April 30, 2015 Last Updated 10:13 am

$40 million pension settlement charge leads New York Times Co. to report loss in Q1 of 2015

While digital ad revenue rose 10.7 percent, it could not make up for the 11.1 percent decline in print ad revenue

NEW YORK, NY – April 30, 2015 —  The New York Times Company  announced today adjusted diluted earnings per share from continuing operations (defined below) of $.11 in the first quarter of 2015 compared with $.07 in the first quarter of 2014. There was a first-quarter 2015 diluted loss per share from continuing operations of $.09 compared with diluted earnings per share of $.02 in the same period of 2014.

Adjusted operating profit (defined below) grew to $59.2 million in the first quarter of 2015 from $56.6 million in the first quarter of 2014, as broad cost reductions more than offset a decline in revenues. There was an operating loss of $11.1 million in the first quarter of 2015 compared with an operating profit of $22.1 million in the same period of 2014, driven by special pension charges in this year’s first quarter.

“We got off to a solid start in early 2015, as our Company maintained its digital momentum,” said Mark Thompson, president and chief executive officer. “We increased our digital subscriber count by 47,000 in the first quarter, more than in any quarter over the past two years, bringing us to a total of 957,000 paid digital subscribers. The strong digital consumer growth in the first quarter was largely attributable to improved retention and higher traffic to the website, partially as a result of our recent audience development efforts.

“We also saw digital advertising revenue continue to expand at the double-digit pace that began in the second half of last year, ending up 11 percent in the first quarter, driven by growth across mobile, Paid Posts and video.

“Adjusted operating profit also grew in the quarter, as broad cost reductions more than offset an overall revenue decline driven by print advertising. While we will continue to make digital investments to fuel our Company’s growth, cost management will remain a key focus in 2015.

“In recent weeks, I have made two significant appointments intended to simplify the structure of our executive team and drive results. Kinsey Wilson, who joined the company in February as editor for strategy and innovation, adds responsibility for product development and technology across the company as executive vice president, product and technology. Kinsey has both deep roots in journalism and a keen understanding of the challenges and opportunities surrounding product monetization. And Meredith Kopit Levien , who has already transformed our advertising group, is adding responsibility for our consumer business and becomes chief revenue officer. Unifying advertising and marketing under Meredith’s leadership will allow us to more effectively accelerate the progress of both groups.”

Comparisons
Unless otherwise noted, all comparisons are for the first quarter of 2015 to the first quarter of 2014. Discontinued operations in 2014 include the results of New England Media Group (NEMG), which was sold 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 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.

First-quarter 2015 results included the following special items:

  • A $40.3 million ($24.0 million after tax or $.15 per share) pension settlement charge in connection with a lump-sum payment offer to certain former employees. These lump-sum payments were made with cash from The New York Times Companies Pension Plan, not with Company cash.
  • A $4.7 million ($2.8 million after tax or $.02 per share) charge for a partial withdrawal obligation under a multiemployer pension plan.

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, resulting in distribution cost savings for the Company.

The Company had severance costs of $1.5 million ($0.9 million after tax or $.01 per share) and $3.1 million ($1.8 million after tax or $.01 per share) in the first quarters of 2015 and 2014, respectively.

Results from Continuing Operations

Revenues
Total revenues for the first quarter of 2015 decreased 1.6 percent to $384.2 million from $390.4 million. Circulation and other revenues increased 0.8 percent and 6.5 percent, respectively, while advertising revenues declined 5.8 percent.

Circulation revenues rose as revenues from the Company’s digital subscription initiatives and January’s increase in home-delivery prices for The New York Times more than offset a decline in print copies sold. Circulation revenue from the Company’s digital-only subscription products was $46.1 million in the first quarter, an increase of 14.4 percent from the first quarter of 2014.

Paid subscribers to the Company’s digital-only subscription products totaled approximately 957,000 as of the end of the first quarter of 2015, an increase of 20 percent compared to the end of the first quarter of 2014.

First-quarter print advertising revenue decreased 11.1 percent while digital advertising revenue increased 10.7 percent. Digital advertising revenue was $42.3 million, or 28.2 percent of total Company advertising revenues, compared with $38.2 million, or 24.0 percent, in the 2014 first quarter.

Other revenues rose 6.5 percent in the first quarter primarily due to an increase in revenues from the Company’s conference business as well as from rental income.

Operating Costs
Operating costs decreased 4.2 percent to $350.3 million from $365.8 million in the first quarter. Costs decreased mainly as a result of print distribution efficiencies as well as declines in depreciation and amortization, raw materials and outside printing expenses. Adjusted operating costs decreased 2.6 percent to $325.0 million.

Non-operating retirement costs were flat at $8.9 million in the first quarter. The exhibits in this release include the detail of those expenses.

Raw materials costs decreased to $20.3 million from $22.0 million in the first quarter due to paper price and volume declines.

Other Data

Interest Expense, net
Interest expense, net decreased to $12.2 million from $13.3 million due to a lower level of debt outstanding as a result of the repayment of the principal amount of the Company’s 5.0 percent senior notes made late in the first quarter of 2015 and debt repurchases made in 2014.

Income Taxes
The Company had an income tax benefit of $9.4 million in the first quarter of 2015 and income tax expense of $3.8 million in the first quarter of 2014. The income tax benefit in 2015 is due to the $23.8 million loss from continuing operations before taxes that resulted from the two pension charges.

Liquidity
As of March 29, 2015, the Company had cash and marketable securities of $847.8 million (excluding restricted cash of $30.6 million primarily to collateralize certain workers’ compensation obligations). Total debt and capital lease obligations were $427.7 million. During the first quarter of 2015, the Company repaid, at maturity, the remaining $223.7 million principal amount of its 5.0 percent senior notes.

At the beginning of the first quarter of 2015, entities affiliated with Carlos Slim Helú exercised warrants to acquire 15.9 million shares of the Company’s Class A common stock, and as a result the Company received cash proceeds of $101.1 million.

Capital Expenditures
Capital expenditures totaled approximately $5 million in the first quarter of 2015.

Outlook
Total circulation revenues in the second quarter of 2015 are expected to increase at a rate similar to that of the first quarter of 2015.

Total advertising revenues in the second quarter of 2015 are expected to decrease in the mid-single digits compared with the second quarter of 2014.

Operating costs and adjusted operating costs are each expected to decrease in the low-single digits in the second quarter of 2015 compared with the second quarter of 2014.

The Company expects the following on a pre-tax basis in 2015:

  • Results from joint ventures: breakeven,
  • Depreciation and amortization: $60 million to $65 million,
  • Interest expense, net: $40 million to $45 million, and
  • Capital expenditures: $35 million to $45 million.

NYTCo-Q1-2015

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