November 1, 2017 Last Updated 7:46 am

The New York Times reports revenue up 6.1%, profits up in strong Q3 report

Operating profit was $33.0 million in the third quarter of 2017 compared with $9.0 million in the same period of 2016

NEW YORK, NY — November 1, 2017 – The New York Times Company announced today third- quarter 2017 diluted earnings per share from continuing operations of $.20 compared with $.00 in the same period of 2016. Adjusted diluted earnings per share from continuing operations (defined below) was $.13 in the third quarter of 2017 compared with $.06 in the third quarter of 2016.

Operating profit was $33.0 million in the third quarter of 2017 compared with $9.0 million in the same period of 2016, largely due to higher digital subscription revenues and lower severance costs, which more than offset lower print advertising revenues. Adjusted operating profit (defined below) was $56.5 million in the third quarter of 2017 compared with $39.2 million in the third quarter of 2016, principally driven by strong digital subscription revenues, which were partially offset by lower print advertising revenues.

Mark Thompson, president and chief executive officer, The New York Times Company, said, “We had a strong quarter once again, with solid growth in digital subscriptions, digital advertising and subscription revenue and overall profitability.

“Total revenue for the Company grew by 6 percent in the quarter and we added 154,000 net digital-only subscriptions, a 14 percent increase in the number of net subscription additions compared with the same quarter last year, driven by strong growth across our products. Of note, our digital news product added 105,000 subscriptions and Cooking, which launched as a paid digital product early in the quarter, added 23,000 subscriptions.

“These results reflect the ongoing strength of our digital strategy and continued demand for quality, in- depth journalism.”

Comparisons

Unless otherwise noted, all comparisons are for the third quarter of 2017 to the third quarter of 2016.

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.

Third-quarter 2017 results included the following special items:

  • A $30.1 million gain ($16.1 million after tax and net of noncontrolling interest or $.10 per share) from joint ventures related to the the sale of the remaining assets of Madison Paper Industries, in which the Company has an investment through a subsidiary.
  • A $2.5 million charge ($1.5 million after tax or $.01 per share) in connection with the ongoing redesign and consolidation of space in our headquarters building.Third-quarter 2016 results included the following special items:
  • A $2.9 million charge ($1.8 million after tax or $.01 per share) in connection with the streamlining of the Company’s international print operations (consisting of severance costs).
  • A $5.0 million gain ($3.0 million after tax or $.02 per share) in connection with an arbitration matter related to a multiemployer pension plan.

The Company had severance costs (in addition to those associated with the third quarter 2016 streamlining of the Company’s international print operations) of $2.1 million ($1.3 million after tax or $.01 per share) and $13.0 million ($7.8 million after tax or $.05 per share) in the third quarters of 2017 and 2016, respectively.

Results from Continuing Operations

Revenues

Total revenues for the third quarter of 2017 increased 6.1 percent to $385.6 million from $363.5 million in the third quarter of 2016. Subscription revenues increased 13.6 percent, while advertising revenues decreased 9.0 percent and other revenues increased 17.7 percent.

Subscription revenues in the third quarter of 2017 rose primarily due to significant growth in recent quarters in the number of subscriptions to the Company’s digital-only products, as well as the 2017 increase in home-delivery prices for The New York Times newspaper, which more than offset a decline in print copies sold. Revenue from the Company’s digital-only subscription products (which includes our news product, as well as our Crossword and Cooking products) increased 46.3 percent compared with the third quarter of 2016, to $85.7 million.

Paid digital-only subscriptions totaled approximately 2,487,000 at the end of the third quarter of 2017, a net increase of 154,000 subscriptions compared with the end of the second quarter of 2017 and a 59.1 percent increase compared with the end of the third quarter of 2016. Of the 154,000 additions, 105,000 came from the Company’s digital news products, while the remainder came from the Company’s other digital products.

Third-quarter print advertising revenue decreased 20.1 percent, while digital advertising revenue increased 11.0 percent. Digital advertising revenue was $49.2 million, or 43.3 percent of total Company advertising revenues, compared with $44.4 million, or 35.5 percent, in the third quarter of 2016. The decrease in print advertising revenues resulted from a decline in display advertising, primarily in the luxury, travel, real estate, media, technology and telecommunications categories. The increase in digital advertising revenues primarily reflected increases in revenue from smartphone, programmatic and branded content, partially offset by a continued decrease in traditional website display advertising.

Other revenues rose 17.7 percent in the third quarter largely due to affiliate referral revenue associated with the product review and recommendation website, The Wirecutter, which the Company acquired in October 2016.

Operating Costs

Operating costs decreased in the third quarter of 2017 to $350.1 million compared with $356.6 million in the third quarter of 2016, largely due to lower severance, print production and distribution costs and savings in international operations, which were partially offset by higher costs following the acquisitions of The Wirecutter and Fake Love and marketing costs. Adjusted operating costs increased to $329.2 million from $324.4 million in the third quarter of 2016, largely due to higher costs from acquisitions and marketing costs, which were partially offset by lower print production and distribution costs and savings in international operations.

Non-operating retirement costs, which exclude special items, decreased to $3.1 million from $3.8 million in the third quarter of 2017, primarily due to lower multiemployer pension plan withdrawal expense.

Raw materials costs decreased to $15.7 million compared with $18.2 million in the third quarter of 2016, largely due to volume declines.

Other Data

Joint Ventures

During the third quarter of 2017, the Company recognized a $30.1 million gain from joint ventures related to the sale of the remaining assets at a paper mill previously operated by Madison Paper Industries, in which the Company has an investment through a subsidiary. The Company’s proportionate share of the gain was $16.1 million after tax and adjusted for the allocation of the gain to the noncontrolling interest.

Interest Expense, net

Interest expense, net decreased in the third quarter of 2017 to $4.7 million compared with $9.0 million in the third quarter of 2016 as a result of the repayment, at maturity, of the Company’s 6.625 percent senior notes in the fourth quarter of 2016.

Income Taxes

The Company had income tax expense of $23.4 million in the third quarter of 2017 compared with income tax expense of $0.1 million in the third quarter of 2016. The increase was primarily due to higher income from continuing operations in the third quarter of 2017.

Liquidity

As of September 24, 2017, the Company had cash and marketable securities of approximately $822.9 million (excluding restricted cash of approximately $17.9 million, substantially all of which is set aside to collateralize certain workers’ compensation obligations). Total debt and capital lease obligations were approximately $249.4 million.

Capital Expenditures

Capital expenditures totaled approximately $39 million and $6 million in the third quarters of 2017 and 2016, respectively, and $67 million and $17 million in the nine months ended 2017 and 2016, respectively. The increase in both periods was primarily driven by the ongoing redesign and consolidation of space in our headquarters building and improvements at our College Point printing and distribution facility.

Outlook

The Company’s fourth quarter of 2017 contains 14 weeks compared with 13 weeks in the fourth quarter of 2016. The following outlook reflects both the inclusion and exclusion of the impact of this additional week.

On a 14-week basis (including the impact of the additional week):

Total subscription revenues in the fourth quarter of 2017 are expected to increase in the high-teens compared to the fourth quarter of 2016.

Total advertising revenues in the fourth quarter of 2017 are expected to decrease in the high single- digits compared with the fourth quarter of 2016.

Operating costs and adjusted operating costs are expected to increase in the high-single digits in the fourth quarter of 2017 compared with the fourth quarter of 2016.

On a comparable 13-week basis (excluding the impact of the additional week):

Total subscription revenues in the fourth quarter of 2017 are expected to increase approximately 10 percent compared to the fourth quarter of 2016.

Total advertising revenues in the fourth quarter of 2017 are expected to decrease in the low double- digits compared with the fourth quarter of 2016.

The Company expects the following on a pre-tax basis in 2017:

  • Depreciation and amortization: $60 million to $65 million,
  • Interest expense, net: $18 million to $20 million, and
  • Capital expenditures: $90 million to $95 million.

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