reflect continued pressure on advertising revenues, total circulation revenues rose led by the ongoing expansion of our digital subscription base," said Arthur Sulzberger, Jr., chairman and chief executive officer, The New York Times Company. "Digital subscription trends have remained robust and at quarter end, paid digital subscriptions across the Company totaled approximately 592,000, up 11 percent from the end of the second quarter.
"Early in the fourth quarter of 2012, we completed the sale of the About Group for $300 million, plus a working capital adjustment. This sale will allow us to enhance our focus on our core business of generating and distributing high-quality journalism. In early October, our interest in Indeed.com was sold for approximately $167 million as a result of the sale of that company. The after-tax proceeds from these transactions further strengthened our solid liquidity position."
Comparisons
Unless otherwise noted, all comparisons are for the third quarter of 2012 to the third quarter of 2011. The results of the Regional Media Group, which had previously been included in the News Media Group and was sold in the first quarter of 2012, and the results for the About Group, which was sold in the fourth quarter of 2012, are reported within discontinued operations for all periods presented. The quarterly results of the About Group for 2012 and 2011 are summarized in the exhibits to this release.
The Company previously classified its businesses into two reportable segments, the News Media Group and the About Group. However, following the announcement of the About Group sale in August 2012, the Company views its operations and manages its business as one reportable segment effective for the quarter ended September 23, 2012. The Company will continue to provide revenues for The New York Times Media Group and the New England Media Group.
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.
There were no special items in the third quarter of 2012.
The third-quarter 2011 results included the following special items:
A $65.3 million ($37.8 million after tax or $.24 per share) gain on the sale of 390 of the Company's units in Fenway Sports Group.
A $46.4 million ($27.5 million after tax or $.18 per share) charge in connection with the prepayment of the Company's $250 million 14.053 percent notes.
In addition to these special items, the Company had $3.0 million ($1.7 million after tax or $.01 per share) in severance costs in the third quarter of 2012 and $2.9 million ($1.7 million after tax or $.01 per share) in the third quarter of 2011.
Third-Quarter Results from Continuing Operations
Revenues
Total revenues decreased 0.6 percent to $449.0 million from $451.6 million. Advertising revenues decreased 8.9 percent, circulation revenues increased 7.4 percent and other revenues decreased 2.9 percent.
Print and digital advertising revenues decreased 10.9 percent and 2.2 percent, respectively, largely due to the challenging economic environment, ongoing secular trends and an increasingly complex and fragmented digital advertising marketplace. Circulation revenues rose mainly as growth in digital subscriptions and the increase in print circulation prices in the first half of 2012 at The New York Times and The Boston Globe offset a decline in print copies sold.
Operating Costs
Operating costs increased 2.3 percent to $440.5 million from $430.5 million. Excluding depreciation, amortization and severance, operating costs increased 2.8 percent to $415.0 million from $403.9 million mainly due to higher benefits costs, performance-based compensation costs, stock-based compensation expense and costs associated with higher commercial printing revenues.
Other Financial Data
Digital
Digital businesses principally include NYTimes.com, BostonGlobe.com and Boston.com. In the third quarter of 2012, total digital advertising revenues decreased 2.2 percent to $44.6 million from $45.6 million primarily because of lower national display and real estate classified advertising revenues. Digital advertising revenues as a percentage of total Company advertising revenues were 24.4 percent in the third quarter of 2012 compared with 22.8 percent in the third quarter of 2011.
In the first nine months of 2012, the Company's total digital advertising revenues decreased 2.0 percent to $145.7 million from $148.8 million in the first nine months of 2011. Digital advertising revenues as a percentage of total Company advertising revenues were 23.6 percent for the first nine months of 2012 compared with 22.4 percent in the first nine months of 2011.
Paid subscribers to The New York Times and the International Herald Tribune digital subscription packages, e-readers and replica editions totaled approximately 566,000 as of the end of the third quarter, an increase of approximately 57,000 or 11 percent since the end of the second quarter of 2012. Paid digital subscribers to BostonGlobe.com and The Boston Globe's e-readers and replica editions totaled approximately 26,000 as of the end of the third quarter, up about 3,000 or 13 percent since the end of the second quarter of 2012.
Joint Ventures
Income from joint ventures was $1.0 million in the third quarter of 2012 compared with a loss of $1.1 million in the third quarter of 2011. Joint venture results for the third quarter of 2012 were primarily impacted by the sale of the Company's interest in Fenway Sports Group in the first half of 2012 and improved results for the paper mills.
Interest Expense, net
Interest expense, net decreased to $15.5 million from $20.0 million mainly due to the prepayment of the Company's $250 million 14.053 percent senior notes in August 2011.
Income Taxes
The Company had an income tax benefit of $2.8 million (effective tax rate of 42.6 percent) in the third quarter of 2012 and an income tax expense of $27.7 million (effective tax rate of 39.5 percent) in the first nine months of 2012.
The Company had an effective tax rate of 66.1 percent in the third quarter of 2011 primarily driven by the impact of special items. The Company's effective tax rate for the first nine months of 2011 is not meaningful given the near break-even results.
Liquidity
The following table details the original maturities and carrying values of the Company's debt and capital lease obligations as of September 23, 2012. Cash in the table below excludes restricted cash of approximately $24 million that is subject to certain collateral requirements. Net debt represents debt and capital lease obligations, net of cash and short-term investments. The Company believes net debt, a non-GAAP measure, provides a useful measure of the Company's liquidity and overall debt position.
(in thousands) | September 23, 2012 | ||||||
2012 4.610% senior notes | $ | 75,000 | |||||
2015 5.0% senior notes | 250,000 | ||||||
2016 6.625% senior notes | 225,000 | ||||||
2019 Option to repurchase ownership interest in headquarters building | 250,000 | ||||||
Total | $ | 800,000 | |||||
Less: Unamortized amounts | (30,175 | ) | |||||
Carrying value of debt | $ | 769,825 | |||||
Capital lease obligations | 7,114 | ||||||
Total debt and capital lease obligations | $ | 776,939 | |||||
Less: Cash and short-term investments | (614,114 | ) | |||||
Net debt | $ | 162,825 | |||||
As of September 23, 2012, there were no outstanding borrowings under the Company's $125 million revolving credit facility.
Subsequent Events
On September 24, 2012, the first day of the fiscal fourth quarter, the Company completed the sale of the About Group for $300 million in cash, plus a net working capital adjustment of approximately $16 million, subject to customary post-closing review and finalization. The Company expects the net after-tax proceeds from the sale will be approximately $290 million and expects to record an after-tax gain of approximately $68 million in the fourth quarter of 2012.
In early October 2012, Indeed.com, a search engine for jobs, in which the Company had an ownership interest, was sold. The pre-tax proceeds from the sale of the Company's interest were approximately $167 million. The Company expects the after-tax proceeds and the after-tax gain from the sale, which will be recorded in the fourth quarter, to be approximately $100 million.
In addition, the Company repaid in full the $75 million 4.610 percent senior notes that matured on September 26, 2012.
Capital Expenditures
Capital expenditures totaled approximately $5 million in the third quarter of 2012, and approximately $20 million in the first nine months of 2012.
Pension Obligations
As part of the Company's strategy to reduce its pension obligations and the resulting volatility of the Company's overall financial condition, in September the Company offered certain former employees who participate in The New York Times Companies Pension Plan the option to receive a one-time lump sum payment equal to the present value of the participant's pension benefit (payable in cash or rolled over into a qualified retirement plan or IRA) or to commence an immediate monthly annuity. The election period for this voluntary offer will end during the fourth quarter of 2012.
While it is too early to estimate the participation rate, assuming an acceptance rate of 50 percent of the pension obligations associated with the offer, the Company would make settlement distributions of approximately $100 million and would record a non-cash settlement charge of approximately $45 million in the fourth quarter of 2012. The settlement distributions, the majority of which will be made by the end of 2012, will be made with existing assets of the pension plan and not with Company cash. The actual amount of the settlement distributions and the charge will largely depend upon the number of participants electing the offer and the associated pension benefit of those electing participants, as well as interest rates and asset performance. This offer is expected to have a minimal impact on the Company's underfunded pension plan balance and the timing and amount of its funding obligations.
Outlook
Total advertising revenue trends in the fourth quarter of 2012 are expected to be similar to third-quarter 2012 levels.
Total circulation revenues are expected to increase in the mid- to high-single digits in the fourth quarter of 2012 because of growth in digital subscriptions as well as print price increases implemented earlier this year.
The Company expects operating costs to increase in the low-single digits in the fourth quarter of 2012.
In addition, the Company expects the following on a pre-tax basis in 2012:
Results from joint ventures: $4 to $6 million,
Depreciation and amortization: $95 to $100 million,
Interest expense, net: $60 to $65 million, and
Capital expenditures: approximately $35 million.
Conference Call Information
The Company's third-quarter 2012 earnings conference call will be held on Thursday, October 25, at 11:00 a.m. E.T. To access the call, dial 888-218-8088 (in the U.S.) and 913-981-5581 (international callers). Participants should dial into the conference call approximately 10 minutes before the start time. Online listeners can link to the live webcast at www.nytco.com/investors.
An archive of the webcast will be available beginning two hours after the call at www.nytco.com/investors. The archive will be available for approximately three months. An audio replay will be available at 888-203-1112 (in the U.S.) and 719-457-0820 (international callers) beginning approximately two hours after the call until 5 p.m. E.T. on Friday, October 26. The access code is 6840432.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. These risks and uncertainties include national and local conditions, as well as competition, that could influence the levels (rate and volume) of national, retail and classified advertising and circulation generated by our various markets, material increases in newsprint prices and the development of our digital businesses. They also include other risks detailed from time to time in the Company's publicly filed documents, including the Company's Annual Report on Form 10-K for the year ended December 25, 2011. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
The New York Times Company, a leading global, multimedia news and information company with 2011 revenues of $2.3 billion, includes The New York Times, the International Herald Tribune, The Boston Globe, NYTimes.com, BostonGlobe.com, Boston.com and related properties. The Company's core purpose is to enhance society by creating, collecting and distributing high-quality news and information.
This press release can be downloaded fromwww.nytco.com.
Exhibits: | Condensed Consolidated Statements of Operations | |||
Revenues by Operating Segment | ||||
Advertising Revenues by Category | ||||
Footnotes | ||||
Other Notes | ||||
Reconciliation of Non-GAAP Information |
THE NEW YORK TIMES COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars and shares in thousands, except per share data) | ||||||||||||||||||||||||
Third Quarter | Nine Months | |||||||||||||||||||||||
2012 | 2011 | % Change | 2012 | 2011 | % Change | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Advertising | $ | 182,641 | $ | 200,508 | -8.9% | $ | 618,103 | $ | 665,492 | -7.1% | ||||||||||||||
Circulation | 234,867 | 218,601 | 7.4% | 695,152 | 640,917 | 8.5% | ||||||||||||||||||
Other(a) | 31,520 | 32,460 | -2.9% | 101,007 | 98,826 | 2.2% | ||||||||||||||||||
Total revenues | 449,028 | 451,569 | -0.6% | 1,414,262 | 1,405,235 | 0.6% | ||||||||||||||||||
Operating costs | ||||||||||||||||||||||||
Production costs | 201,577 | 197,504 | 2.1% | 608,118 | 603,649 | 0.7% | ||||||||||||||||||
Selling, general and administrative costs | 216,457 | 209,269 | 3.4% | 666,291 | 664,731 | 0.2% | ||||||||||||||||||
Depreciation and amortization(b) | 22,485 | 23,747 | -5.3% | 75,521 | 70,564 | 7.0% | ||||||||||||||||||
Total operating costs | 440,519 | 430,520 | 2.3% | 1,349,930 | 1,338,944 | 0.8% | ||||||||||||||||||
Write-down of assets(c) | — | — | N/A | — | 9,225 | N/A | ||||||||||||||||||
Pension withdrawal expense(d) | — | — | N/A | — | 4,228 | N/A | ||||||||||||||||||
Operating profit | 8,509 | 21,049 | -59.6% | 64,332 | 52,838 | 21.8% | ||||||||||||||||||
Gain on sale of investments(e) | — | 65,273 | N/A | 55,645 | 71,171 | -21.8% | ||||||||||||||||||
Write-down of investments(f) | 600 | — | N/A | 5,500 | — | N/A | ||||||||||||||||||
Income/(loss) from joint ventures | 1,027 | (1,068 | ) | * | 2,077 | (4,026 | ) | * | ||||||||||||||||
Premium on debt redemption(g) | — | 46,381 | N/A | — | 46,381 | N/A | ||||||||||||||||||
Interest expense, net | 15,497 | 20,039 | -22.7% | 46,413 | 69,782 | -33.5% | ||||||||||||||||||
(Loss)/income from continuing operations before income taxes | (6,561 | ) | 18,834 | * | 70,141 | 3,820 | * | |||||||||||||||||
Income tax (benefit)/expense | (2,796 | ) | 12,440 | * | 27,707 | 3,509 | * | |||||||||||||||||
(Loss)/income from continuing operations | (3,765 | ) | 6,394 | * | 42,434 | 311 | * | |||||||||||||||||
Income/(loss) from discontinued operations, net of income taxes(h) | 6,026 | 9,074 | -33.6% | (86,272 | ) | (99,440 | ) | -13.2% | ||||||||||||||||
Net income/(loss) | 2,261 | 15,468 | -85.4% | (43,838 | ) | (99,129 | ) | -55.8% | ||||||||||||||||
Net loss attributable to the noncontrolling interest | 21 | 217 | -90.3% | 101 | 515 | -80.4% | ||||||||||||||||||
Net income/(loss) attributable to The New York Times Company common stockholders | $ | 2,282 | $ | 15,685 | -85.5% | $ | (43,737 | ) | $ | (98,614 | ) | -55.6% | ||||||||||||
Amounts attributable to The New York Times Company common stockholders: | ||||||||||||||||||||||||
(Loss)/income from continuing operations | $ | (3,744 | ) | $ | 6,611 | * | $ | 42,535 | $ | 826 | * | |||||||||||||
Income/(loss) from discontinued operations, net of income taxes | 6,026 | 9,074 | -33.6% | (86,272 | ) | (99,440 | ) | -13.2% | ||||||||||||||||
Net income/(loss) | $ | 2,282 | $ | 15,685 | -85.5% | $ | (43,737 | ) | $ | (98,614 | ) | -55.6% | ||||||||||||
Average number of common shares outstanding: | ||||||||||||||||||||||||
Basic | 148,254 | 147,355 | 0.6% | 148,042 | 147,103 | 0.6% | ||||||||||||||||||
Diluted | 148,254 | 151,293 | -2.0% | 151,762 | 152,424 | -0.4% | ||||||||||||||||||
Basic (loss)/earnings per share attributable to The New York Times Company common stockholders: | ||||||||||||||||||||||||
(Loss)/income from continuing operations | $ | (0.02 | ) | $ | 0.05 | * | $ | 0.29 | $ | 0.01 | * | |||||||||||||
Income/(loss) from discontinued operations, net of income taxes | 0.04 | 0.06 | -33.3% | (0.59 | ) | (0.68 | ||||||||||||||||||
