February 4, 2016 Last Updated 10:09 am

Cost savings drives $87.7M profit in Q4 for The New York Times Co.

Publisher had an operating profit of $136.6 million in full year 2015, compared with $91.9 million in 2014, as 10.6% increase in digital advertising offset 6.6% decline in print

NEW YORK, NY – NY – February 4, 2016 —  The New York Times Company announced today fourth-quarter 2015 diluted earnings per share from continuing operations of $.31 compared with $.22 in the same period of 2014. Adjusted diluted earnings per share from continuing operations (defined below) were $.37 in the fourth quarter of 2015 compared with $.26 in the fourth quarter of 2014.

Operating profit grew to $87.7 million in the fourth quarter of 2015 compared with $62.4 million in the same period of 2014, driven by broad cost savings. Adjusted operating profit (defined below) was $117.7 million in the fourth quarter of 2015 compared with $103.9 million in the fourth quarter of 2014.

For the full year of 2015, the Company had an operating profit of $136.6 million compared with $91.9 million in 2014, with the increase mainly driven by lower costs, including decreased severance expense, partially offset by an increased pension settlement charge in 2015. Adjusted operating profit in 2015 was $289.0 million compared with $256.3 million in 2014.

“We ended the year with a solid quarter, with strong growth in adjusted operating profit and digital advertising and consumer revenue, and the addition of 53,000 net new paid digital-only subscribers, the largest number of new subscribers in a quarter in three years,” said Mark Thompson, president and CEO, The New York Times Company. “We also succeeded in significantly reducing our costs.

“Overall, 2015 was a year of progress across the business. From the launch of virtual reality, continued growth in T Brand Studio, enhancement of mobile ad products, reimagined print sections and the delivery of consistently excellent journalism, we laid the groundwork for continued digital growth.”

Comparisons
Unless otherwise noted, all comparisons are for the fourth quarter of 2015 to the fourth quarter of 2014. Discontinued operations in 2014 include post-sale adjustments related to the 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.

Fourth-quarter 2015 results included the following special item:

  • A $4.4 million ($2.6 million after tax or $.02 per share) charge for a partial withdrawal obligation under a multiemployer pension plan.

Fourth-quarter 2014 results included the following special items:

  • A $9.2 million ($5.9 million after tax or $.04 per share) impairment charge related to the Company’s investment in a joint venture.
  • An $11.5 million ($.07 per share) income tax benefit primarily due to a reduction in the Company’s reserve for uncertain tax positions.

The Company had severance costs of $2.7 million ($1.6 million after tax or $.01 per share) and $9.4 million ($5.6 million after tax or $.03 per share) in the fourth quarters of 2015 and 2014, respectively.

Results from Continuing Operations

Revenues
Total revenues for the fourth quarter of 2015 were $444.7 million, flat compared to the same quarter in 2014. Circulation revenues increased 1.3 percent, while advertising revenues declined 1.3 percent and other revenues were flat.

Circulation revenues rose as revenues from the Company’s digital subscription initiatives and the 2015 increase in home-delivery prices at The New York Times more than offset a decline in print copies sold. Circulation revenue from the Company’s digital-only subscription products increased 13.3 percent to $50.4 million in the fourth quarter and 13.8 percent to $192.7 million for the full year of 2015 compared with the fourth quarter and full year of 2014, respectively.

Paid subscribers to the Company’s digital-only subscription products totaled approximately 1,094,000 as of the end of the fourth quarter of 2015, a net increase of 53,000 subscribers compared to the end of the third quarter and a 20 percent increase compared to the end of the fourth quarter of 2014.

Fourth-quarter print advertising revenue decreased 6.6 percent while digital advertising revenue increased 10.6 percent. Digital advertising revenue was $69.9 million, or 34.1 percent of total Company advertising revenues, compared with $63.2 million, or 30.5 percent, in the fourth quarter of 2014.

For the full year of 2015, print advertising revenue decreased 8.0 percent while digital advertising revenue increased 8.2 percent. Digital advertising revenue was $197.1 million in 2015 compared with $182.2 million in 2014.

Operating Costs
Operating costs decreased 7.7 percent in the fourth quarter of 2015 to $352.7 million from $382.3 million in the fourth quarter of 2014. Costs declined mainly as a result of efficiencies in print production and distribution as well as declines in severance, depreciation, amortization and raw materials costs. Adjusted operating costs decreased 4.1 percent to $326.9 million.

Non-operating retirement costs, which exclude special items, decreased to $7.5 million from $11.2 million in the fourth quarter, driven by lower pension interest expense as well as lower retiree medical costs. The exhibits in this release include the detail of those expenses.

Raw materials costs decreased to $20.2 million from $24.4 million in the fourth quarter due to lower newsprint prices and volume declines.

Other Data

Interest Expense, net
Interest expense, net decreased to $8.0 million in the fourth quarter of 2015 from $12.0 million in the fourth quarter of 2014 due to a lower level of debt outstanding as a result of the repayment, at maturity, of the Company’s 5.0 percent senior notes in the first quarter of 2015 and an increase in dividend income from investments.

Income Taxes
The Company had income tax expense of $28.0 million in the fourth quarter of 2015 and $8.7 million in the fourth quarter of 2014. The increase was primarily due to an increase in income from continuing operations in the fourth quarter of 2015 and the reduction in the Company’s reserve for uncertain tax positions in the fourth quarter of 2014.

The Company had income tax expense of $33.9 million for the full year of 2015 and an income tax benefit of $3.5 million for the full year of 2014. The increase was primarily due to an increase in income from continuing operations in 2015 and the reduction in the Company’s reserve for uncertain tax positions in 2014.

Liquidity
As of December 27, 2015, the Company had cash and marketable securities of approximately $904.6 million(excluding restricted cash of approximately $28.7 million primarily to collateralize certain workers’ compensation obligations). Total debt and capital lease obligations were approximately $431.2 million.

Share repurchases totaled $23.9 million in the fourth quarter and $69.8 million for the full year of 2015. As of February 2, 2016, repurchases totaled $83.0 million and $18.1 million remained under the Company’s current repurchase authorization.

Capital Expenditures
Capital expenditures totaled approximately $10 million in the fourth quarter of 2015 and approximately $29 millionfor the full year of 2015.

Outlook
Total circulation revenues in the first quarter of 2016 are expected to increase at a rate similar to that of the fourth quarter of 2015.

Total advertising revenues in the first quarter of 2016 are expected to decrease between 2-4 percent compared with the first quarter of 2015.

Operating costs and adjusted operating costs are each expected to increase in low-single digits the first quarter of 2016 compared with the first quarter of 2015.

The Company expects the following on a pre-tax basis in 2016:

  • Depreciation and amortization: $60 million to $65 million,
  • Interest expense, net: $35 million to $40 million, and
  • Capital expenditures: approximately $45 million.

NYTCO-Q4-2015

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